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Science and Free Markets

Using Microfinance to help disaster victims

Today, OpinionJournal has an excellent article, A Hand Up, Not a Handout, by Mr. Yunus urging to use microfinance to help Katrina victims. The best is at the last:

... giving someone a hand up doesn't always require a handout. The most important thing is to help people get back to work while letting them hold on to their self-respect. Microloans can do just that.

Mr. Muhammad Yunus and the Grameen Bank (which he founded) jointly won the 2006 Nobel Peace Prize. A very well-deserved recipient in a very long time.

Why microfinance is so successful for helping poor?:

The basic philosophy behind microfinance is that the poor, although spurned by traditional banks because they can't provide collateral, are actually a great investment: No one works harder than someone who is striving to achieve life's basic necessities, particularly a woman with children to support. Sadly, it is also true that in catastrophic circumstances, very little of the cash so generously given ever gets all the way down to the very poor. There are too many "professionals" ahead of them in line, highly skilled at diverting funds into their own pockets. This is particularly regrettable because very poor people need only a little money to set up a business that can make a dramatic difference in the quality of their lives.

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