By Jack Kemp and Christopher Crane
August 26, 2003 for the Washington Times
According to the great Talmudic philosopher Maimonides, “The highest form of charity is to prevent someone from having to take charity.” Thirty-two years ago, Al Whittaker, a former president of Bristol Myers International, had a dream. He looked at the crisis of chronic poverty in the developing world, and saw the two essential ingredients necessary for lifting millions of women and men out of economic impoverishment: “credit” and “entrepreneurship.” By providing credit in the form of a small loan at fair-market value to poor, jobless people who had no collateral to borrow money from a conventional bank, he became a pioneer of what now is known as “microfinance.” The insight was to help others help themselves by giving them the jumpstart they needed to start a small business of their own. The dream took on wings.
Over the years, Mr. Whittaker’s Christian ecumenical humanitarian organization, Opportunity International, has lived up to its growing reputation of giving the poor an alternative to charity. Today, this non-profit group creates entrepreneurial empowerment by providing loans and job training directly to poor people at the grassroots level. The loans are then paid back to grow new businesses or expand existing ones. It’s not about a “handout.” It’s about showing people how to work their “way out” of chronic poverty — that which Colin Powell calls “the greatest moral challenge of the 21st century.”
Last year, Opportunity International issued 536,033 loans worth $127.2 million for 397,489 clients, increasing their daily income and creating jobs for their neighbors in 25 developing countries. By 2007, the organization plans to finance 1 million poor entrepreneurs per year; and by 2010 its goal is to finance 2 million people per year into their own businesses. Furthermore, 98 percent of its clients pay their loans back on time and at market-rate interest! Notions that the poor are not creditworthy are shattered by this reality. And, given access to credit and capital, capitalism can be democratized.
This is really the story of compassionate capitalism, or of what we like to call “venture capital energizing the spirit of entrepreneurship among the working poor.” It’s like playing football. There is no winning game without a winning strategy. On the international playing field of the war on chronic poverty, one of the proven winning strategies is called “microfinance.”
Is microfinance the only tool? Of course not. Ownership of one’s own home and property is a vital pathway to economic freedom and independence. Hernando De Soto, president of the Institute for Liberty and Democracy, headquartered in Peru, writes in his seminal book, “The Mystery of Capital,” about the crucial importance of constructing a legal framework that protects individual property rights, encourages mortgages, enforces contracts, defines and records deeds. No less important, he writes, is establishing a system of civil courts to unleash the “capacity of property to reveal the capital that is latent in the assets we accumulate.”
We must start, however, by recognizing that money and consumer power are the keys to ultimately buying a home and property. Even before that, people must be able to feed themselves and their families. It is a little-known fact that only a small percentage of hunger is caused by war, famine and natural disasters. For the majority of the world’s hungry people, food is available. The money to buy it is not. The root cause of hunger and malnutrition, therefore, is insufficient income to buy enough food. Microfinance is the jumpstart so many people need to begin the process of meeting their most basic human needs; and then, accumulated capital can be saved and invested towards purchasing a home and property to begin the process of real wealth-building.
Most of us are aware that the gap between the world’s richest and poorest is growing. We know that this is not acceptable because it makes for an extremely unstable world. When people are economically deprived, they can be politically and culturally deprived as well. What results is a feeling of powerlessness and worthlessness, making it easier for neglectful and uncaring tyrannical regimes, as had been the case in Iraq, to victimize and manipulate them. We also know that poverty represents a breeding ground for terrorism, emanating from people’s feelings of desperation. The bottom line is that we must do more to narrow that gap between the rich and poor in our world.
When we tap into one of the key economic forces that have made America great, namely, venture capital to energize the spirit of entrepreneurship, and harness it with compassion in the form of credit for the working poor — we have a formula for ending chronic poverty. In so doing, we have the capacity to empower individuals and transform whole communities. Then a new pathway of possibility for building new wealth emerges through the creation of new marketplaces, the acquisition of property and the rise of home ownership — from South Central Los Angeles to Kabul, Afghanistan and from Baghdad to Accra, Ghana.
Jack Kemp is chairman of Empower America. Christopher Crane is the CEO of Opportunity International USA.