Sunday, August 19, 2012

Microfinancing is fine but its finite in focus

The model for 99% of the economy might not be workable for 1% at one end -The really productive and really risky bit .
Microfinancing will not address primary production poverty on its own .The role of government is critical there . The conversation in the home of blunt instruments could almost be irrelevant not exist when so many are living off margins of 10% or larger . With returns to capital of less than 2% rural land producers need solid ownership ,capital , inheritance and use laws ( focus more on capital security rather than income security)
Economic policy which does not look at a capital security as well as income security  is cheap , blinkered and nasty.
"Microfinancing is a great thing to rebadge finance to help development happen ,but the best of the West means government also get involved both to avoid cannibalization ,leverage and constitutional security for the benefit of the family the new bank is focused on helping . eg savings and loan in the US - no one noticed that real productivity on the ground was no longer the focus .
Government is also needed to avoid new banks going to industry sectors that pay well consistently and avoiding those who need both long term support but long term capital security in ownership and laws which limit their high exposure to risk.
New banks always needed to focus on real productivity but producers need MORE more than handouts and loans at rates of say 5% that any secondary industry can easily cope with  .
Focusing on farmers will send new banks broke . All industry is not the same and for the first time in history only the citizens and benefactors of the modern industrial estate think that one model of success and sustainability can work
Short term gain in support can clearly lead to long term pain in productivity.
Silly stupid sectors call for more money for areas of need ONLY . Screw our most productive sector any more and it will shrink like it is now.