Monday, November 17, 2008

Microcredit

Like a typical Belizean, I love to lament. I hope for better days, but I have no real concrete solutions. So, I've been challenging myself to think about tangible actions that the country can make. Hopefully, this blog will be one of many.

If we solve our economic problems, we'll solve our social problems too. There is a direct link between the GDP per capita of a country and it's level of happiness and level of crime & violence. Notwithstanding the diluting effect of HIV/AIDS and prevalence of drug usage, which lowers economic development.

So, we need jobs in Belize. It's highly unlikely that we'll attract a big company to start a manufacturing plant here. They've been here before, and they've left. The country benefits in the form of salary of employees and business tax, which the government collects. Though labour in Belize is cheap, it's not cheap enough. These big businesses are looking for the lowest costs so that they can maximize their profits. Why pay a worker $1.50 American an hour here when they can pay $0.50 an hour, or less, in India? And institute 12 hours work days? Which Belizean do you know would work under such conditions? Our labour laws protect us.

Since we can't attract outside investors, without guaranteeing them 15% profit on their investments {or more}, or arranging to neglect business tax {an incentive some countries make}, we should look at smaller scale ideas.

Enter microcredit. Microcredit offers the poor training and small loans to start small business. These are the people who have no collateral, so they are ineligible to banks and credit unions. In business, this is one of the most high risk investments of all. Nothing but honor are preventing the loanees from taking the money and never returning. The loanees are supposed to pay back their loans, and the money circles as the creditor loans it to another poor person.

This incenvtive is a great hit in South East Asia. In Bangladesh, where the incentive started, $5 billion has been distributed to $7 million women. Many of them single mothers. I don't have to spell out the benefits to the nation because of microcredit.

Now, I'm not exactly sure what the original parameters of the failed DFC were, but I'll guarantee you this, they loaned money to the wrong people for the wrong reasons. Microfinance is the way to go in Belize. With strict parameters and mandatory training. Training is key... in literacy, basic math skills, and accounting... for this idea to work.

Now, as to where we'll get the money to finance such a scheme, I have no idea. We're facing a multi-million dollar budget shortfall. Again. I'd suggest that successful businesses can help to provide the capital. Or the Government can set aside 30% of collected business tax.

You help the poor and you help the most vulnerable of this nation. Tell me, isn't that the very definition of democracy?

2 comments:

Democrates said...

Indeed, "microfinancing" has been the buzz word for the past half year or so as one means to climb out of the financial crisis. Even developed nations are talking about its implementation in order to provide some relief from the global financial crisis.

You mentioned Belize's poor foreign investment record. There's a reason for this: we have a horrible tax structure, ESPECIALLY for businesses and multinational corporations. I can see why few would want to invest without getting concessions. I'm a big advocate for FDI. However, the Belizean populous has a xenophobic stance toward foreign investors, mostly because of the abject agreements between GOB and Ashcroft. Seeing as this is a comment, I'll just end here. I like the issue you chose though :)

The Voice said...

Economics is not my thing so I had to do a little research and lone two cent words to get my point across. I'm sure this topic from your mouth would have me scrambling to Wikipedia for clarification!

I don't know about FDI. They rarely do what they're "supposed" to do. It increases the gap between the haves and haves not... and I'm a socialist at heart. Down with the neoliberal capitalism!