Development vs Aid
Development and aid are two incredibly valuable but different approaches to poverty alleviation. One seeks to address the immediate needs of poor people; the other aims to build their capacity to change their own lives. Microfinance is a development tool focusing on long term solutions rather than immediate needs. Microfinance can’t help the destitute. But it can help the working poor in politically stable, developing countries.
With this in mind, if you met Maria you may be faced with a dilemma. Maria lives in West Timor, Indonesia – a largely agrarian society where people are dependent on a good harvest to survive the year. Here, living off the land is a way of life. Most people grow food on small plots, keeping what they need and selling what little extra they have.
Maria is married to Johanis, a carpenter. Together they have five children. Maria rents a small plot of land on which she grows rice, paying her landlord with a fixed amount of food. Despite her hard work, she is struggling to grow enough rice to pay her rent and feed her family.
Aid
You could give Maria rice every month, to supplement what she already grows. She would no longer be solely dependent on one small plot of land to feed her family. Sounds like a simple and effective solution, right? But what happens in a year or two when the money which paid for Maria’s rice runs out?
Maria is left with little food and a farm that is no longer as productive as when it was her sole source of income. Despite your help, Maria is struggling again to feed her family. As rice has been given away for free, the local market has also adapted. With more rice on offer at the market, its value decreased and many people started growing ’cash’ crops. The community no longer produces enough rice to sustain itself.
Development
You could give Maria a small loan. The small loan includes training and allows Maria to make repayments on a seasonal basis, when her cash flow is high. A small loan allows Maria to:
• Buy more seeds to plant more rice.
• Purchase fertiliser and pesticide to maximise her crop yields.
• Sell more rice at the local market and increase her income.
In time, Maria can save enough money to purchase a small plot of land. Now the food Maria grows can directly benefit her family.
She may also be able to employ other local people, which helps them support their families.
Maria now has the capacity to feed her family and increase the productivity of her farm. It doesn’t matter if donations are directed elsewhere – she’s been equipped with the skills and capital to invest in her own future.
She’ll be able to support her children through high school and perhaps even to university. In time, her family will break out of the cycle of poverty.
Maria’s success could also help invigorate the local economy and provide employment opportunities to other local people, achieving depth of impact.
In this situation, providing aid would overlook the capability of Maria to support her family. Development tools, such as microfinance, give her the hand up she needs to continue doing what she already does so well – using creativity and hard work to support her family.
There are still millions of people like Maria who need your help – please click here to donate now and change someone’s life forever.