There are theories that state that more trade between African countries are key to the expansion in African economies but unfortunately there are facts that illustrate and this is the first step to achieving our goal. I believe that the way forward to take a Pan Africanist 19 approach the situation. Through the provision of ranging financial services, microfinance can be seen to be highly desirable especially because it contributes to the Millennium Development goals (a few of them being to eradicate extreme poverty and hunger, achieve universal primary education and develop global partnership for development). The introduction of micro finance in Africa has contributed to many of these objectives and due to its unique structure it allows governments to target extreme cases in need of dire help. Low income families receiving micro financing have a larger incentive to keep children in school as their short run income is greater. The goal of earning a sustainable income that allows the recipient to pull his or her family out of poverty is completely achievable as seen in Sierra Leone when an initial microcredit loan was given to 3000 youth involved in the Plan Sierra Leones Youth Microfinance Project that was followed up with lessons on how to save and utilize money to see quick profits. This allowed the young entrepreneurs to sustain and later expand their businesses to full effect. Micro finance also leads to cases of indebted households with low and irregular incomes. Because of this there has been a more critical views on micro finance in particular, micro credit. Currently, microcredit is being used in an attempt to encourage economic growth through small entrepreneurs. Though this does seem like an excellent idea, it would only make a substantial difference if most of the poor people in Africa were entrepreneurs; the reality is that most of the population riddled with poverty would rather go for the much safer option of joining the labour force. In some cases, the introduction of micro finance actually restricted growth. For example, in South Africa post-apartheid (1994), micro finance had implicated untold damages on the economy and society of the country. The idea was to increase the number of jobs, real incomes and subsequently the feeling of dignity in the poorest corners of the country. By looking at this scenario, it is fair to say that microcredit is detrimental to development in developing countries. This is because its aims are to subsidise small companies which therefore allow them to reap the rewards of profit as well as benefit the country’s economy but in practice we see more and more that it is about supporting consumption spending. Micro entrepreneurs cannot utilize microcredit to benefit themselves as well as make a significant improvement to the country’s economic situation. In the 1980s Norway's development agency attempted to teach Kenyan cattle herders how to run a fish-freezing factory to export fish from Lake Turkana to the countries of the world. This project failed spectacularly and the factory was closed before production started. Because of this many of the Kenyan population rely on food aid from the UN. Micro financing is a highly risky and expensive way to increase the consumption needs of those of the population that do not have a stable income. This poses the question of whether Africa as a continent is at the stage where economic growth can be achieved through the increase of competition of small firms; and to that I answer no. Micro finance has been proven to be effective as it enables and initiates self-reliance for individuals but currently this is not what Africa need to progress forward. Ultimately I believe that the allocation of scarce resources into, most of the time, unproductive micro-enterprises is detrimental to development and growth of the country’s economy because the opportunity cost is large. This is simply because small time entrepreneurs like sellers in the market selling their product do not contribute a substantial amount to the building of the economies productive capacity. From seen examples it’s clear to see that microfinance cannot, at least single-handedly, transform the economies of Africa that have been held back by many structural constraints such as corruption in governance.
19 Pan-Africanism is the political unity of all inhabitants of Africa
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