Comments on: The illusion of poverty reduction http://www.redpepper.org.uk/the-illusion-of-poverty-reduction/ Red Pepper Sat, 16 Feb 2013 17:28:54 +0000 hourly 1 http://wordpress.org/?v=3.4.1 By: Omar Touray http://www.redpepper.org.uk/the-illusion-of-poverty-reduction/#comment-19682 Omar Touray Tue, 13 Sep 2011 13:26:07 +0000 #comment-19682 I am not criticizing the writer but I am telling you Micro finance is so far the best the poor can rely on to emerge out of poverty.The AUTHOR who writes the article must know that the poor are categorized into two, the abject poor and the entrepreneurial poor. the former need welfare support while the latter are the ones being targeted by the MFIs. After giving them (abject poor)some welfare support for few years they can be groomed to join the Van of MFIs. thank you for now I am not criticizing the writer but I am telling you Micro finance is so far the best the poor can rely on to emerge out of poverty.The AUTHOR who writes the article must know that the poor are categorized into two, the abject poor and the entrepreneurial poor. the former need welfare support while the latter are the ones being targeted by the MFIs. After giving them (abject poor)some welfare support for few years they can be groomed to join the Van of MFIs.

thank you for now

]]> By: Kester http://www.redpepper.org.uk/the-illusion-of-poverty-reduction/#comment-644 Kester Mon, 20 Dec 2010 10:53:37 +0000 #comment-644 Thanks, I was previously convinced microfinance was a great idea and was skeptical and suspicious of the article halfway through but ended up convinced. That's the best kind of short writing. Do you think absolutely *all* microfinance is bad, or does it depend mostly on exactly how it is done? And what do you think of Triodos Bank's Microfinance Fund? Thanks, I was previously convinced microfinance was a great idea and was skeptical and suspicious of the article halfway through but ended up convinced. That’s the best kind of short writing.

Do you think absolutely *all* microfinance is bad, or does it depend mostly on exactly how it is done? And what do you think of Triodos Bank’s Microfinance Fund?

]]> By: Garry Haywood http://www.redpepper.org.uk/the-illusion-of-poverty-reduction/#comment-569 Garry Haywood Sat, 18 Dec 2010 21:08:23 +0000 #comment-569 Good article. The reason that Micro-finance continues to be popular is that it is focus on the in-activity of the poor as the reason for their poverty. So, making the poor active, is a solution to the problem of the poor being inactive. Its not an attempt to solve poverty per se. Sadly, it's like taking a decongestant to cure a cold. It wont work, but it might stop the sniffling. It seems to me that there are two problems with micro-finance : firstly, there is the problem of the 'red queen effect' - that co-evolutionary growth enlarges the gap between rich and poor, even if the poor are somewhat enabled; and secondly, the enablement is a network function which connects the poor to the network of trade, which on the one hand is connecting them to opportunity of producer, on the other hand it connecting them to the opportunity consumer. I call this latter process the 'symmetric footprint' paradox. When a any business grows, it does so by expanding its trading footprint - the territorial growth of its its sales network. This growth is must be accommodated by the co-expansion of its procurement network, its buying footprint. The gain an entrepreneur builds into it network from customer acquisition, which must usually be somebodies else's customers, is lost through the expansion of is supplier network. For the theory of micro-finance to work, the residual from this networking process must be sufficient to cover the cost of borrowing plus the cost of growth and then leave a surplus great for quality of life rise but also more for for further investment. However, the process is self-defeating because the costs of growth are subject to economy of scale, and to reach the scale inflection point is either out of reach of the micro-finance or it must come via an establish trarder that can price-in opportunity cost through discounting. In addition, the successful entrepreneur will levitate to the out of the origin-network and into a more mature network. Each way the sub-network of poor producer/consumers looses out by growth of network activity. Effectively, Mircofinance is connecting poor producers into the more established networks and converting them into poor consumers. Thus, micro-finance only alleviates the symptom of low production and low consumption. Good article.

The reason that Micro-finance continues to be popular is that it is focus on the in-activity of the poor as the reason for their poverty. So, making the poor active, is a solution to the problem of the poor being inactive. Its not an attempt to solve poverty per se. Sadly, it’s like taking a decongestant to cure a cold. It wont work, but it might stop the sniffling.

It seems to me that there are two problems with micro-finance : firstly, there is the problem of the ‘red queen effect’ – that co-evolutionary growth enlarges the gap between rich and poor, even if the poor are somewhat enabled; and secondly, the enablement is a network function which connects the poor to the network of trade, which on the one hand is connecting them to opportunity of producer, on the other hand it connecting them to the opportunity consumer.

I call this latter process the ‘symmetric footprint’ paradox.

When a any business grows, it does so by expanding its trading footprint – the territorial growth of its its sales network.

This growth is must be accommodated by the co-expansion of its procurement network, its buying footprint.

The gain an entrepreneur builds into it network from customer acquisition, which must usually be somebodies else’s customers, is lost through the expansion of is supplier network. For the theory of micro-finance to work, the residual from this networking process must be sufficient to cover the cost of borrowing plus the cost of growth and then leave a surplus great for quality of life rise but also more for for further investment.

However, the process is self-defeating because the costs of growth are subject to economy of scale, and to reach the scale inflection point is either out of reach of the micro-finance or it must come via an establish trarder that can price-in opportunity cost through discounting. In addition, the successful entrepreneur will levitate to the out of the origin-network and into a more mature network. Each way the sub-network of poor producer/consumers looses out by growth of network activity.

Effectively, Mircofinance is connecting poor producers into the more established networks and converting them into poor consumers. Thus, micro-finance only alleviates the symptom of low production and low consumption.

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