Ideas to Action:

Independent research for global prosperity

X

David Roodman's Microfinance Open Book Blog

Feed

A finely written piece by Leo Hornak in the Independent that weaves personal narrative with broad ideas about what microfinance is and where it should be headed:

I remember the day three years ago when I decided I no longer wanted to be a part of the microfinance industry. I was standing in a one-room house in a small town in southern India, meeting a family that had taken out a microfinance loan. The mother and father were tired and nervous – both had the gaunt, prematurely aged look that is the hallmark of rural poverty in India. With them was their daughter Laxmi, a tiny eight-year-old girl, hiding in the folds of her mother's sari.

"For the three days that they took her away, I couldn't touch food," Laxmi's mother told me through a translator, pointing at her daughter. "We are just glad to have her back." A few weeks before, Laxmi had been kidnapped and held hostage by a local moneylender called Mrs Lalitha. Laxmi's parents had failed to keep up with payments on a debt. The debt was not to a loan shark or a mafia boss, however. It was to a registered Indian microfinance company which still claims in its brochures to be dedicated to fighting poverty, with a particular emphasis on women's rights and "empowering the girl child". Loan repayments had been informally outsourced to the moneylender.

...

Some of the accusations made against microfinance are unfair, exaggerated and bear little relation to how small loans actually affect the poor in Bangladesh and India. On the other hand, supporters of microfinance, including Dr Yunus, have been content to let equally misleading myths about their work go unchallenged for years. It is an industry that has got used to making promises it cannot keep.

...

It would have been helpful if the microfinance movement had placed more emphasis on other banking services, such as savings or insurance, than on loans. A right to savings, rather than credit, would be genuinely useful. Insurance for health also has the potential to improve people's lives dramatically.

Related Topics:

Disclaimer

CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.