Monday, December 6, 2010

The Microfinance Debate: What would you do?

Minimum information and maximum media coverage has created the monster microfinance debate: greedy bloodsucking bankers or saviours of the world?.
I am particularly troubled by the fervor and timing of this debate because Diwali/Christmas/New Year is when, motivated by a spirit of thankfulness and/or spirit of saving on taxes, we do our annual bit of charitable giving. How will you give this year? The Financial Times (thank you FT) article Microfinance: small loan, big snag is a nuanced view with data from many countries. Microfinance is still about lending to people with no collateral; where traditional banking did not lend. That has not changed. What has changed is the desire to scale- more capital to benefit more poor people; while the majority of microfinance institutions, still led by dedicated entrepreneurs, stay true to the mission, different elements (in India, e.g. it is corrupt politicians worried about losing votes if the poor benefit from entrepreneurship who have garnered much media attention) have taken advantage of the situation. This does not mean that sustainability (double bottom line- do good and do well) is inherently impossible. Another FT article Perhaps microfinance isn’t such a big deal after all presents the strategy on how to deal with the pangs of going mainstream. fly under the radar- Just lets tone it down- lets not call microfinance the way to solve every problem - its just banking after all.
How will you donate this year? Whether it is Kiva or Microplace some other form of lending - I urge you to do your own homework - it is complicated and I personally do not know a single greedy bloodsucking banker in the microfinance realm.

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