<i>A Billion Bootstraps</i> book review: A hand up, not a handout

A Billion Bootstraps combines enthusiasm with expertise to introduce a powerful system of investment to foster small enterprise in the developing world, says Unicef UK's David Bull.

by David Bull
Last Updated: 31 Aug 2010

This book could change lives. Yours, your company's and, more importantly, those of millions of poor people given small loans to develop businesses that will lift them out of poverty.

Bill Gates bootstrapped Microsoft, and Masaru Ibuka bootstrapped Sony, and this book argues that you could give this opportunity to the world's poorest. Phil Smith and Eric Thurman bring together the worlds of business and philanthropy and they are 'on a mission to defeat poverty'. A Billion Bootstraps: Microcredit, barefoot banking and the business solution for ending poverty sets out to prove how microcredit can help millions to improve their standard of living, and to convert readers to supporting microcredit as a way of giving to poor countries - a hand up, not a handout.

More than half the world's wealth is held by 10% of the global population; 40% of the world's entire population live on less than $2 a day. That is about 2.5 billion people struggling to survive on just 5% of the world's income. In the UK and the US, social welfare programmes provide a safety net for the poorest; no such safety nets exist in developing countries.

Thurman is a leading expert in international philanthropy and has managed microcredit programmes in 30 countries. Smith, a private investor, is a more recent advocate, and together they are out to make converts: 'A safe assumption is that if you're reading this book, you probably want to make a difference. Why else would you give away your money?' In turn, they take the reader through the mechanics of how microcredit is organised, providing both positive and negative examples.

For the donor, the authors provide a simple ratio to apply to almost every 'giving' situation. They call it the 'cost-per-life' (CPL). The more beneficiaries per programme, the lower the CPL, and the more effective the programme.

'Donors to microcredit programmes can shed the old hand-out mentality and become true partners in progress with people of the developing world,' the authors explain.

The reader is led step-by-step into questioning the impact of their current donations to charity, to work out their own indicators of desired results from their giving, and is provided with numerous examples of the benefits of microcredit to its recipients.

Readers are also made aware of the effectiveness of giving their skills as well as their money. This is, however, a rather simplistic approach to development - many of the most vital interventions, such as life-skills education or child protection, are less easily measured but no less vital.

On average, borrowers need a loan the size of the average annual income per capita of the borrower's country, as low as £60 in Africa. The equivalent in the UK would be £22,650. Loans are usually short-term - say, six months - so that, when repaid with interest, a given sum can be loaned time and time again throughout the community, a minimum of 20 times if seen as 10 years of six-month loans. In other words, every $1,000 contributed will eventually provide at least $20,000 in microloans.

The authors report that 'repayment rates for good microcredit programmes typically exceed 98%'. The benefits are not just an immediate improvement in the standard of living, but also the growth of self-respect and independence and the knowledge that further loans are available for those who repay their loan on schedule. The model is a tried-and-tested one based on that of village-level groups working with the local loan-provider.

The book is an easy read, enlivened by the authors' personal anecdotes and experiences. They paint vivid pictures of life in the poorest communities, where 20 hens and a scrap-metal coop is a poultry enterprise; a suckling pig is savings for next term's school fees; a Ukrainian woman's first small business, using a loan to purchase pencils, paper and other school supplies, has increased tenfold. 'From a business perspective, microcredit is a marvellous opportunity. Demand far outstrips supply. Potential borrowers are knocking down the doors to get the product.'

The foreword is by Dr Muhammad Yunus, the Bangladeshi economist who won the Nobel Peace Prize in 2006 for his work in founding the practice of microcredit nearly 30 years ago with the Grameen Bank. Unicef has partnered with both since the early 1980s, giving poor women access to funds for the first time. Of the 1.2 billion people who live on less than $1 a day, the majority are women.

The book combines enthusiasm and expertise, and it would be a hard heart that is not inspired to look further into supporting a charity that provides funds for microcredit in the poorest countries. Nevertheless, microcredit is not a simple panacea for international development. Not every poor person has the skills or aptitude to establish a business, and many are so poor and excluded that even microcredit loans are beyond their reach.

For the most socially and economically excluded - children orphaned by Aids, street children, refugees and victims of conflict - other kinds of support, education and training are needed, and the poor will still need health, education and protection through other kinds of investment.

Just one gripe. Since the authors are American, references are to US organisations and policies; the book's impact would be considerably enhanced in the UK if there were footnotes or appendices with relevance to the UK.

David Bull is executive director of Unicef UK

A Billion Bootstraps: Microcredit, barefoot banking and the business solution for ending poverty; Phil Smith and Eric Thurman; McGraw-Hill Education; £15.99.

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