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The biggest hurdle in the growth and development of developing countries is the lack of adequate capital. Most of these economies are labor rich. The abundance of labor and lack of capital means poor labor productivity, low wages and poverty. The only solution is access to capital, and the best way of doing it is to lend directly to enterpreneurs instead of investing in the large monolpolistic conglomerates which are able to exploit the surplus labor and make billions at their cost anyway.

The challenge is how to lend directly to an enterpreneur. it is not easy to asses the person's credibility, and it may be very difficult to ensure that it does not fall into wrong hands.

In January this year, the United Nations entrepreneurship program EMPRETEC got an extension to the African continent. Though the results of this initiative in Africa will take some time to be fully known, it is a very positive development, that reinforces the importance of supporting African entrepreneurs to bring about development. The need of the hour is to extend this conviction to personal initiatives in a manner that sufficient confidence develops in the global community, so that they can actually lend to an entrepreneur in Africa in a credible manner.

This process is being taken to its logical conclusion by many initiatives today, all of which are playing an important role in building the confidence of small investors in the viability of effectively lending there. Among the organizations or movements which have under focus, KIVA, OPPORTUNITY, FINCA, ACCION are some of the common names. Then there are certain organizations which are directing their energy primarily towards women, like GLOBAL MAMAS, WOMEN IN PROGRESS etc. There are now another breed arriving on the scene which in addition to lending credibility to the process of micro-investments, are also promising returns, like JARKKOLAINE.

Then there are also many agencies, which are combining investments with development work, and creating employment and capacity building in the process, like the Irish agency, SELF-HELP. The Carter Center also runs similar projects which aim at improving agricultural production and promoting rural entrepreneurs in many African countries.

The process of direct lending to small investors is also being tried, but the effective and sustainable model so far is that of community based disbursement of micro-loans, which is invariably more effective because of peer and social pressure for repayment of the principal, so that the same then can be used by another person.

Between charity and investment, while charity provides immediate relief, long time development can not come without investment and entrepreneurship. The benefits of large investments are cornered primarily by the well off sections of the society. Thus micro investment can play a significant role in uplifting of the most downtrodden. The problem of getting this done requires a certain level of confidence in the process of lending, and its viability. This is exactly where agencies like Kiva will play a very important role in times to come.

Learn more about this author, V. Kumar.
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