Or discredit fighting poverty in Europe?
Microcredit is s system founded by the economics professor Mr. Muhammad Yunus, known as the banker of the poor. He aimed to give the very poor people a chance, namely those who could never get a normal bank credit. That was why he got money borrowed from banks and then borrowed it to the poor, who would have to present a viable project for their subsistence or improvement of their livelyhoods. So far, so good. This system indeed got many families out of extreme poverty in many poor countries and is worldwide recognized.
Some years ago, we tried to organize an event to promoting this in Portugal. The National Association for Credit did not feedback on supporting this intention and we droped the issue. Fortunately Microcredit seemed to get quite developed in Portugal, and some TV documentaries were dedicated to it, so I assumed everything was going well. Until the moment I knew a case-study of someone who contacted Microcredit. I’ll omit here his identity, we will just refer as “He”.
He, like many thousands of Portuguese people is unemployed, but wants to get a real work.
After responding a lot of ads for jobs, he concluded it would not be possible to feed himself and family with the slim salaries being offered. In fact, in Portugal, minimun wage is not enough for a living of a family, so he remains receiving the unemployment social subsidy, which is not a remedy for ever.
Nevertheless he is an entepreneur person who would love to open his own business. Knowing that could never get a normal credit, contacted Microcredit. But was imediately told that due to an existing debt that is being payed (less than € 10.000), he could not be attributed a micro-credit loan.
This is a true story, but illustrates that in Portugal – and I would dare say in Europe – it is obvious that the rules for the attribution of microcredit should be adapted, having in mind the real causes for poverty. In Kenya, for instances, only around 30% have access to the bank system. All others don’t even have a bank account.
In Portugal, and probably in all Europe, most people have bank accounts, but the main problem is that that they cannot afford paying their loans, which in may cases are used for the basic needs, like housing. So, unlike some southern or eastern countries, most people has to make a loan.
For instance, in Portugal is frequently more expensive to rent a house than to buy one and pay the bank loan on a monthly basis. So most people have bought houses. Montly payment for a flat represents in many cases more that 50% of a person’s income.
The attribution of microcredit loans in Portugal is done by certain banks, under applications oriented by the Portuguese Association of Microcredit. I don’t know details of such applications, but apparently it seems they are done under risk evaluation similar to normal loans. I believe if Microcredit is supposed to help fighting poverty in Europe, it must be adapted to this reality: those who cannot get a credit are not those that don’t have money to get an account, but those who got “trapped” in regular bank loans or “easy credit” companies, unemployment or unsustainable low wages of precarious jobs.