What would happen if people living in poverty were forgiven their small loans?

Question:

I was watching a documentary about microfinance in developing countries. Many of the loans were 20-100 dollars. What would happen if people living in poverty were just given the money, and not expected to pay it back? How would that effect the economy?

Answer:

The need to pay it back would discipline the actions of the borrower, make them choose more worthwhile projects. This would raise efficiency.