Who is Microfinance Really Helping? Is the Rich Profiting from the Poor?
Published by Drew Meyers, Editor | 02 Jul 2008 at 08:29 pm
The other day, I came across a post worth reading by Vivian Norris de Montaigu from the Huffington Post — Economic Colonization: The Rich Profiting from the Poor is Not the Way to Handle Microfinance. She wraps it up by saying this –
What is the point of helping the poor build up small businesses, if it is only to eventually provide wealthy, Western-owned businesses and individuals with even a larger share of the world’s wealth? In addition to that the rich believe they are doing a wonderful thing by “helping” the poor, when they are in fact acting like robber barrons.
It needs to stop. Quit patting yourself on the back for investing in microfinance that pays you a big return. Donate to reputable microfinance organizations such as the Grameen Foundation or Grameen America. Do your research before you donate! You should be paid nothing at all in terms of interest, and the capital you invest should be given as the way to begin a cycle which can help to create a sustainable solution to poverty.
I certainly agree that the people should not be making money off the world’s poor by requiring excessive interest rates for access to their capital. But at the same time, I think there is room for both types of microfinance lenders — those who ask for a return on their investment and those who do not. After all, the bottom line is that micro loans allow people to help themselves break free from poverty — and I don’t see too much bad happening from that.
Author's Website: http://www.ohheyworld.com
Chris Blow on 02 Jul 2008 at 10:50 pm #
Absolutely I agree with you: I think there must be a mass-market appeal for microfinance, and that means people can’t always be expected to want to volunteer — to think otherwise is just poor design.
Kayla Villnow on 03 Jul 2008 at 7:25 am #
One of the concepts that I personally love so much about Grameen is that it is assuming that credit should be a universal human right– that people should be extended credit regardless of social or economic standing. Microfinance instituations, for the most part, have found a way to provide that service to the poor of our world in a way that hopefully breeds self-sustainability for both the entrepeneur, as well as for the orgnization/institution.
Like Drew and Chris said, there needs to be room for both. The poor, although lacking in material recources, do not lack in overall resourcefullness or creativity. In addition, as I work for a microfinance org, and have had the chance to form some great relationships with the people I work with–charging interest on a loan, a FAIR interest, actually lends itself to restoring dignity in these people. They are able to pay back interest on their loans, and in doing so, they began to understand themselves as productive and able-bodied members of society. This is important; valuing humanity and fostering dignity are the crux of what every person on this earth deserves.
Microfinance organizations and their entrepreneurs alike will not benefit from exorbitant interest rates, clearly. They will however, benefit from a balance of good-willed charity, and then clean sources of privately LENT money. Many MFI’s would not be able to grow nor succeed without taking out loans themselves, loans which we too (and I mean MFI’s collectively) pay interest on.
Microfinance is still business, but with a heart.
Michael Van Patten on 03 Jul 2008 at 8:09 am #
Regarding the comments above, while I agree that the Microfinance sector will continue to benefit dramatically from contributions by non-profits and organizations like Kiva and Microplace, where below market rates are being paid, in order for this sector to experience the growth needed to have a real global impact it needs to attract the attention of more main stream investors and pay returns commensurate with the risk percieved or actual.
Like any emerging investment sector, Microfinance lacks the standardization and secondary market needed to take it from the non-profit, charitable foundation or purely social arena, to the mainstream capital market arena. Various debt and equity financing structures do exist however they do not offer much liquidity or transparency.
Once more supportive data and research is compiled where benchmarks and returns are more openly documented, you will see more capital allocated to this sector.
I dont think its realistic for this market to depend just on social contiousness to attain the growth needed to touch all that are in need of its services.
No money, no microfinance: Big companies cutting microfinance spend | myKRO on 19 Jul 2008 at 1:58 pm #
[...] few months and, even before that, the news was sparse. I think that ultimately this leads back to Drew’s post from week ago on who is benefiting from microfinance. I agree with Drew that we definitely need both kinds of [...]