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The Next Evolution in Microcredit


The Revolution of Microcredit
Microcredit is the most influential idea to sweep through development work in decades. The power of the microcredit revolution is based on the shattering of two of the most accepted conventional wisdoms about our economic system: that our current financial markets ensure the optimal allocation of resources, and that the best hope for the poor is for the wealthy to give them jobs.


To the traditional financial markets, the recipients of microcredit -- the uncollateralized poor -- are assessed to be among the least creditworthy prospects in the world, and needless to say, the poor have never received any meaningful recognition in capital markets. And yet, in complete contrast to the conclusions of these traditional markets, recipients of microcredit actually pay back their loans more reliably that those deemed creditworthy.
"Recipients of microcredit actually pay back their loans more reliably that those deemed creditworthy."

According to the second myth, for the benefit of all society, finance should be kept in the hands of wealthy institutions that can best allocate it and offer the most realistic possibility of creating jobs to help the poor. However, once given the capital resources to raise their own productivity, the poor build better jobs than those provided in the lowest bidder market -- better in terms of stability, human capital enhancement, job satisfaction, and often income. Microcredit has taken everything we thought we knew about development and our economic system and turned it upside down.
"Microcredit has taken everything we thought we knew about development and our economic system and turned it upside down."

Microcredit has shown us there are realistic options for sustainable growth other than those provided by current markets. It has also shown that resources allocated to the bottom can help wealth percolate up in ways wealth has never trickled down. It makes clear that the key factor separating the poor from the rich is nothing more than access to resources, and that when given more options than just selling their labor in a bidding war against the rest of the world's poor, workers can access the kinds of opportunities they deserve.

Microcredit's Limitation
Despite the revolution in development that microcredit has pioneered, its potential impact has serious limitations, and it is unable to address some of the most fundamental problems the world's workers face today. The problem stems from one of the secrets to microcredit's success: that credit only be given to those at the very bottom of the pyramid. This has made it impossible to give to productive organizations comprised of more than a few people, because to loan to a company would be to loan to its owner, not the employees at the bottom. Microcredit is therefore limited almost exclusively to individuals and to the small-scale or cottage industry. While this reaches a very important segment of the self-employed poor, it cannot impact the millions of the workers stuck in the now infamously poor conditions of mass production in the developing world. To the problem of the sweatshop economy, microcredit is mute and impotent.
"To the problem of the sweatshop economy, microcredit is mute and impotent."

The New Solution
This is precisely the problem The Working World has been created to overcome. At the heart of the solution are democratic work groups. By using democracy, The Working World has broken microcredit's limitation to cottage industry. Just like with traditional microcredit, small loans without collateral are given to those with no options -- the workers of sweatshop industries. But in this case, those workers pool their labor and their loans together as a cooperative company, and the scales of industry this cooperative can then engage in are almost limitless. This allows workers with access to capital to be the engine of development throughout the economy, not just limited to the cottage. The benefits of microcredit are spread to a much larger group of the world's impoverished, and a working alternative to the sweatshop emerges.
"The benefits of microcredit are spread to a much larger group of the world's impoverished, and a working alternative to the sweatshop emerges."

This isn't just theory, this is the real experience of The Working World. The myth-shattering potential of microcredit has now been brought to mainstream mass production. Large groups of workers are receiving credit from us and are controlling businesses using democracy, and on many occasions out-producing their traditional business counterparts. Our method is not magic: it still requires a great deal of work and perseverance and is fraught with obstacles. Rather than being an end to human problems, it is a beginning for the world's poor and working classes to take back control of their own solutions.


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