While this is a really good article in some ways, Big Banks Draw Big Profits From Microloans to Poor – NYTimes.com, it is so snarky that it detracts from the reporting. For example:
“In recent years, the idea of giving small loans to poor people became the darling of the development world….”
or
“Actors like Natalie Portman and Michael Douglas lent their boldface names to the cause”
finally
“The fracas over preserving the field’s saintly aura “
It’s really simple. Microloans work well when they enable people to borrow very small amounts of money at a reasonable rate in order to kick start their business or help them deal with other financial needs that they could not have satisfied through other means. Microloans are not meant to be “trendy” or “saintly”, any more than lines of credit or personal credit cards are. Now they that have been shown to be profitable, the crooks and loan sharks are moving in. As the economist who started it says very well:
“We created microcredit to fight the loan sharks; we didn’t create microcredit to encourage new loan sharks…Microcredit should be seen as an opportunity to help people get out of poverty in a business way, but not as an opportunity to make money out of poor people.”
I think it is a testament to the strength of microfinancing that the greedy are getting involved. But while testament is fine in a limited way, what is really needed is better governance of the lenders to restrict them from ripping off people who have little money. That’s what’s needed. What isn’t needed is snark on the subject matter from Neil MacFarquhar of the NYTimes.com.
Smart People I Know 