On the right track

The end-of-year double-issue of The Economist is usually worth waiting for.  The one that came this week includes several very nice essays.  The one I liked best describes life in Kibera, a Nairobi slum.  Here are some short outtakes:

Upwardly mobile Africa ... Boomtown slum ... A day in the economic life of Africa’s biggest shanty-town ...To equate slums with idleness and misery is to misunderstand them ... Kibera is a thriving economic machine. Local residents provide most of the goods and services. Tailors are hunched over pedal-powered sewing machines. Accountants and lawyers share trestle tables in open-air offices. Carpenters carve frames for double beds along a railway line. Whole skinned cows hang in spotless butcher shops. “Give me 30 bob,” says a customer to a paraffin seller, who has just taken delivery of several jerry cans from a porter with a steel-frame wheelbarrow. All day long, sweaty porters cart supplies along filthy lanes, hissing to shoo people out of the way. .. Life in Kibera can be harsh. Disease is rife, food is short for some, and death can come suddenly.

Just after eleven o’clock an explosion thunders past the paraffin seller. Lights in the shops along the lane expire instantly, then a mob charges past, accompanied by sharp screams and a sizzling, dancing power cable that has blasted off a faulty transformer overhead. The cable eventually goes limp and the crowd disperses. Minutes later the lights come back. ... The transformer, like all power in Kibera, is run by shady types who tap into the city grid. They are less than scrupulous when it comes to safety and they charge heavily. But at least Kibera has power, unlike many other parts of Africa. Soft drinks sold in shops are chilled. Rooftops are awash with TV aerials and mobile phones are as ubiquitous as in the West.

Kibera may be the most entrepreneurial place on the planet. ... The key to making it in Kibera is access to capital. A market of one million potential customers crowds in on entrepreneurs, but raising the money to start a business is hard. Most banks won’t lend to them because they have no collateral, perhaps not even a fixed address. Those who manage to borrow face high interest rates. Moses Mwega pays 25% a year and considers himself lucky. Over the years he has built up a cosmetics shop selling creams, wigs and shampoos. The bank recently accepted his stock, a television set and a second-hand sofa, including lace doilies, as collateral. He got 350,000 shillings ($4,000) to expand his business.

There are entrepreneurs all over the world.  For most of them, access to capital is the problem.  Thanks to the internet, crowd-funding has a role.  I am a big fan of Kiva and do most of my giving through them.  Here is an academic paper (by Tillman Bruett) that shows how they and others like them are on the right track.