Tag Archives: micro-lending

Real Jobs for Real People in the Informal Economy

Informal economy

New Orleans I argued yesterday that as important as “new” industries and mass employers are in finding real employment for millions, that the days when headlines of General Motors hiring 4000 workers are going to be few and far between.  What we need is localized informal workshops, training, production, marketing, and sales that can provide dignified, remunerative work for millions.  I for one am rethinking part of the Gandhian paradigm of trying to find “village” and home-based “industries that can produce livelihoods.

I’m not saying I have the answers here, but I’m clear that we need to start thinking in some additional dimensions that are based on hitting millions of scratch singles rather than the occasional homerun.  Here are some examples of good work that would provide real products and benefits:

  • Yard Work:  Seasonal, but ….
  • Home Repair and Rehab:  Easy to train and supervise and at the right price point, everybody needs it.
  • Food Production:  New Orleans, Detroit, and hundreds of other cities have the space without the skills for urban farmers.
  • Bio-diesel Production and Distribution:  Pick it up at restaurants, make it happen on small investment, and market widely.
  • Household Furniture:   In India and Kenya this is a road side “industry,” but the demand for serviceable, reasonable, household furniture is universal.  I could use a couple of big bookcases right now.
  • Repair Centers:   Once again this is a lesson from the rest of the world where repair trumps replacement and is accessible with basic training and supervision.
  • House Painting:   Inside in winter, outside the rest of the year.
  • Hauling:  It’s happening everywhere now, but there isn’t an efficient “dispatch” or distribution system for the work, which plagues many of these mass-employer.
  • Ride-shares or jitney trips
  • Recycling and small scale “green” work
  • Technical assistants and repair for computers and how to use them.

We need to reckon with a permanent pool of workers in an informal economy.   Many of the former trades’ people hired by Home Depot and Loews need to be hired by city and manpower agencies.  We need to convert social networking to jobs information, dispatch, and distribution as well as things like patch.com.

We would need to adapt public and private “micro-lending” to these kinds of domestic informal industries.

We would also need to reckon with a different way of understanding “social security” payments and health provision for workers in this kind of economy (see the “Maharashtra Model” in current Social Policy magazine.

We would need to be willing to look at work and workers differently.

Maybe we ought to look at work that is on the other side of the law now and is killing our communities, and making it all street legal so that the workforce involved also is formalized, but that’s a longer subject for another time.

I need to do some back of the envelope math on how many jobs might be produced on small scale, home and community based efforts, but for now though I could be wrong about everything I’m saying there, I am clearly correct that we simply must change the paradigm for how we think about mobs and employment for the mass of workers who have no work in today’s economy.

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Crisis of Accountability for Microfinance in India

New Orleans

Vikram Akula of SKS Microfinance

Vikram Akula of SKS Microfinance

Microfinance has many positives, but should never be confused or misnamed as a “poverty reduction” strategy.   There is simply no way to reduce poverty through debt.  Microfinance or microcredit or micro-lending or whatever the name has a value for the poor as a way to access minimal credit to create or improve livelihoods, but such livelihoods, usually in the informal sector are marginal and fraught with the same risks common to all informal work and small business for that matter.  ACORN International’s experience around the world is also very clear that there should never be any confusion about whether or not many of these loans are charitable because in fact they are often simply predatory.

I say all of this to put in some context a confusing article in today’s Times entitled “Microcredit is Imperiled in India by Defaults” by Lydia Polgreen and Vikas Bajaj.  The handwringing in the article painted the problem as a “subprime” crises because 80% of the money being lent in India comes from the state banks and in Andhra Pradesh the article says, “…almost all borrowers have stopped repaying their loans, egged on by politicians who accuse the industry of earning outsize profits on the backs of the poor.”

Indian politicians have deservedly earned a lot of skepticism and abuse for their probity and fairness, but in this case there’s a lot more to the story, and the politicians are right about this, as even some of the industry officials partially concede.

Here’s the real story in India in a nutshell.   The microfinance industry is no longer your older brother’s microfinance industry of even a decade ago with small non-profits and NGO’s and do-gooders.

Fueled by private bank money, many private finance operations have swooped into this lucrative market for lending to poor families and poor workers.  Microfinance is a major player in South Asia in India and Bangladesh particularly.   Andhra Pradesh is leading the accountability parade because the penetration of microfinance in the lending market in that state now accounts for about 12.5% of the loans outstanding.  Karnataka, where Bangalore is located is next with over 9%, Tamil Nadu, where Chennai (Madras) is the largest city has almost 5%, as does West Bengal, home of Kolkata (Calcutta).

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