Mitigating The Resource Curse: A Proposal For a Microfinance and Educational Lending Royalty Law
This article discusses how a portion of natural resource revenues could be dedicated to bottoms-up lending programs particularly for small business and educational lending.
Countries that are rich in natural resources often experience less economic growth than countries that lack natural resources. Weak and corrupt governments, concentration of economic activity in the petroleum sector, and insufficient investment in education and human capital are often blamed for this phenomenon. Efforts to combat it have focused on top-down approaches that impose alternative institutions on petroleum states or police the spending of resource wealth. The paper states that lending to small business and education would be beneficial because:
- Entrepreneurial lending would help support economic growth in sectors other than petroleum;
- Educational lending would help counter a lower level of education observed in resource rich nations.
The article proposes a modest royalty that would be divided between microfinance and educational lending. This royalty would strike a balance between the desire of governments to fill their treasuries and the need to reach a meaningful number of citizens and thereby contribute to diversifying economic and educational activities.
