the poultry project

The Importance of Microsaving in Developing Countries

July 27th, 2010

I recently ran across a NY Times blog post written by Nicholas Kristof in May of last year. In it Kristof discusses the importance of ensuring a secure place to save money for the poorest people in the world’s developing countries. He asserts that savings is a more important element of microfinance than lending due to the risks of theft and violent crime in countries whose poorest inhabitants are forced to keep their savings under their own roof. Says Kristof,

“Likewise, the book notes that many poor people must pay to save. That’s right — instead of receiving interest for depositing their savings with someone, they have to pay interest on their own money. One common scheme in West Africa, for example, charges an annual interest of 40 percent for accepting savings. If you struggle to save $100, a year later you have $60. But at least it’s safer than it would be under the bed. If we develop banks that actually serve the poor and accept savings, even if they paid zero interest, that would be a huge step forward and a big incentive to start saving.”

Check out Kristof’s full post here. It’s a short read but an interesting look at the importance of the availability of a secure place to save money.

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Security, Stability Necessary for Economic Growth

July 20th, 2010

Following the July 11 terrorist attacks that rocked the Ugandan capital of Kampala, billionaire Kenyan businessman Chris Kirubi discussed how instability brought about by the threat of terrorism can cause great harm to the economic climate of the region. In a July 19th opinion piece for Business Daily Africa Kirubi said,

“Take for example the average Kenyan, who after many years of saving and visualising being self-employed, decides he wants to establish an up-market eatery that can be frequented by all nationalities.

Apart from the usual fixed overhead costs, he now has to contend with additional insurance costs to cover terrorism and the re-building of his business in the event of such a catastrophe.

He is obviously going to think harder and longer before starting up any such venture which puts at risk his whole livelihood.”

Kirubi notes that in East Africa small to medium market enterprises are some of the biggest creators of jobs in the region. In order for entrepreneurial-minded people to go about starting such small to medium-sized businesses political stability within a country, as well as within neighboring countries, is essential. Such a statement may seem obvious but it’s difficult to overstate the importance of peace, stability, and a competent government for developing economies. Without the assurance that their businesses will be secure from the presence of any external threats seeking to damage them (terrorists or a civil war for example), entrepreneurs are much less likely to start their own businesses. Fewer small businesses mean fewer employment opportunities that in turn mean lower levels of consumption. Lower consumption levels hurt already existing businesses leading to a downward cycle in economic activity. All in all instability reduces the likelihood developing countries will experience economic growth.

You can check out Kirubi’s full piece here.

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