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Why Microfinance Can't Help Haiti

Updated on January 23, 2010

What?

In case you have happened upon this article by chance, and not heard about the news in Haiti, then here's the breakdown.

On January 12th, 2010, Haiti experienced one of the greatest earthquakes within the western hemisphere of the last decade.  Located at the epicenter of the disaster, the 7.0 quake resulted in the collapse of all modern methods of sustaining advanced life, including: buildings, roads, power lines, water and food supplies along with many more common necessities.

For those of you who have been informed, you understand just how severe the situation is and how sorely needed supplies are within the Western Hemisphere's poorest nation.

With millions wounded and sick, with many more unaccounted for, what Haiti needs right now is plain and simple: Help.

But What Kind?

Essentially, there are two kinds of help: Microfinancing and Charity.

The first, a commonly misconstrued concept, as noted above, holds a clearly distinct difference with charity.  The goal of microfinancing is to help small businesses to improve the commercial and financial range within a community.  More specifically, this system merely builds upon the infrastrucutre already in place in order to enhance the transportation, acquirement and distribution of goods and services.  The reason that this method will not work in Haiti situation is because there is no infrastructure.  Demolishing countless buildings, homes and major commercial areas, not only has this earthquake removed the best locations to operate businesses, but it has stopped business altogether.  

Within such a state of shock, who knows how long it will take for those affected to recover from this disaster.


The second approach that can be used to combat the current situation, and the most beneficial at the moment, is charity.  A non-sustainable form of giving back to a socially hampered community, charity allows for the free transfer and purchase of goods to those without the funds to obtain everyday necessities.  I believe that at this point, charity will be the only logical answer to Haiti's problems at the moment, as the country lacks a consistent flow of electricity, water, food, medicine or shelter to care for the millions afflicted by the earthquake.

When Will Microfinance Be Ready?

Unfortunately, just to return Haiti to its former state of poverty will take years to accomplish.  But, there are always exceptions...

A little known fact about Microlending businesses, such as Kiva, is that these companies lend out the money from their own pocket first, and then merely use the money donated by others as the backing for their loan.  Therefore, the $10 you donated to that group of women in India is merely insuring the investment Kiva made several months ago.

While not publicly appraised or mentioned in the news, there are still some functioning businesses within Haiti that need as much help as they can get.  If you would like to help, but don't want to donate your money to charity, look up loans within the Haiti region of any Microfinance website in order to continue to prolonged lending time within the afflicted nation.  This reimbursement in the lost money of the companies will allow the business owners to stay confident about their investments and realize that the last thing they can do is to withdraw from the country and look to loan elsewhere.

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