The two readings for this week share a common theme and emphasize the importance of investing in entrepreneurship. Both the chapter titled “Reluctant Entrepreneurs” and “The Parable of the Black Sheep” take on a similar approach to addressing the issue of poverty and lack of upwards mobility in the lower class. The chapters point out the shockingly high number of poor business owners compared to the proportion those actually attempt to grow their business. However, the tones used by the authors in each passage are different despite the similar theme.

In “Reluctant Entrepreneurs,” Banerjee and Duflo talk about the importance of microfinance in the funding of entrepreneurial projects. As we have previously learned, the poor are often neglected by commercial banks as an unprofitable market sector. Microfinance helps bring the poor into the banking system and help them get the funding needed to grow their businesses. It turns out that the default rate on these loans is extremely low especially when compared to the much higher default rates on commercial loans. The unbanked tend to get discouraged easily and fail to pursue expansion plans. They become content with the status quo, which perpetuates structural poverty and adds on to the lack of class mobility. However, when they do get funding, empirical data shows that despite the shockingly high interest rates of more than 4%, these poor entrepreneurs pay off these loans and actually succeed to grow their businesses. People just need to get a chance to improve their status and they will deliver in most cases.

The other text by Sharma takes a similar approach to the issue of poverty, but it takes on a much more reproachful tone. It almost seems as though the poor are content with the status quo and choose to remain where they are. Following the logic behind this viewpoint, that means that the poor can only move up in social class if they are coaxed to do so by a much wealthier individual or organization. I don’t agree with this viewpoint because I believe that in some areas, even those with a lot of ambition are set up to fail. They need outside help to break away from the exploitation plaguing their community and will jump at the opportunity to do so. Once again, all they need is a chance. I don’t think that the poor are “comfortable where they are” but I do agree that the courage received from somebody putting faith in their business can help people expand beyond their current capacity.

I believe that the outlook of these two passages is rather positive. Microfinance is expanding and there are goals to have over 95% percent of the world included in the banking system by 2020. These goals may be farfetched, but anticipating significant progress is still a realistic viewpoint. If these microfinance initiatives continue to fund entrepreneurial projects, we might see a significant decrease in the global poverty rates especially in third world nations.

I was always under the impression that Fair Trade was always the best option to ensure social justice for indigenous people. My past beliefs were only strengthened by what we learned about in the class from the exploitation of people in the Congo in the Coltan trade or the use of child labor in the cocoa industry. However, Sarah Besky has provides us with an example in which this is not the case. In “Colonial Pasts and Fair Trade Futures,” Besky shows that the fair trade framework can sometimes be detrimental to an area and draws examples from the Darjeeling Tea Trade.

Besky explains how the colonial framework left behind by the British was actually socially and economically beneficial to the indigenous people of the area. Colonial labor policies guarantee the welfare of the plantation workers. The Plantation Labor Act states that owners must provide workers with housing, schooling for the workers’ children, proper food rations, and even health care. While British colonial rule might have been exploitive in many other ways, the framework they left behind for plantations was actually very fair.

Interjecting Fair Trade into the current colonial style structure is detrimental to the wellbeing of the indigenous people of the area. The laws that govern “fair trade” are very loosely written and they offer a way out for plantation owners who don’t want to pay for the welfare of their employees. In fact, by operating through “fair trade,” employers can abstain from providing healthcare and schooling for workers’ children. Thus the Plantation Labor Act is ignored and all of the social benefits that go along with are swept away.

In most cases, Fair Trade is still the best and fairest option to ensure social welfare for the indigenous people of an area, but this case does provide me with something to think about. It is good to be open minded at all times and never limit your mind by just assuming that something that is seemingly good, must be the best option in all cases. In all honesty, I believe that I learned the most from this case study than any of the other texts we have read over the course of the semester. It is great to have an understanding of the potential pitfalls of pursuing fair trade.

Tonight’s reading, titled “Harnessing Entrepreneurial Energy,” proves that it is possible to steer clear of business as usual and it in some cases more efficient. The CEO of Root Capital, Will Foote, actually started off as a Wall Street banker. He abandoned his respectable position to try to expand banking services to those who need it most. He created a microfinance institution that provides loans to underprivileged communities that are often neglected by commercial banks. His experience reminds me of the guest speaker we had last week who left his position at a hedge fund to provide portable water jugs to Africans. Their successes show that it is possible to stray from the norm and do some good in the world.

Commercial banks tend to avoid poorer communities in fear that entrepreneurial startups from these areas are likely to fail and are too risky. Meanwhile they leverage their assets and invest in more risky ventures such as mortgage bundles. The interesting truth is that the default rate on these microfinance loans is actually 1% in most places which make it significantly less risky than what these banks are used to which is historically around 10% in the US. People in these places need these loans and will do whatever they can to pay them off. These people are desperate and they know that if they don’t pay off the loan, they will not be able to get additional funding in the future.

Mr. Foote focuses on farmers who have difficulty financing improvements to their land or technology to increase their future production. His company gives courses to all business owners that wish to receive loans which increase their knowledge base on how to run a successful business. The five day courses taught in Uganda focused on teaching local entrepreneurs the technical skills needed to manage their cash flow and improve their accounting practices. Root Capital boasts a repayment rate of over 98% which goes to show that microfinance banking can be successful and less risky than commercial banking if done correctly. It is also more effective than charitable giving because it offers a long term solution for improving the quality of life of these farmers. By installing water efficient processing equipment, many farmers were able to care for the land without needing the help of their children. In turn, this allows more farmers to send their kids to school which has long term residual effects on the quality of life in the area and the ability for these kids to succeed.

The efforts of Root Capital to provide loans to the underprivileged at a fair interest rate is a great example of fair trade in the microfinance sector, but the extent of their services stretches much further. The ability for farmers to fund expansion projects for producing cash crops such as cocoa allows them to avoid working for oppressive drug lords. Drug farming is quite common in these poorer areas since impoverished people are much easier for these drug lords to exploit and manipulate. Once they get the funding to create the foundation needed for a sustainable, legal, and ultimately rewarding business, they are able to improve their quality of life and that of the community as whole.

The book titled Fair Trade: A Human Journey shows the importance of reducing the exploitation of people in third world countries. It was unfortunate to see the level of poverty that millions of people live under in order for people in industrialized to have access to luxury items at low costs. Items such as chocolate, diamonds and smart phones might make are lives easier or more enjoyable, but they do not play a crucial role in our survival. This makes this exploitation even more disturbing. It also proves that fair trade is possible since people who are able to buy luxury items money have at least some additional money to spend on fair trade certified products.

The description of the poverty situation in Bangladesh was appalling, especially the first-hand accounts of rape. Women are raped regularly and few men are held accountable for their actions. Some women turn to prostitution in order to provide for their families, but there are good chances that the man who has his way with her will not even pay her. Furthermore, he might even beat her after having raped her. Women do not even pursue justice in most cases because they don’t even have enough money to pay for legal fees. Fathers must often beg from door to door for even a single grain of rice in order to keep their children from starving. This level of poverty is shocking and it is hard to believe that this type of socioeconomic distress exists in the 21st century.

Luckily there is some hope for things to change in Bangladesh. Fair Trade initiatives made by the Mennoite Center Committee have helped oppressed women get earn a decent wage for artisan crafts. These fair trade programs are highly effective because they give these impoverished women more than simply what they need to survive. Women can save up money over a span of time until they have enough to start their own self-sufficient artisan business. These initiatives are very promising considering that they not only help impoverished individuals, but also make them self-sufficient such that they aren’t always reliant on the MCC programs.

The photographs in the book help evoke human emotions of pain and despair. They are very effective in emphasizing the gravity of the situation in impoverished nations. I believe that these pictures are even more effective than what is described in the text because it puts a face onto the pain and suffering that occurs in these places. I hope that the Fair Trade initiatives of the MCC are successful in the long term and that the program is able to expand into many other nations. The work of the MCC certainly makes the future seem a bit less bleak.