Put Your Faith in Microfinance

On June 1, former Deputy Defense Secretary Paul Wolfowitz became the next head of the World Bank. His mission: to end global poverty. The trouble is, few agree on how to go about it. So Foreign Policy asked five of the world’s leading development experts to offer Wolfowitz some free advice on getting the job done.

Clearly recognized today as the only efficient way to fight poverty, microfinancing provides poor people with badly needed access to credit. Typically, poor people have no property and, hence, no collateral. Without collateral, they have no means to secure a loan. So the entrepreneurial ability and ambition of poor people is blocked by their lack of access to credit. Microfinancing unleashes that entrepreneurial ambition by offering small loansnormally in the hundreds of dollarsas start-up capital at normal interest rates. The global repayment rate for microfinance loans is about 98 percent. These loans allow families to get out of poverty, send children to school, and finance healthcare costs. They also help poor people garner the resources necessary to defend their freedom and democratic rights.

Clearly recognized today as the only efficient way to fight poverty, microfinancing provides poor people with badly needed access to credit. Typically, poor people have no property and, hence, no collateral. Without collateral, they have no means to secure a loan. So the entrepreneurial ability and ambition of poor people is blocked by their lack of access to credit. Microfinancing unleashes that entrepreneurial ambition by offering small loansnormally in the hundreds of dollarsas start-up capital at normal interest rates. The global repayment rate for microfinance loans is about 98 percent. These loans allow families to get out of poverty, send children to school, and finance healthcare costs. They also help poor people garner the resources necessary to defend their freedom and democratic rights.

Today, 10,000 microfinance institutions around the world serve some 80 million clients. The potential worldwide market for microfinancing is probably in the neighborhood of 800 million people.

Microfinancing is the most efficient and least expensive instrument for fighting poverty that Wolfowitz and the bank have at their disposal. By providing poor people with a necessary instrument of entrepreneurship, microfinancing is also the best way to foster free markets and democracy in the regions where that system is needed most.

Return to Table of Contents

Jacques Attali is a writer, president of PlaNet finance, an international nonprofit organization, and a contributing editor to Foreign Policy.

More from Foreign Policy

Newspapers in Tehran feature on their front page news about the China-brokered deal between Iran and Saudi Arabia to restore ties, signed in Beijing the previous day, on March, 11 2023.
Newspapers in Tehran feature on their front page news about the China-brokered deal between Iran and Saudi Arabia to restore ties, signed in Beijing the previous day, on March, 11 2023.

Saudi-Iranian Détente Is a Wake-Up Call for America

The peace plan is a big deal—and it’s no accident that China brokered it.

Austin and Gallant stand at podiums side by side next to each others' national flags.
Austin and Gallant stand at podiums side by side next to each others' national flags.

The U.S.-Israel Relationship No Longer Makes Sense

If Israel and its supporters want the country to continue receiving U.S. largesse, they will need to come up with a new narrative.

Russian President Vladimir Putin lays flowers at the Moscow Kremlin Wall in the Alexander Garden during an event marking Defender of the Fatherland Day in Moscow.
Russian President Vladimir Putin lays flowers at the Moscow Kremlin Wall in the Alexander Garden during an event marking Defender of the Fatherland Day in Moscow.

Putin Is Trapped in the Sunk-Cost Fallacy of War

Moscow is grasping for meaning in a meaningless invasion.

An Iranian man holds a newspaper reporting the China-brokered deal between Iran and Saudi Arabia to restore ties, in Tehran on March 11.
An Iranian man holds a newspaper reporting the China-brokered deal between Iran and Saudi Arabia to restore ties, in Tehran on March 11.

How China’s Saudi-Iran Deal Can Serve U.S. Interests

And why there’s less to Beijing’s diplomatic breakthrough than meets the eye.