Overcrowding and Underfunding: Microfinance and Slowing Urban Concentration

March 19, 2018

Around 75% of the developing world’s poor still live in rural areas. However, urban growth in these same countries accounts for much of the United Nation’s predicted global population increases. Not only are these levels of urban migration increasing every year, but the rates are becoming more and more unsustainable. As these megacities continue to concentrate, overcrowding, poor sanitation, and public safety issues continue to compound as well. In fact, in the next 20 years, urban populations are expected to rise by five billion.

However, there are efforts being taken to reduce this trend. 88% of the least developed countries in the world have undertaken policies to reduce rural migration to urban areas. One specific area of focus here is the displacement of people by natural disasters. In 2011 alone, 14.9 million people were forced to leave their home due to damages caused by a natural disaster. As a result, many governments are beginning to invest in enhancing the adaptive capacity of people in disaster-prone areas to mitigate mass urban migration after a hurricane or earthquake. This is where microfinance comes in. Fewer people flood into cities if they have a stable foundation on which they can rebuild. The importance of microloans in this context is that they provide stability to people who may have just had their entire lives swept out to sea. Especially around one year after the fact, when government and international support has dried up, microfinance allows people to keep building and rebuilding their lives.

A push factor is defined as a negative aspect or condition that motivates one to leave their home. People often migrate for a host of reasons: jobs, schooling, safety, and variety of other circumstances continue the global ebb and flow of persons. In rural settings, the main push factor is usually job availability or education. So far removed from hubs of industry and sources of capital, there is often an economic ceiling that dictates just how high one person can rise without any help. With increased access to capital comes a raising of that ceiling and an increased economic potential that would otherwise be unattainable. Creating a new source of capital helps to flow additional funds into the community and can become the difference between immigration and emigration.

One of the simplest ways to combat the exponential flow of people from rural areas to crowded urban ones is to develop the rural zones so that, at least economically, there is a reason to stay. Because rural areas in developing countries are usually remote, creating infrastructure from the outside is extremely expensive. However, sponsoring new sources of capital or loan pools can help to mitigate the need to move to a financial hub.

Microfinance is not by any means a be all, end all solution. However, it can be used in this context to create a foundation for a community to build their own stability with their own people, creating a trade center instead of moving to one. Given that a Wisconsin Microfinance loan pool needs no real infrastructure to operate, access to capital and access to better economic situations can be created anywhere. By 2050, it is estimated that 66% of the world’s population will live in cities. Efforts must be undertaken to maintain a better spatial distribution of peoples so that our future, both globally and financially, can be sustainable.