But many people, even in rich countries like the US, don't have a buffer to deal with situations like these. To many of them, paying $100 interest so that they can get their car fixed today, and continue to go to work and earn a living, is a rational and reasonable decision when compared with the alternative (can't drive to work -> no income -> can't pay bills -> ...).
I think it feels that way to those who think they know what helps and what doesn't. To me, it feels like a vast majority agree helping is good, but are cynical about the method and helpers. I think we can all agree that repeated failures and not learning from them is intolerable.
I've thought for some time that this is one area where (as you say) there's a clear social need, and that the solution is for a non-profit lending organisation to offer the loans. As in, the lending company would, overall, aim to break even once the cost of operation, loan defaults, and profit from loans are taken into account.
It probably goes without saying that the loans would have a higher interest rate than those seen with longer-term standard loans, but I'd imagine they'd be orders of magnitude lower than some of the awful, predatory rates --many over 1000% APR-- that we typically see with UK 'payday' loans.
As I said above, the major issues are (i) effective underwriting, and (ii) efficient operations.
The better you can distinguish good customers from bad (better data and better models), the less money you lose to people that don't pay back. The better your tools to serve customers, the more customers you can serve without needing to increase the size of your team.
By reducing costs, you can charge less, get more customers etc.
A non-profit would face exactly those same two challenges, just to break even. Not needing to make a profit would have a much much smaller impact on its ability to reduce prices, than the two factors I mention.
I remember in the '90s all the fuss about "microcredit" in developing countries. Maybe it's time to have something like that in "developed" countries too?
"Microcredit has been a disaster for the poorest in South Africa" https://www.theguardian.com/global-development-professionals...
"India's micro-finance suicide epidemic" https://www.bbc.com/news/world-south-asia-11997571
"Micro-credit schemes of trouble: Housewives turn ‘beggars and prostitutes’ to cope" https://punchng.com/micro-credit-schemes-of-trouble-housewiv...
The original microcredit vision was low rates, in strong collective settings, as an investment to support productive endeavours: giving people enough money to start a business, or supporting them in emergencies so that their situation wouldn't dramatically change (fix a broken car so you can keep working etc etc). It shouldn't be a way to support consumption. It's hard not to inject moralism in the process, but there must be criteria.
Anyway, even if we're specifically talking about micro-enterprise, there is a high rate of failure and then people having the loan as millstones around their necks, and there's questions about how good it really is to have a bunch of businesses of the sort that are financed by microcredit: https://governancexborders.com/2013/05/29/the-art-of-pointle...
In the US we have Credit Unions, which are exactly this.
And, even if they were short cash for some reason,they have both access to zero-cost (or negative cost, given rewards) short-term loans [0] and sufficient income after essential expenses to pay it off without resorting to loans with interest.
[0] e.g., currently zero-balance credit cards as long as paid off within the next billing cycle.