May 18, 2008

“A Silent Tsunami” : The Food Crisis and Small Entrepreneurs

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There has been a food crisis brewing. The U.S.’s Farm belt has been on the comfortable end of an ample 40% rise in commodity prices since October, but those hefty profits have naturally translated into significant losses for consumers. A UN representative recently suggested that this persistent upsurge in food prices be considered a “silent tsunami,” crushing developing countries’ consumers especially. Until policy intervenes, it seems, these prices and this tsunami will keep swelling.
The World Bank’s fresh new president, Bob Zoellick, issued a warning last month that the food crisis is pushing 100 million into hunger and malnutrition, and that this strain could catapult at least 30 countries into social upheaval. Sizable riots have sprouted in Bangladesh, Jordan, Morocco, Senegal and Egypt, with similar uprisings pulling Haiti into political tumult last month.
The rising costs are a strain on everyone’s budget, including the small entrepreneurs that borrow from microfinance institutions (MFIs). Analysts and industry representatives have recommended that institutions adjust and diversify interest rates for the spectrum of their clients, from farmers that may be seeing a pleasant bump in profits, to the majority of other small and micro-business owners that are feeling the crunch. Even with this variety of fine-tuning though, MFIs won’t so easily sidestep this threatening and potentially devastating wave.