Microfinance involves group lending to the poor leading to the formation of "social capital ". Md. Yunus, a Nobel-prize winner, started the Grameen bank microcredit model in Bangladesh, which is now successfully replicated in Nigeria in the form of National Poverty Eradication program (NAPEP). "Microfinance is expected to alleviate poverty through increased household incomes"" (Aigbokhan 2011, p. 15) by enabling poor households with little or no savings to acquire production inputs, including technology and to start up micro and small-scale enterprises (Aigbokhan 2011). Smith and Thurman, in A billion Bootstraps, identify the need for "bootstrappers"" i.e. "people who build business with sweat equity " (Smith & Thurman 2007, p. 7) to help LDC's grow out of poverty. The opponents here seek to promote "barefoot banking " an idea borrowed from "barefoot doctors"" originating in China where local farmers were trained in basic medical practices to improve healthcare (WHO 2008). An example of blooming microfinance can be seen in Zambia with over $75 Million given out and successfully repaid. (Moyo 2009, p. 131). Not only will microcredit help local business grow but will also launch local hidden saving boosting investments into local sectors and FDI, the impact of which will be significantly greater than aid grants (Moyo 2009).
Lack of Credible Threats and Accountability .
Opponents of Foreign Aid like Andrew Mwenda, a native of Africa, having seen the ill effects of Aid, argues the lack of threats and accountability as the principal reason for the failure of aid (Mwenda 2006). "Some actors have the right to hold other actors to a set of standards and to impose sanctions if they determine these responsibilities have not been made " (Grant & Keohane 2005, p. 38), exactly what is omitted from the current aid system. Multiple solutions posed to this include the donors willing to punish the recipients by the threat of revoking future funding in response to poor implementation (Azam & Laffont 2003).
