Micro Credits – A Solution For Poverty?

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By Viktor Persson

After the Norwegian Nobel prize committee decided to give the United States president Barack Obama the peace price, a president that later came to continue to war in Iraq, and also fund insurgents in Syria, I seriously started to doubt the reasoning skills of the members of this Nobel Prize committee. And after having watched the documentary ‘The Micro Debt’ by Tom Heinemann, I have concluded that the Nobel Prize committee (at least those handing out the peace prize) do not know anything about what it means to create actual peace in this world. Because when they decided to give Muhammad Yunus the peace price, for having founded the Grameen Bank, and invented the concept of micro loans, and for thereby apparently having found a solution to poverty, they were obviously not using basic mathematics to assess the outflows of such loan methods.

YunusThough, before we dive into the basic mathematics of Micro Debt and whether this can be a solution for poverty or not, let me share the story of Muhammad Yunus, his bank, and the stories that has begun to surface about his money lending practices. It begins in 1976 when Yunus (supposedly) found out that small loans could make a disproportionate difference in a poor person’s life. According to Wikipedia, the first loans Yunus gave, made it possible for the borrowers to profit. Yunus business expanded, and by July 2007, his bank had issued around US$6.38 billion to 7.4 million borrowers.

As mentioned above, Yunus was awarded the peace price in 2006 for his efforts to create economic and social development. However after the release of the documentary ‘The Micro Debt’ the Bangladeshi government decided to review Yunus bank, and Yunus himself was removed as Managing Director of his bank. This is not particularly strange considering the claims that are made in the documentary, and the compelling evidence that it presents, that the micro debt is not at all a solution for poverty, but rather a trap, making the large amount of borrowers worse off than before.

Though in this blog I am not going to focus on Yunus and whether the claims made against him are true or not. My focus will instead be the concept of micro credits and whether these loans makes any sense; is it really possible to remove poverty through debt? The Micro Credit concept is not unique to Bangladesh; it has also become popular in South Africa, where it has created the opposite of poverty reduction. The following quote gives a stark description of the situation that unfolded.

”The microcredit-induced problems that emerged in South Africa are two-fold. First, microcredit per se is actually an “anti-developmental” intervention. For one thing, it exists on paper to support the smallest income-generating activities, but in practice is increasingly all about supporting consumption spending. In South Africa, the microcredit movement has created an incredibly risky and expensive way to support the immediate consumption needs of the very poorest.

With few poor individuals possessing a secure income stream that might ensure full repayment of a microloan – unemployment is now higher than it was under apartheid – many of the poorest individuals have been forced to repay their microloan by selling off their household assets, borrowing from friends and family, as well as simply taking out new microloans to repay old ones. For far too many now “financially included” individuals in South Africa, using microcredit to support current spending has been a disastrous and irreversible pathway into chronic poverty.”

Milford Bateman, Microcredit has been a disaster for the poorest in South Africa, (2015-09-25)


Euros - MicrocreditAcademics and other proponents of the Micro Credit as a way out of poverty makes the assumption that the money lent will be used by the borrower to further his business. This however, is just that, an assumption. Most poor people are just as middle class people, not entrepreneurs, and do not have a very entrepreneurial relationship with money. The loan will be used to buy goods for immediate consumption, and will only serve to put more pressure on the debtor. In worst-case scenario, this will lead the already poor person, to loose the little safety they do have, when they are forced to sell their house to meet interest and installment payments.

Further, those borrowers that are indeed entrepreneurs, and that do invest their money in a business, there is nothing that says that these businesses will be able to profit. Nine out of ten startups fail – and that number will probably be even higher when not only you, but also all of your neighbors, decide to go out on the streets and sell the same thing – which did happen in South Africa.

Then we have the big problem when it comes to Micro Credits, the interest rates. On some of the Micro Loans that interest rate will be at 100 % or more. There is no startup that yields a sufficient profit to cover such a high interest rate. Conveniently for the creditors, most of the debtors are not proficiently literate, and will thus not really understand what they are signing.

Yunus was applauded when he was able to offer loans to poor people that cannot offer any securities in case they would forfeit on their installments. However, to ensure repayment of the loans, Yunus bank have developed a system of “solidarity groups”. It is these small informal groups that together apply for loans and its members act as co-guarantors of repayment and support one another’s efforts at economic self-advancement. Hence Yunus use the psychology of group pressure to ensure that the poor people are sufficiently motivated to pay back their loans. And even though this might seem innocent, in reality it has lead to the most horrific of consequences. One woman that was unable to pay her loan was pressed by her co-guarantors to take up prostitution as a way to meet her installment payment. That woman later poured kerosene on herself, and lit herself on fire. That is the effectiveness of group pressure when survival is in the picture.

What are we then able to conclude from all of this? One thing is clear: We cannot trust academics to know what is right! Even though they have a degree in economics, and even though they have received the Nobel peace price, that does not mean they actually understand how reality operates. Academics have their nose buried in deep books and because of that they will many times miss what is right before their eyes. Hence, we have to educate ourselves, and take responsibility. We cannot rely on a small intellectual elite to know how to solve such things as poverty – this is a problem that involves, and touches all of us, and accordingly it is everyone’s responsibility.

Then, the second thing we can learn: Change cannot come through DEBT. The very reason why we are living in a world where money is increasingly more difficult to obtain is because of DEBT. We live in a debt based system, and this forces us to work more – and even still there will/must be a loser. With debt, someone always loses; someone must be that poor guy that has to pay back the interest.

Real change will come through changing the structural design of the economic system – because only through changing the rules of the game are we removing this incessant fear of survival that is currently holding the entire human race in its grip. That structural change must involve giving all human beings a dignified life, real security, real safety, and easy access to money. This cannot come from debt, as debt is the very instigator of fear, anxiety and stress.

Hence, if you are interested in solving poverty, I suggest that you investigate the Living Income Guaranteed. This is an economical system that will revolutionize the way we think about money – and that is precisely what we need. We need something new, a brand new way of looking at things – a fresh start – free from debt and the old pessimistic ideas that apparently, poverty is unable to be removed from the face of this earth.


For more reading:


Watch the documentary ‘The Micro Debt’


Investigate the Living Income Guaranteed Proposal

What is payment? We got it wrong this whole time!

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By Blaž Cegnar


We are raised up by the society to believe that we pay for things with money. You know: paper, coin, digits on the bank account. Whenever we want something that we don’t have or is not ours, we pay for it in the store with money and then it’s ours. Then we can do with it whatever we want, because WE paid for it with OUR MONEY. Then there is this division in our society where some believe that one should always work to earn one’s money and that those who don’t do ‘real’ work are bad people, lazy, selfish. Others like the capitalist idea where one invests one’s money (earned, stolen, inherited or all of the above) so that the money ‘works’ for you and one just gets the benefits, the profits. But what all have in common is that all live in the illusion of money and payment, because everyone believes that we pay for things with money. I did too, but boy, was I wrong.



We don’t pay for things with money. Nothing is actually paid for with money. So, what is the real payment for a product or a service? Who does in fact, actually pay for it? If I walk into a store and buy some milk, who paid for it and with what? Me with my money? Nope, this is a complete illusion. Can you see it? Wake up – who really paid for the milk? The cow that produced it. The farmer who collected it, the people who packed it and moved it to the store. All these beings PAID for it WITH their WORK. This is the only REAL payment that exists, ever. Everything is paid for with work, with effort, with movement. Giving some ‘money’ over the counter is not a payment, it is a joke. It is some ‘kids’ playing games, imagining things. This is what we are doing when we believe that we actually paid for something when we give our money or when we transfer some digits to another’s bank account – we are imagining things. We aren’t really doing a damn thing, we are only taking what is already there and shuffling some paper and digits around because we care so much about them – the digits and the paper we call money. But we only care about the amount of our digits and our paper, not about another’s. But no, we don’t even dare to talk with anyone openly about our money, our digits and our paper, or theirs, because it’s a secret. If I have less money than you then I am ashamed and if I have more than you then screw you, that’s how life works. But it doesn’t. This is how we created the system of money to work in our minds – big difference.

Money is just a tool, a mind tool in a game with rules that we create, and it can be very useful to help us disperse the goods in a more equal, reasonable, practical way. Money is not evil or bad. We are evil and bad, because of the way we use it to abuse each other – Life – with it. So, our society today does not use money to disperse goods in an equal, reasonable, practical way for all to live a Dignified Life. We use the money to enslave each other, we use the money to say who is worthy of life and who is not worthy of life. We use the money to define whose life is worth more and whose life is not worth a penny. And we take it dead serious. We do not give a shit when people suffer and die because we do not allow them to have enough money. We allow them to work to the bone though, of course, but we do not recognize the payment that they do, the REAL PAYMENT, THE PAIN-MENT.

All these abused workers do all the pain-ment for us while others mostly just shuffle the paper – ‘money’ – around and then we actually believe that the hardest PAIN-MENT that the ‘lowest’ workers do is worth the least amount of credit? We obviously do believe this, because we give the workers who work the most and the hardest, the least amount of credit for it. We came up with this rule that such people, who work the hardest and the longest, who do most of the ACTUAL HARD PAIN-MENT for all of us, should get the least amount of credit for it. Would we like to be in their shoes? Would we give ourselves the same amount of credit if we had to work in their shoes? No, be serious and be self-honest. Oh, did we get this whole payment thing wrong on all the levels imaginable! So, here we see that we have to redefine the word PAYMENT, which we dared to define and understand so selfishly and contrary to the actual reality of things, so that we can stop abusing and stop creating abuse of Life with it and actually come up with a definition that is supportive for all.

Current definition (from Wiki): A payment is the transfer of an item of value from one party (such as a person or company) to another in exchange for the provision of goods, services or both, or to fulfill a legal obligation.

Re-definition: PAYMENT – the pain-ment of work, labor and effort that one gifts into an activity, product or service. These people, who work to the bone in sweatshops all over the world and all people who work anywhere, are the ones who actually pay and make the PAIN-MENT for our shit that we then buy with money: our iPhoneys, our fancy plastic fantasies, our clothes etc. Workers are the ones who paid for it.


Gastar dinero con prudencia - salvar al capitalismo


So, the next time I see myself say or think: “Hey, I paid for that!”, I’ll stop, breathe and realize: Wow, I did not really pay for that at all, I just gave my money for it, my credits, my imaginable value. And mostly not even to the being who ACTUALLY paid for it with their own physical labor. That being is probably suffering somewhere in a sweatshop, being abused by all who don’t understand where the actual payment happens, who do not value the Life of all beings equally as their own and do not give all the equal credit for the work and the pain-ment they do. I will no longer allow the abuse of money and payment and I will speak up for all beings that do not get their equal credit in spite of all the PAIN-MENT they do. I will work to implement a new system, where Life, work and pain-ment of all the beings is valued equally and where all receive their equal credit for being alive and sharing their Life with me, so that we can all be alive together in a Life worth living.


So, taking this new definition of the word payment: how does it affect one’s awareness of reality and how should the money system change according to it so that there is no more abuse?


Firstly, we become aware that no one is actually paying for anything with money, because the only form of real, actual payment is movement / labor / work / effort itself, towards a goal, product, service that is best for all, that supports all. When we are aware of this, we can see that we cannot really value work through money, because most of the work can be valuable and useful for the society in some way or another. Sure, some work is more urgent than another and so, some work must be done prior to some other work. For example; producing food for all is more urgent than painting a picture, but this does not change the value of work itself – it only changes the priority, the urgency of it, the order in which the work should be done – very important to realize. So, what is the value of baking bread? What is the value of building houses, producing electricity, assembling iPhoneys, designing and planning new things? What is the value of singing, painting, making a sculpture? Can we really put a value in digits on any work? Sure, any random number will do… But it is still just and illusion of the mind, a thing that we made up. So, really, what is the real value of any work and effort that supports Life? It is the value of Life itself, because Life expresses self through work, effort, expression, art, movement…


So, you see, the value of any work that supports Life equals to the value of  Life itself, because Life does it. Can you see? Wake up – do you see it yet?

Living Income Guaranteed - Logo


So, in a system where this would be fully realized and implemented people would work firstly on things that are necessary to sustain a Dignified Life for all and then they would work on anything they like – and all would still get an equal amount of credit for it, based on the value of Life itself. So simple, yet so hard to grasp through a mind of selfishness. So, back to where we are at the moment in our reality, of course we cannot just remove all money and say every work is priceless, because we have been living in the illusion of money and payment for so long. Thus we need to gradually realize the illusion, like I explained above, and step by step implement the necessary changes in the system that will – in the end – lead to a Dignified Life for All, where money as we know it today will no longer exist.

We can start by implementing a solution that is described in the Living Income Guaranteed Proposal. This proposal / goal is not an Utopian world. What I am talking about is a world of common sense, a world where Life is actually recognized and honored in all. What we have today and what we have been trying to live until now – this is the real Utopia, because we are trying to live according to illusions that we create in our minds. And whenever we try to live out illusions that are not in consideration with the actual reality – we create suffering.

As long as we create suffering, we are doing it wrong and we are trying to live out the illusions of our minds that are not real, that are selfish. So simple, yet so hard to see through our minds, as long as we try so hard to avoid any self-responsibility.

I dare you to join me and see through the deception of money and payment that we have today. The economic solution I suggest to read  about: Living Income Guaranteed


Further information: