Microcredit in the Middle East

Microfinance chart of the Middle EastThe chart at right is from a Powerpoint presentation by Motaz El Tabaa of the Alexandria Business Association, showing the Gross Loan Portfolio (GLP) in different countries in the middle east.

I'm especially struck by how small the amount is for Iraq, where the United States literally shipped $12 billion in [http://www.guardian.co.uk/world/2007/feb/08/usa.iraq1 pallets of $100 bills], only to see most of it disappear without a trace. A report prepared for the [[Committee on Oversight and Government Reform]] of the [[U.S. House of Representatives]] described the careless way the money was handled by the [[Coalition Provisional Authority]] (CPA) under U.S. proconsul [[Paul Bremer]]:

[http://oversight.house.gov/documents/20070206130101-80952.pdf One CPA official described an environment awash in $100 bills]. One contractor received a $2 million payment in a duffel bag stuffed with shrink-wrapped bundles of currency. Auditors discovered that the key to a vault was kept in an unsecured backpack. They also found that $774,300 in cash had been stolen from one division's vault. Cash payments were made from the back of a pickup truck, and cash was stored in unguarded sacks in Iraqi ministry offices. One official was given $6.75 million in cash, and was ordered to spend it in one week before the interim Iraqi government took control of Iraqi funds.

A summary of the minutes from a May 2004 CPA meeting show a single disbursement of $500 million in security funding labeled merely "TBD," meaning "to be determined." The failure to account for the $20 billion expended by the CPA appears to have had serious consequences. Many of the funds appear to have been lost to corruption and waste. According to the Inspector General, thousands of "ghost employees" were receiving paychecks from Iraqi ministries under the CPA’s control. Some of the funds could have enriched both criminals and insurgents fighting the United States.

Soldiers guarding pallets of money in IraqSoldiers guarding pallets of money in Iraq

Just for comparison's sake, $12 billion is more than twice the amount of money that has been invested thus far in microfinance projects worldwide. Several people at the microfinance conference I'm attending have said that the actual demand for microfinance among poor people worldwide -- the market for the service -- is at least ten times the amount currently available. There are projects that have been working passionately and enthusiastically to ramp up to the point where one group has $300 million being lent to poor people in India. And unlike the U.S. in Iraq, which was literally piling up money in bags in unlocked rooms, microfinance projects are incredibly diligent about tracking their funds, following up with borrowers and making sure the money is being used for its intended purposes (and that borrowers repay their loans).

As this example illustrates, the money that the U.S. has literally thrown to the wind in Iraq could have done an enormous amount of good if it had been used differently. It's a tragedy of wasted opportunity on such a massive scale that my mind boggles just thinking about it.

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