Micro-credit vs the FARMS approach

Micro-credit was hailed as a cure-all for poverty. Nevertheless, several recent studies have documented the true picture. Little evidence was found for the illusory claims of reducing poverty. In fact, studies have shown that instead of the poor being released from poverty, secular micro-credit programs have encumbered the poor with layers of debt! This horrendous outcome is not surprising to me. Why? Because the whole scheme was built on the backs of the poor. The poor pay for this help, by supporting those running the programs as well as funding the cost of their credit, enabling the financiers to become richer and richer. This unbiblical approach to poverty, funded by interest rates of 35% and above, is a travesty. One study reported that the poor paid over 21 billion dollars in micro-credit interest in 2012!

But there is good news! FARMS International has a biblical approach to poverty. Local volunteers run our programs, so the cost is very low. Also, we do not charge interest! This fact alone gives the poor a real chance at making a decent profit, thus enabling them to come out of the poverty cycle. Above all, there is a tangible spiritual component missing in the many prominent micro-credit programs. At the very core of our programs is the spiritual concept of giving your way out of poverty. Jesus said, “Give, and it shall be given unto you...” This biblical truth has supernatural outcomes when put into practice by God’s children. Compare this to any secular agency. There is a stark difference. As many of you know, those receiving a FARMS loan agree to tithe from their project profits back into their local church. This is revolutionary thinking! How can giving produce more for the poor? The answer is simple; God blesses the obedient giver in many subtle and even miraculous ways.

FARMS does not use the term “micro-credit” because micro-credit produces “loan clients”. Small loans keep the borrower in perpetual need of the next loan, just to get by. It is very profitable for “micro finance organizations” to have a large clientele needing regular loans. Why would they ever want the poor to be free from the need of additional financing? A recent study found that the average yield of loan portfolios for micro finance institutions averaged 21.5%! “He that oppresseth the poor to increase his riches, and he that giveth to the rich, shall surely come to want.” Proverbs 22:16

Our approach is to give large enough loans to set a family or individual on a path out of poverty. On average our loans have a value similar to the yearly income of an average poor family in the region served. This amount is more than a family can realistically save, and opens tangible opportunities to use their God given talents to prosper. It is possible for a family to reach economic independence. In the next few posts, we will highlight our program in northern Thailand among the Mien hill tribes. Some of these inspiring families had such good success with their first loan that the committee approved additional loans to expand their ventures.

Joseph Richter, Executive Director


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