The Nature of Poverty and Micro-finance Solutions

Understanding the Nature of Poverty
Successful problem solvers share the common trait of understanding the problem
thoroughly, which is an integral part of finding a solution. As stated by John Dewey, “a problem
well put is half solved” (Campbell.48). The problem of poverty can simultaneously be
understood as a cause and effect. For example, poverty could be the root cause of illiteracy, debt,
oppression, lack of opportunities and resources. However, it could also be the result of all those
aforementioned problems. The nature of these problems is cyclical, often making it more
difficult to pin point one and work towards it. If a problem solver approaches a singular problem,
the blind-spots created in the solution will often make it fail. To understand the multifaceted
nature of this problem, Akula lived amongst the poor for several years and learnt about relevant
additional issues such as corruption in the region, illiteracy, and lack of book-keeping knowledge
before he implemented solutions.

Previous Attempts to Reduce Poverty
The problem of poverty has been around long enough that several solutions have been
attempted. One approach is to care about an issue, but to jump into solutions before
understanding who it helps. “The development community takes a top-down view of rural
poverty” wherein NGO executives get “their information from either large scale survey
questionnaires or brief and hurried visits to villages located just outside of cities” (Akula.41).
With their “limited direct engagement with poor people, they get incomplete information” and
they “end up designing inadequate and sometimes downright harmful, programs” (Akula.41).
For example, programs for rural education pull children away from working for their parents.
These programs leave the children unskilled to work on the fields and inadequately educated to
compete for jobs with more educated applicants. Thus it is important to understand the economy,
the environment and the people before implementing solutions to developmental problems.
A successful poverty reduction attempt was that of Muhammad Yunus, who did
extensive fieldwork to understand the problems of the poor. He revolutionized the lending
system, freed up bonded laborers, and invented the concept of microfinance. Akula’s
microfinance model was inspired by Yunus’, but was a profitable venture instead. This business
model helped SKS Microfinance to attract investors and reach thousands of villages
subsequently. The following section focuses on Akula’s path, why it was successful and lessons
from his story that can be applied to solve other problems.

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