10 Mar

Learning Microfinance from a Vending Machine

By Riley Bathauer, 2nd year, Business Administration

Picture charity as a vending machine. We would see great options on this vending machine: I think I’ll choose the local animal shelter! I have a dollar in my pocket to spare, so I think I’ll donate that much today. When you put a dollar into the machine, out comes a token of appreciation instead of candy. This token is not tangible, but it has a deep value to you. By giving the machine a dollar, you made a difference.

If charity is a vending machine, microfinance is a broken vending machine.

Why broken?

Well, for a microfinance vending machine, once you put in your dollar, you will find it spat back out at you like, well, broken vending machines. Fold properly and it will still be sent back to you. What’s odd is despite not having actually put your dollar successfully in the machine, you still received a token of appreciation. What gives?

Microfinance gives!

Microfinance is a vending machine that challenges the system of investment capital. Conceptualized for our modern world in the 1970s, microfinance offers tiny “micro” loans to individuals in underdeveloped areas all around the globe. Microfinance institutions (MFIs) such as Kiva work with communities to develop a new system of sustainability.

Why loans? Loans imply that the people we are “donating” to are going to have to pay us back, and with interest. That may not sound like an ethical solution for alleviating poverty until you consider the full effect of the vending machine.

Say I donated $50 to Pamela in Guatemala to pay for her family’s meals. At the charity vending machine, I would insert the money and take my token. A couple of weeks later, when I cross this vending machine I am alarmed to find Pamela on the list of donees. The food I gave her ran out, and now I must reach into my pockets again.

Give a person a fish, they eat for a day; teach them to fish, and they’ll eat forever.

Microfinance institutions do not donate money; instead they actively pool people together and offer education on financial planning, help them develop sustainable business practices, and then give them loans so they can make their idea a reality.

When you walk up to a microfinance vending machine, you may see an option to loan Pamela $50 for fishing equipment. Pamela has already been contacted by her local Microfinance Institution, come up with a business model for her family fishing venture, and determined how much money to raise. So, when you put in that $50 into the vending machine, out comes a token of appreciation. But don’t walk away too soon! $50 and a note popped out:

Thank you for funding my family, with your faith in me I was able to feed not only my family, but also my village. I managed to earn enough to pay you back and would be grateful if you considered donating to Sarah – she’s my neighbor and looking to start a pottery business. Thank you for believing in me.

Not only did you help Pamela sustain her family, but you also have the money back in your hand! This is where our “broken” vending machine works its magic, for now we can do it all over again. And, with a 98% repayment rate, this cycle of good will can go on until, potentially, the end of poverty.
With this new knowledge perhaps the microfinance vending machine is not broken at all – microfinance works together with charity to change our global socioeconomic environment. It is tool that we can take use to impact the world around us – all it takes is the goodwill put in your quarters and decide where they will go.


Leave a Reply

Your email address will not be published. Required fields are marked *