Bill and Melinda Gates are steering their influential and incredibly active anti-poverty foundation away from micro-loans and towards micro-savings, a small but important distinction that will change how the Gates' foundation spends hundreds of millions of dollars in a worldwide effort to combat the causes and symptoms of poverty. The Puget Sound Business Journal's Clay Holtzman explains:
Gates said she is convinced that unlike the foundation’s push to discover new vaccines, the microsavings effort will produce short-term results, perhaps in just three years or so. "You will see real results very quickly," Melinda Gates said.
What especially struck me is how much the foundation is shifting its microfinance strategy away from microcredit and toward microsavings. Christen, a microfinance expert, called the focus on savings a "narrowing" of the foundation’s strategy, which it has supported since 2005 in the form of several grants (the foundation has made a total of 83 grants to microfinancial services for the poor, some are for microloan groups, others are for other strategies).
If you're an expert, professional, or news junky when it comes to foreign aid, this should sound awfully familiar to the ideas of New York Times columnist Nick Kristof, who has written extensively about micro-savings. Here's a December 30, 2009, Kristof, column, "Sparking a Savings Revolution."
...Some people in the development world argue that microlending has been oversold, and there has been a bit of a backlash against it lately — including a "no pago" movement here in Nicaragua. This "don’t pay" effort has been orchestrated by the leftist government of President Daniel Ortega.
I don’t agree with the criticisms of microloans, for I’ve seen how tiny loans can truly transform people’s lives by giving them the means to start small businesses. Even so, there’s evidence that the most powerful element of microfinance is microsavings, not microloans.
This led one observer to suggest on Twitter that Bill Gates had become a "BIG groupie" of Kristof's columns, having "jump[ed] on the microsavings bandwagon" championed by Kristof. Kristof acknowledged the comment, adding the somewhat banal observation, "hm."
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