Poverty, microcredit, and Mahatma Gandhi: lessons for donors

The most pressing moral, political, and economic issue of our time is pover ty in developing countries. Donor support to poverty alleviation efforts th rough massive aid has not delivered the expected results. The primary reaso n for this failure is the incompatibility between the macro policy driven b y globalisation, liberalisation and privatisation (GLP) and the goals of in dividual projects. This contradiction is best illustrated by the microcredi t sector. While on the one hand donors support lending to micro enterprises , on the other GLP makes the very same micro enterprises unviable and micro finance institutions subsidy-dependent. Adapting Gandhian thoughts on econ omic development may be one way to resolve these contradictions and help th e poorest. If donors spend more resources on promoting wage-employment thro ugh viable micro enterprises, instead of self-employment through micro fina nce, that would help millions of risk-averse and hard-core poor, particular ly the poorest women to come out of poverty. The key issue, as Gandhi had e mphasised, is putting purchasing power into the hands of the poor, with the ir self-respect intact.