I first read about micro loans around 6yrs ago and really liked the idea but I never got into it. A few years later I moved to the Philippines and I've gotten to see micro lending first hand.
Is the net effect beneficial or harmful? I think a large part of that comes down to the lender. The exchange rate really works in their favor in countries like this so a little can go a long way. But without a solid spending plan the money may not help. I've seen people borrow money to start stores....they choose stores because their friend/neighbor/family member/etc have started stores and are making a profit. The problem is a lot of the time no market research is done, and the store goes under for lack of customers, too many stores in too small of an area, etc. I've heard cases of people borrowing money to buy a cow. They plan on buying it young, let it eat grass, and sell it for several times the initial investment a few years later. Sounds great doesn't it? Then the cow keels over from something and they now have debt. Or people will start a restaurant and expect instant customers..not realizing you more than likely have to operate at a loss for awhile before you start making profit.
A good lender will make them have a good business plan and point out the shortcomings prior to giving out the money. But there are quite a few that just give money to anyone that approaches...which is a shame because then the funds are dry when someone with a good plan comes along.
But given the right idea it truly can have a huge impact on someones life. I've seen people borrow a few hundred to build a house so they can get out of rentals and reduce monthly bills. I know someone that expanded their restaurant and can now seat twice as many people/....and in peak hours she keeps those seats full. A local fisherman that spends his days casting a small net by hand or using one line to fish was watching the tourists at the local beaches. He thought since he is sitting there in the water anyway, he could make more money if he bought a kayak and rented it per hour. When its rented he makes 4 times more per hour than minimum wage...and I'm pretty sure before buying the boat he was making less than min. wage. Not sure if its paid itself off yet but I can see it doing so soon. One girl I know recently got a job in a European country (Italy? I forget now) working on a chicken farm. Her pay will literally be about 9-10times what she was making here, but she didn't have enough money to get the records/clearances she needed to enter the other country...so a loan came in handy.
