The concept behind microlending is a simple one: A $25 dollar loan in the U.S. translates into much more when exchanged for the local currency of a developing nation. On August 10, 2009, 25 U.S. dollars could be exchanged for 73.4 Peruvian soles. You can see how a loan of 1,000 U.S. dollars -- aggregated from a number of individual investors on a microlending Web site -- can really help an entrepreneur start or nurture a small business.
The spirit of capitalism pervades the concept of microlending. With their loans, entrepreneurs can purchase the items they need to support their businesses until they're self-sufficient. Since microlending has taken off around the globe, it's helped make capitalism the standard economic system of an increasingly globalized world.
Microlending doesn’t work. As strategies for ending poverty go, microlending appears to be among the worst that has ever been tried, just one step up from doing nothing at all to help the poor... Milford Bateman debunks virtually every aspect of the microloan gospel. Microlending doesn’t empower women, Bateman writes — instead, it makes them into debtors. It encourages people to take up small, futile enterprises that have no chance of growing or employing others. Sometimes microborrowers don’t even start businesses at all; they just spend the loan on whatever. Even worse: the expert studies that originally sparked the microlending boom turn out, upon reexamination, to have been badly flawed.
Nearly every country where microlending has been an important development strategy for the past few decades, Bateman writes, is now a disaster zone of indebtedness and economic backwardness. When he tells us that “the increasing dominance of the microfinance model in developing countries is causally associated with their progressive deindustrialization and infantilization,” he is being polite. The terrible implication of the facts he has uncovered is that microlending achieves the opposite of development. Even Soviet-style Communism, with its frequently mocked five-year plans, worked better than this strategy does, as Bateman shows in a tragic look at microloan-saturated Bosnia.
Theorists purport that increased globalization through free market systems make friends out of potential enemies, for example, the U.S. and China.