Sunday, December 30, 2007

A Silicon Valley Story from Al Jazeera

I do not normally expect to find Silicon Valley news on the Al Jazeera English Web site; and, in all fairness, this is not strictly an Al Jazeera story. The "Agencies" byline seems to be their way of saying that the report has been compiled from their wire sources, without explicitly naming any of those sources. Nevertheless, it is interesting that I had to wait until examining my Al Jazeera feed before encountering this item, which definitely has its "roots" down the Peninsula in Silicon Valley.

The story concerns eBay launching a new subsidiary, MicroPlace, which will basically allow anyone on the Internet to participate in the microfinancing process for which the 2006 Nobel Peace Prize was awarded to Mohammed Yunis and his Grameen Bank. Here is the lead:

Online auction giant Ebay has launched a microlending website that enables people to invest in entrepreneurs in poor communities around the world and get a return on their money.

"You are actually investing in the world's working poor," Tracey Turner,'s founder, said.

Unlike micro-finance organisations, which make interest-free loans to people in developing countries, offers investors profits in return for funding people across the world who are trying to build better lives, Turner said.

The report is written in a highly positive tone, the only contrarian position being saved for the final paragraphs:

The UN's humanitarian news agency, IRIN, showed that according to research by the a microfinance consortium in 2003, evidence of the effectiveness of microfinance as a tool for development remains slim, partly because of the difficulty in monitoring and measuring impact.

Questions have arisen about whether microfinance can ever be as important a tool for poverty alleviation as its proponents and practitioners suggest.

In the IRIN article, Thomas Dichter of the Cato Institute, a Washington DC-based think-tank, called the potential of microfinance "grossly overestimated".

Dichter also criticised the influx of microfinance institutions, claiming that agencies are "jumping into this field" under the assumption they can alleviate poverty without actually looking at the different causes of poverty in different regions.

I am not suggesting that Al Jazeera should have done a more thorough job of pursuing both sides of this argument. I think it is more important that they bothered to release this story at all, particularly in light of the particular approach to the profit motive that seems to be taking (which I suspect would be of interest to the Cato Foundation). There are plenty of "grass roots" foundations out there through which people can make small contributions that matter. (My wife and I have been partial to the Heifer Foundation, partly through our interest in animals.) However, if this particular project does not succumb to the potential flaws and pitfalls that it faces, it may become a case study of how the Internet may be harnessed for the public good on a global scale in far more substantive ways than those observed thus far in, for example, the One Laptop Per Child program.

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