Mohammad Yunus and Jacqueline Novogratz couldn’t come from two more different backgrounds. Yunus was an economics professor in Bangladesh when he decided to do something about the widespread poverty in neighboring villages. He won the Nobel Peace Prize in 2006 for pioneering microfinance and the Grameen system. Since the 1980s, Yunus’s model has been replicated all over the world, including developed and developing countries alike. Novogratz went to high school in suburban Virginia, went to UVA, and worked as an international banker for Chase Manhattan. But she wanted to do something good in the world. In the late 1980s, she quit her job with Chase and began working to develop a microfinance institution in Rwanda. Throughout the 1980s she also worked as a consultant for the World Bank and UNICEF. In 2001, she launched the Acumen Fund with invests in local firms throughout East Africa and Southeast Asia.
What Yunus and Novogratz have in common is a pragmatic desire to lift people out of poverty. Out of this pragmatism comes a willingness to listen to the poor – to find out what their skills and dreams are and then find ways to connect them to investments that will help them reach these dreams. Novogratz managed to transform a doomed charity project into a full-fledged profit-making bakery in a matter of months and launched the first microlending institution in Rwanda. Yunus proved that the poor are creditworthy and that with credit, poverty does not have to be a cycle.
So why don’t we just listen? Why don’t more development economists spend time living with the people they serve?
We should be approaching international development as a trickle-up approach rather than the traditional trickle down. By investing in people at the bottom, growth will begin at the household level and trickle up to the national level over time. Streams of aid intended to trickle down are impeded by the massive dams of bureaucracy. As a result, foreign aid consistently fails to capture any growth (except for maybe at the personal level for bureaucrats).
But our focus on the bottom must also be pragmatic. Instead of providing “aid” and “charity” which are unsustainable and can prevent growth, international development should be about providing investment and credit. These tools, among others yet to be realized, actually encourage growth through partnerships with the poor, rather than a donor-client relationship that only encourages dependency.
In short, we have to stop treating the poor as if they are helpless sheep. We have to start treating them like human beings.