It recently occurred to me that the small-business/entrepreneur financing and payday loan systems in the US could fill the role of microfinance, as per a post-script in an earlier post. Does it? How is it similar, or not similar? I frankly don’t know enough about either system to comment further.
My motivation in asking is that the poverty trap — which Banerjee and Duflo find in some but not all circumstances — seems to exist in first-world poverty. At least, I frequently hear the notion invoked (implicitly) when discussing intergenerational transfers of wealth, socioeconomic-status-mediated access to healthcare, public school reform, tax reform, and so on. Obviously microfinance is not a catch-all escape from the poverty trap, and I’d argue that the entrepreneurial opportunities in India that make microfinance effective do not exist in the United States. But payday loans, to me, look an awful lot like the local village lenders that Banerjee and Duflo describe. Moreover, part of why microfinance works so well (where it works) is its infiltration of community life. Are poor American communities not often weak? Could an analogous system be possible in poor American communities? Could it be implemented at the grassroots level, without patriarchal (or even “nudging”) intent? It’s not that I’m feelng any rich-kid guilt; I just know how much people hate being told what to do, especially Americans.