Microcredit Facilitates Development
The Base of the Pyramid (BoP) is an aggregation of many kinds of individuals and groups who represent potential markets for goods and services. The BoP represents approximately four (4) billion people who primarily live or transact in informal markets throughout the developing world. The failure of traditional foreign aid to foster economic development in BoP countries has caused aid organization, governments, and social businesses to innovative new solutions. Individuals that reside within the BoP have an annual per capital income which is less than three thousand dollars annually or less than $8.21 pr day. Microcredit is a newer concept which addresses economic development and foreign aid concerns at the base of the pyramid (London, 2020; Oatley, 2012).
Investopedia defines microcredit as a common form of microfinance that provides an extremely small loan given to an individual to help individuals to become self-employed or grow a small business. These borrowers tend to be low-income persons, especially BoP countries. Microcredit is also known as microlending. Microcredit provides entrepreneurs in LDCs with micro or small loans to create or expand existing businesses; microcredit loans are designed to extend financing to individuals without credit access and to replace usurious interest rate loans from local money lenders. These microloans create opportunities for borrowers to increase individual quality of life; microcredit has star power. In 2006, the Nobel Committee called microcredit a liberating force and awarded the Nobel Peace Prize to Muhammad Yunus, the “godfather of microcredit” (London, 2020; Oatley, 2012).
Capitalism is centered within the free market economy; therefore, the freer the market, the better capitalistic result. A narrow conceptual view of entrepreneurship insulates entrepreneurs from emotional, environmental, political, social, and spiritual dimensions of life. Conversely, society would be better if entrepreneurs pursued a multi-dimensional perspective which seeks make a profit while doing good. Entrepreneurs must avoid being driven solely by business profits but pursue social entrepreneurship. By defining entrepreneurship more broadly, entrepreneurs can radically change the character of capitalism by addressing may of the social and economic ills resident within global communities. Let us suppose entrepreneurs, instead of having a sole motivation — such as maximizing profit — now has two sources of motivation which are mutually exclusive, yet equally compelling: profit maximization and doing good to people in their local communities (Oatley, 2012).
Social business, a newer concept, has an objective of making a difference in the world. Social businesses are important because they can potentially address very vital concerns of mankind. Social business can change the lives at the base of the pyramid and help to alleviate poverty. Grameen Bank is one example of a social business which provides microcredit at the base of the pyramid. Some of the largest microfinance institutions include ACCION International, Grameen Bank, and Pro Mujer of Bolivia. Microcredit is making people’s lives better around the world (Oatley, 2012).
Works Cite
London, T. (2020). The base of the pyramid promise: Stanford University Press.
Oatley, T. (2012). Debates in International Political Economy: Pearson Education, Inc.
