Muhammad Yunus stated at a recent microfinance event, “Microfinance still works. [it hasn’t been] hit by the meltdown process.” If he’s right, and I have not seen any statistics to back it up, then the safest loans to invest in over the last few years would have been the sub-subprime loans. (full article)

  • JimA

    Maybe microfinance hasn’t been hit yet, but it’s when those who fund microfinance institutions (MFIs) get hit and loans to MFIs aren’t made because lenders can’t fund their investments, and the MFI has to cut back lending so loan repayments can be used to repay maturing loans, THEN it will in fact be impacted. New loans to clients won’t happen, as things get worse, loan renewals won’t happen as the MFI will need cash to meet maturing debt obligations. Unless you’re a deposit taking MFI, and only fund your loans with deposits, and you don’t lose any of your depoitors, then yes, perhaps it won’t hit a microfinance as hard. Then, as an MFI, you only have to worry that your clients can withstand the general economic downturn. Aside from those things, microfinance should sail through this crisis unscathed.

  • Thanks, Jim, for the comments. It’s unfortunate that MFIs will pay for the sins of the less credit-worthy. Do you think that there is any chance that investors will see microfinance as a safe harbor in the storm? I can imagine folks pulling there money out of sinking index funds and putting them into Compartamos or one of the commercial Microfinance funds. Or is that just wishful thinking?

  • Pingback: Will the Global Financial Crisis Hurt Microfinance? | myKRO()