Giving Compass' Take:

• Microcredit is useful in helping individuals become entrepreneurs and driving progress in achieving SDG 1: Eradicating poverty. 

• What are the challenges with microcredits and small loans? How are donors helping advance this system? 

• Learn more about how microloans can strengthen your community.

One person in every 10 is living in extreme poverty today, earning less than $1.90 per day. This figure has dropped significantly from 35% in 1990, but the issue remains a top priority of the UN Sustainable Development Goals (SDGs). Eradicating poverty (SDG 1) means finding more innovative, cost effective and scalable ways of reaching the last 10%.

Arguably, one of the more effective solutions to alleviating poverty in the past several decades has been microcredit, in which very small loans are extended to impoverished individuals. Microcredit has proven extremely effective in helping individuals, oftentimes women, become entrepreneurs.  In order for a person to succeed with a microloan, they must have their own entrepreneurial inclination. Starting and running a business is simply not for everyone.

Additionally, microcredit lenders inevitably screen out people in the most critical levels of extreme poverty. Often times, extreme poverty is marked by malnourishment, insufficient shelter and hygiene, and extreme vulnerability to illness and natural disasters. If a person facing these critical conditions is given a microloan, it’s likely they will prioritize their next meal over their business, and rightfully so. But it’s for that reason that people in the most extreme poverty are often ineligible for microcredit.

Nurturing job-creating companies (SDG 8), and scaling these business models, can be the key to unlocking jobs for the 736 million people still living in extreme poverty worldwide. Upaya Social Ventures, a Seattle-based non-profit, finds social enterprises like Saahas that operate in the most marginalized communities around the world and are ripe to scale, while maintaining a focus on employing the extreme poor. Upaya provides investment and consulting support to help the businesses grow and monitors the impact of the jobs they create.

Read the full article about microcredit opportunities by Heather Targosz at Global Washington.