Everyone needs a loan...

People who know me have probably picked up that I am skeptical about micro-credit, despite having worked for a decade and a half in that field.

The reason for my lack of enthusiasm can be found in the old adage, "If your only tool is a hammer, all your problems start to look like nails." Or, another way of saying the same thing, If all you can do is lend money, then it starts to look like everyone needs a loan. 

For a couple of decades, we imagined that millions of micro-credit clients were borrowing progressively larger and larger sums and successfully starting or expanding small businesses. 

“If all you can do is lend money, then it looks like everyone needs a loan.”

And, of course, many of them were. But - studies showed - about an equal number were getting in debt trouble, or at least found that the interest they were paying was greater than the benefit they were reaping. 

But why is this? Don't people need loans to get businesses started, or make them grow? The answer is, Yes. But.

Yes, finance is an important part of business start up and growth, but it's the last part. A loan is only useful when someone has a viable business idea, adequate management and technical skills, a regulatory environment that won't cause them too much trouble, a market for whatever goods and services they produce, a source of inputs, a place to work, support from their family, and good enough health. Then - but only then - a loan is very useful. 

Whereas savings is another story. Savings are useful if you are starting a business, but also useful even if you aren't. Savings are useful if don't have good health, if you don't have a market, if you don't have a business idea. Hence, this site - Savings Revolution!