I would like to start by giving a definition of what is a micro credit. According to the business dictionary, a micro credit is: “A small financial loan made to poverty-stricken individuals seeking to start their own business. This type of loan typically does not exceed a couple hundred dollars, so an impoverished individual cannot solely depend on this type of loan to fund their business.”
According to Banerjee and Duflo, the basic argument in favor of micro credit is that if the money is used well, it can help the improve
ment of the living situations of families, especially when they open a business or when farmers wish to buy fertilizer in order to harvest well the next year, for example. It is a good way to get out of poverty and to become more financially independent as well. However, to every good effects, there are also bad effects. And some institutions take advantage of the poor people. Especially those who do not use the money well once they got a loan. In this case, it may make things worse for some people if they borrow money and can’t reimbursed on time.
However, this situation is not only found in the countries of Africa but it can also be found in the US, for example: When a person is borrowing money, but can’t pay back on time, the interest rate and the fees are increasing which might make the situation worse. In the end, people who borrowed that money may end up more poor that they already were. It is a very unfortunate circle to be part of.
Picture : Banerjee and Duflo – property of Google Image
At the moment there are 19 commercial banks operating in Angola and focusing their business of retail and corporate banking. A few commercial banks, however, do have specific microfinance offerings.
There are two sides: It is hard for poor people to get credit however they need one to be able to build a business or even to buy a small property. I have found on the website of the UN Refugee Agency, an interview made by a man from Angola who said that “My $140 loan has financed a modest business in which me and my wife sell phone cards for mobiles. The micro-credit helped me to change a bit my financial situation. I can now buy bread on a daily basis, which was not possible before.” This man is very lucky and it is proof that micro credit can have a positive impact.
In Angola, a nonprofit called Development Workshop created a micro-finance program as a post-war economic strategy to help individuals create small businesses with the goal to reduce poverty. Using KixiCredito an institution providing micro credit, DW has been able to support over 13,000 clients. KixiCredito offers small loans to poor individuals. In Angola’s informal economy, this has allowed individuals to set up businesses selling fish, baked goods… As of 2015, KixiCredito has injected 400 million USD into Angola’s national economy.
Picture : Link
According to the book in Poor Economics, there are none significant numbers to prove that lives had been improved. Rises in income sometimes went from 5% to 7%, but this was not seen as a fantastical improvement.
As for digital technology, Angola is limited. It is important the poor countries progress to become up to date when it comes to technology, since it today an important part of our world. Angola should develop in other industries such as agriculture and energy, which are currently areas of struggle. Right now, its main source of revenue is oil. Angola is a country which is facing a lot of obstacles and I understand that it must be hard to know what are the priorities.