PART 1
1. What is the basic argument for and against micro-credits that Banerjee and Duflo make? Do you agree with them?
The basic idea of micro-credits are to provide small financial loans specifically to those suffering in poverty filled regions. The origin of this financial system began in Bangladesh and has remained present since the 70’s. These small loans allow for new businesses to begin and gain establishment in developing countries. https://www.investopedia.com/terms/m/microcredit.asp
In terms of the pro’s and con’s of microcredits, Banerjee and Duflo had many different ideas. They discussed the ways in which the small amount of money loaned could easily change the lives of those receiving it as it allows for them to overcome the barriers needed to have enough money to start or grow a self-employed business. Majority of the applicants receiving money would never have the opportunity to receive a loan had it not been for micro-credits allowing them to. Obtaining a loan in an incredibly poor country can be very difficult for an individual who has very little, if any assets. When you consider that there are people living with little access to credit, financing anything is nearly impossible without micro-credit. This can be a very positive start for someone if they use the money in a beneficial way. The downside of micro-credits is that for some, the money is lended to a group. If everyone doesn’t carry the weight of their payments, it can harm the entire group financially. Another downside is having to accommodate weekly payment plans. If there is a set back that week such as weather related issues, health, etc it could easily disrupt the available money needed to make a payment. Along with this, some of the loans have up incredibly high interest rates which prevent the ability to repay in a timely manner. The pressure of repayments also drew attention when there were claims of people committing suicide from the pressures of the officers seeking out money but many of these claims were found to be unreliable.
Overall I agree that there is good and bad in terms of the microcredit system. I believe that for women and children, the access to this money would be enough to get some on their feet to build homes, businesses, and more. But there are several cons as the higher ups are gaining so much from those who have so little. There is a constant pressure to repay the money, and at times this withdraws the learned skills needed to save money.
2. Are micro-credits working in your assigned country? Do you agree with its limits? What is happening in your country with micro-credits or any other way to handle money, savings, trade?
Throughout Ghana, microcredits are shown throughout as an alternative to traditional banking. Those who have been given microcredit have been seen as the members of society engaging productively. There have been noticeable improvements of education and health for those who have been granted borrowings. Through several case studies done in Ghana, the biggest suggestion found was that “clients’ children are regular in school and healthier than those of non-clients” and for this, they believe microcredits should integrate education and health products into their typical programs. I completely agree with this and believe that with the resources being given, there should be obvious improvements to the health and education of all who are benefitting from the microcredit. Due to these credits, the people of Ghana are opening businesses, farming, building homes, and growing economically.
3. Is the article by Mobarak “Instead of Bringing Jobs” a reasonable approach to fixing seasonal poverty? Would this work in the country that you are doing research on? What are limits?
As the article states, it would be a great solution in countries that have the job opportunities readily available in urban areas, but for a country suffering to even employ those already living in the city, the idea of bringing in others suffering in rural areas does not work. This could easily have a reverse effect if those in the poor rural areas began also taking the jobs in urban areas full of people seeking work. In countries where the urban areas have many jobs to offer, I believe that there should be help for those in the rural areas securing jobs and housing when they do travel into the city. Without this, there could be dangers in the cost of having to transport the poor back to their rural townships if they were not able to find profitable jobs.
Within Ghana, this would be a great option for those living in rural farming communities. During the off-seasons, there are still hundreds of jobs booming in the larger cities such as Accra (the capital) or Kumasi where the populations are high, but so are the job offerings. Within a city of that size, it would not affect their local economies nearly as much if there were to be rural employees coming in seasonally to access the labor markets. There is a limit when it comes to how many people do come into the larger cities as housing, resources, and job offering still may become limited if enough of the rural community made their way to the city. This also makes me question if the farming industry could lose employees to those who decide to go to the city and do not return?
4. Read this article from 2017 and watch the video – do you agree? https://www.aljazeera.com/indepth/opinion/2017/05/africa-poor-stealing-wealth-170524063731884.html
I believe illicit financial flows could easily play a part in the poverty levels of Africa as the amount of under the table transactions and falsified records have caused large sums of tax revenue and economic growth from presenting itself in Africa. These leaks keep profitability and internal money from remaining where it should be, and allowing for countries with a much less substantial poverty crisis to be making money off of those who need it the most. Imagine if Africa had the $1 trillion worth of illegal transfers along with the $1 trillion in outreaches of help over the past 50 years. That is an incredibly substantial investment opportunity to truly help the issues which lie within Africa and the poverty stricken nations desperating calling for financial support. I also agree that in terms of the reasons for which this has been happening, you cannot solely blame Africa, but it’s easy to see it in other places even though it’s the worst in Africa. Corruption is found all over the world, but it is very much so evident in countries within Africa.
PART 2
Banerjee/Duflo’s Chapter 10 talks about the debate on pros and cons of development aid with leading economists Jeffrey Sachs (Columbia University) and William Easterly (NYU) pitted against each other. Each side has valid points. After reading for a couple of weeks about the issue of ending poverty, what is your take on this debate?
1. Which side do you take and why?
With this debate, it is definitely easy to see both sides. As a compassionate human being, it feels right to take Sachs’ side as he believes that the aid is beneficial to the poverty stricken countries and at times is the only way that they will ever grow economically. It would be incredibly difficult for me to accept Easterly’s side, although he does have some very valid points. I think that if aid were to no longer be sent, eventually a country would have to figure out how to prosper on its own. The likelihood of the entire country not surviving is not high, but there is a possibility of even worse statistics to come before the rise. I believe that if there was a way to rid Africa of its corruption, there would be a much more successful economy because as we have seen above, with corruption comes the loss of substantial amounts of money.
2. Are there other arguments that could be made and thus another side that could be taken? There is lots of information online; for ex.
The argument that those suffering in poverty are already incredibly resourceful is very true. This can be seen in the way the dress, the foods they eat, their transportation methods, and so much more. I think that teaching them to be resourceful with money rather than just continually providing aid would be a side to that argument that could really draw a lot of questions and provide a lot of helpful information on how to further help those who are unbearably poor. The resources around these countries is also something that could be taken advantage of in many different, and more profitable ways if they were just given the knowledge needed to further profitability through their labor. A huge part of the problem is just the lack of knowledge and resources to obtain the education needed to see economic growth.
3. Gertz and Kharas in “The Road to Ending Poverty” list severely off track countries (SOTCs)? Is your country one of those and if so, why? What do they need to do to move forward? If your country is not one of the SOTCs, what are they doing to move forward?Ghana is not considered an off track country. They are working towards becoming fully unreliant of any aid at all. To do this, the president has created goals and to become more efficient and effective when it comes to managing their resources. They are a country that has a vast supply of natural resources so by utilizing those resources in a more profitable and useful way, the country will easily see growth economically. According to Ghana’s vice-president, “in the past 22 months, we have secured significant improvements in the trends of key macroeconomic indicators such as inflation, exchange rates, and real Gross Domestic Product (GDP) growth rates,” adding: “Ghana’s economy is projected to record one of the highest growth [rates] in the world in 2018”.https://www.gipcghana.com/press-and-media/657-ghana-committed-to-moving-forward-without-aid-bawumia.html
Blog 4810 