Microfinance: To profit or not to profit

Micro finance has become a major weapon in the fight against poverty.  Many organizations that take Christian mission seriously are investigating micro-lending, or already have some sort of micro-finance program in place. With successes like Grameen bank, and Kiva, Christian organizations rightly see micro-finance as a viable means for fulfilling God's command to bring justice to the poor. 

The traditional approach to micro-finance has been a not for profit model.  Either the bank is owned by those whom it services like Grameen, or like Kiva it operates like an NGO, receiving  donations/voluntary loans with a portion of money going to overhead.

However, some economists think that a market driven solution to ending poverty would be more efficient and faster.  Micro-lending groups like SKS recruit investors, charge interest, and generally function like a commercial bank.  They simply do most of their lending to the very poor. They offer collateral free loans, and they charge intrest rates commensurate with "credit rating," usually between 12-15%. 

Those advocate for profit micro-finance argue that the process is more efficient because it incentivizes the initial investment.  In other words people are more likely to provide money to the poor if they will make a profit, even a small one.  It also increases the likeliness of  recruiting large scale investors like hedge funds, mutual funds, and pensions.  Thus, more money is available to more people a lot faster. The big question is when push comes to shove, will the business choose the interests of  its clients or its investors.

What do you think?  Should a Christian organization thinking about getting involved in micro-lending adopt a for profit or non-profit model?  Which best demonstrates God's justice for the poor?

Markets, fahion, and Evangelicalism

Again NPR's Planet Money has inspired my blog post.  This time the podcasters discussed the economic theories of John Maynard Keynes, a British economists who came into prominence during the Great Depression.
 
One of Keynes big ideas was about how market speculation works.  In his The General Theory, Keynes describes an unusual beauty pageant in which the audience votes on the most beautiful face. However, before the vote is to take place the audience is told that those who have voted for the person who wins will also receive a prize.   This changes the psychology of the situation.  No longer will the audience simply vote for the person they find to be most beautiful, but they will try and determine who everyone else might think is most beautiful.  Or even more strategically, will try to assess who everyone else thinks everyone else will think is the most beautiful (ad infinitum). So in the case of markets, investors don't look at the essential soundness of an investment, but how sound/interesting that investment may seem to other investors.  Because, more investors will drive up stock prices.  This is the kind of situation that leads to economic bubbles, and as we have seen in the last years bubbles always burst.

This kind of psychological game is essentially the logic of fashion.  The way most of us participate in fashion is essentially by looking for clues from others about what they think is fashionable, and they in turn look for their cues from others still.  And what is our culture if not fashionable.  The logic of fashion is present from the academy (cognitive science is now in vogue) to the supermarket (organic/local food movement?). 

And of course the logic of fashion is often present in the evangelical church.  We often strive for cultural relevance not by seeking a sustainable and sound approach to our culture, but by trying to find out what others have done, or what people might think is cool.  This might lead to short term church growth, but is this just a bubble that will burst.  How do we engage a society that has at its core the logic of fashion without getting caught up in that logic ourselves? 

Yap Moonstones, and You

One of the podcasts I listen to with almost religious devotion is NPR’s Planet Money.  The podcast explains complex ideas from economics in easy to understand ways.  A few weeks ago the podcast addressed a question that I always wondered about.  What is money?  It seems like a fairly basic question.  Money is such a central part of our lives, but it has no intrinsic value.  It meets none of our basic needs.  It is simply something we all agree has worth.  

The planet journalists at planet money illustrated this fact by exploring the development of currency on the island of Yap.   The Yapese initially had a barter system, so if you wanted my two pigs you might trade me 13 coconuts.  Each of these items serves some real function in terms of human need.  However, Yapese sailors discovered large limestone deposits while exploring the coast of New Zealand.  Some enterprising fellow thought it would be interesting to carve a giant wheel from the limestone and carry it back to Yap on his outrigger.  

Ultimately these stones became a surrogate for the trading of goods.  So if I wanted your two pigs I might give you my giant stone.  However, the stones were difficult to move, so more than likely the stone would remain in front of my house, but would belong to you.  There’s even a story of a stone that fell from an outrigger while being transported.  The fact that the stone was sitting on the bottom of the ocean, did not decrease its use as money.  It was still traded between Yapese.  

The striking truth is that monetary systems, whether Yapese moonstones or US dollars, are based on faith.  We all agree to believe that a dollar is worth whatever it is worth at any given moment and the cumulative effect of our choices makes it so.  

Jesus lived during the rise of a universal Roman currency.  For this reason he talked a lot about the relationship between faith and money.  Jesus’ most powerful statement on money and faith is found in Sermon on the Mount (Matt 6:24-34).  Jesus notes that we cannot serve both God and money.  One faith will ultimately win out.  If we end up putting our faith in money, we will be filled with worry, but faith in God leads to freedom from worry.