The poor person paid out $100 over 10 years, for the equivalent goods that would've costed $50 in upfront capital (good shoes).
So an enterprising banker would be willing to lend this poor person $50, to be repaid with eight $10 installments yearly, for a total of $80 - a 60% return on investment (7.5% pa returns).
This would've kept the poor person's cashflow the same - $10 per year, and he'd have paid an extra $30 for the priviledge of the upfront capital, but saved $20 vs buying new shoes every year for $10, ten years straight.
If those shoes were so important, this would've been the way to do it, not buy a crappy pair every year that end up costing you more in the long run.
Edit: my main point is that financing is a potential way out for those who lack the capital, but is able to to handle the cashflow.
Then they get hit with an unexpected $1k medical bill. They now default on your shoe loan, and the coat loan, and the car loan, and the rest of the microloans.
Poor people generally don't have access to capital except at incredibly high APRs that typically make things worse, not better.
if they were going to get a medical bill, they would've been in the same, or worse position. They would've been without a shoe, instead of with a shoe and face default on the shoe loan.
So an enterprising banker would be willing to lend this poor person $50, to be repaid with eight $10 installments yearly, for a total of $80 - a 60% return on investment (7.5% pa returns).
This would've kept the poor person's cashflow the same - $10 per year, and he'd have paid an extra $30 for the priviledge of the upfront capital, but saved $20 vs buying new shoes every year for $10, ten years straight.
If those shoes were so important, this would've been the way to do it, not buy a crappy pair every year that end up costing you more in the long run.
Edit: my main point is that financing is a potential way out for those who lack the capital, but is able to to handle the cashflow.