Subprime and microfinance

That must be the problem

As the economy  goes from bad to worse, the general consensus seems to be that the trigger (although not necessarily the cause) of our current predicament was unwise lending to the subprime market.  There is plenty of debate as to who is to blame for this lending but at nearly every dinner conversation I have heard consensus on one thing: “making loans to the poorest parts of society is a bad idea.”

Like so many things, much of that statement is true but I am concerned that oversimplifying it will leave those most in need shut out from the power of well used credit.

Muhammad Yunus

In 1983 Muhammad Yunus started the Grameen Bank in Bangladesh (if you not read his book “Banker to the Poor” I strongly recommend reading it) and showed the world how lending to the poorest of society, those without credit history, with no collatoral, and with seemingly no ability to repay made not only good financial sense but was a powerful tool to raise people out of poverty.  Dr. Yunus broke every traditional rule of lending and showed that it worked. He loaned tiny uncollatoralised amounts, to groups of women,  in the poorest part of Bangladesh, at a modest rate of interest and found that not only did they repay with astounding certainty but that in the process his loans transformed their lives and helped raise them out of poverty.  Keep in mind that these customers of the Grameen bank would make the subprime consumers of America and Europe look like they were right off the set of Dynasty.

Its with Dr. Yunus in mind that I have been revisiting the early lessons of today’s Credit Crisis.  Immediately you realise that there are some important differences in the way Dr. Yunus lends money and how we did it in the sub-prime market:

• The Grameen bank loaned the money help people make a living.  We loaned it for non-income generating assets like homes or, worse-still, for frivolous consumer spending.
• The Grameen bank loaned tiny amounts.  We generally loaned large sums.
• The Grameen bank makes sure people pay their first loan before they receive another. We just kept lending.
• The Grameen bank loaned to groups of people who would help each other and share responsibilty for the loan.  We loaned to individuals and relied on their self-assessment forms.

The more I look at it, the more it seems to me that the lesson of the subprime crisis should not be to stop loaning to the poor but rather to change the way we loan to the poor.  Lending to to poorest parts of society is not only important but a crucial tool in helping families rise out of poverty — to stop lending to this segment of society would be a terrible mistake.  On the other hand, to take the painful events of today and create a new model for lending to the poor in the developed world which is based on the principles of the Grameen bank would be a wonderful lesson.

Drilling verses renewables — No thanks.

For those of you who are linked to me on facebook you will have seen me post a couple of articles which highlight some of my frustration with the current energy debate in the U.S. My favourites are this one by Thomas Friedman and this one by Bob Herbert and both from the NYTs.

What I find so frustrating is that lawmakers are trying to make the debate about drilling binary — either drill or pursue renewable energy. Its not a binary decision and to structure an argument that way for political reasons is just appallingly bad leadership at a critical time.

Arctic National Wildlife Refuge

I actually spent some time in northern Alaska, one of the places many would most like to drill. And overall, despite it being within the Arctic National Wildlife Refuge, I would be in favour of increased drilling to reduce dependency on foreign oil.

However, I know that increased drilling goes only a very small way towards reducing our dependency on imported oil and does nothing to reduce our dependency on oil as a whole. Therefore, I would only support it if it came with a long-term, binding and serious commitment from the federal government to reduce demand for oil and increase tax benefits for clean energies.

Many people will disagree with me that new drilling should be allowed at all in places like Alaska but in the context of concrete measures to reduce our dependency on oil, that would at least be a constructive discussion rather than what is happening today on Capital Hill.

Different perspective on climate change post

I saw this article today which provides a different set of evidence on the once green Sahara.  Not as visually powerful as the rock art but compelling nonetheless.

Who is winning the olympics (really)?

I always find the subtle ways in which the media changes our perception of events so interesting. My wife and I have spent most the of the Olympics on holiday by a lake in Connecticut. We don’t really tend to watch any television when we are up here so I have been following the Olympics through the New York Times web site. They report that as of today, the U.S. is ahead in the medal count with 44 medals verses 42 for China. And with all the talk of Michael Phelps and his quest for 8 gold medals who could disagree! I thought the U.S. was cleaning-up in Beijing.

Then last night, I found myself wondering what was happening back at home in the UK and ended up going to the BBC web site. Much to my surprise, I found that they ranked China first in the medal count. After a quick comparison I realised that this was because the BBC’s ranking was by Gold medals not total medals won and China had 24 gold medals verses just 14 for the U.S.

I am not sure which ranking is more accurate but I found it interesting how my perception of what was happening was driven by just a few subtle changes in reporting.

Rock art: A window into climate change

Elephants in the Libyian Desert

I had a really interesting catch-up this week with an old friend of the family, David Coulson from The Trust for African Rock Art (“TARA”). I have known David for years and have admired the amazing work he has done to introduce the world to the wonders of african rock art. This is work that was often completed tens of thousands of years ago usually on a outcrop, under an overhang or perhaps in a cave by our ancestors and then forgotten… until David came along.

A photographer by training, David was instantly attracted to the art by the beauty of the work and power that these images still had to the modern observer. David recognised these as works of significant importance to all humanity but was shocked by the poor understanding and complete lack of protection these images had. He resolved to dedicate his life to finding and protecting these works of art.  I have long found the work powerful and interesting but I will readily admit that it’s not everyone’s cup of tea. However, my recent breakfast with David has given me a fresh view on the art he is finding and the work he is doing.

Giraffe in Niger

Much of the art David has found is in very arid locations like the Sahara, but surprisingly, the art depicts images of animals (e.g., giraffes in Niger, and hippos and elephant in Libya) that belong in much more tropical climates. I find it somewhat haunting to think think of these deserts and to imagine that not that long ago, our ancestors carved and painted these works of art in what relatively lush surrounding.  I cannot think of a more powerful visual representation of climate change and hope that if the world does not take the time to appreciate these works for their artistic merit, that they will at least learn to appreciate them for how they can illustrate the impact of climate change.