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Micro-loans given directly to entrepreneurs in developing countries are a better solution than financial aid given to governments.

When money is given to a poor nation, it usually comes with attachments; the giving nation wants its companies to get contracts and bring in workers, the result is that local people don’t get important jobs, they don’t acquire the skills. Another issue is corruption and bad governance.

The case for micro-loans as demonstrated by Kiva is that rather than waste money to prop up dictators, give it to the people who will use it effectively.
Poor banking infrastructure makes getting credit a big challenge in poor nations, there are no credit ratings for example and so often people in villages don’t even have bank accounts.

With micro-loans the person in a developing nation will makes their case to the community and if ordinary people in developed nations are convinced, they contribute and make the loan, thereby cutting out the corrupt middleman.

Comments

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