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Microfinance
by mstandaert on October 15, 2006
There have been all kinds of stories on Muhammed Yunus winning the Nobel Peace Prize since yesterday so I wanted to highlight some of the better or more interesting ones here as well as survey a bit of the blog coverage since the announcement.
Bangladesh celebrates, of course. Yunus calls for more movement on political unity in the country. Iowans blush with pride at seeing a former World Food Prize winner (Yunus) win the Nobel Peace Prize. Kenya learns lessons from Yunus. The News International in Pakistan calls Yunus a 'true man of peace.' The burden of responsibility has only just begun to get larger, say Yunus. A story of the 'telephone ladies'. The Chicago Tribune calls the award 'richly deserved'.
One of the best things coming out of this is that microcredit is getting some deserved PR. Some at the Wall Street Journal, Reuters, U.S. News and World Report has a primer, and the LA Times.
Some pros (mostly) and cons (a few) at the Council on Foreign Relations:
Promoters have hailed microfinance as the silver bullet of development. Advocates say that providing small amounts of credit to the world's poor can break their cycle of poverty. Moreover, they claim, this can be accomplished through self-sustaining programs. Just lend to the poor at market rates, and their high levels of repayment can fund the effort. Both of these claims, however, remain inconclusive after numerous studies. The mixed results of a wide array of impact assessments leave skeptics wondering whether microfinance really does alleviate poverty beyond anecdotal instances. While stories abound of people who have used microfinance to improve the lives of their families, it has yet to be demonstrated that microfinance makes a substantial difference at the macroeconomic level. Self-sustainability is also suspect, with data indicating that even those microfinance programs committed to financial sustainability cover only 70 percent of their costs. Almost all programs are still substantially subsidized, especially those with explicit social objectives. Some experts have suggested that no more than five percent of microfinance institutions (MFIs) worldwide will ever be sustainable. Layer on the unfortunate press surrounding cases of oversaturated markets with hopelessly indebted, hopelessly poor borrowers, and one begins to question whether microfinance is all that its proponents claim.
My main concerns about microfinance are possible abuse by politicians or ideological forces using microcredit to leverage their power, either to 'buy votes' or in other more subtle ways. I've only seen a few stories mention issues surrounding this, so it doesn't seem to be a major problem at the moment, mostly because those starting the ball rolling with microfinance have higher interests than making money or securring power. But I won't be surprised to find out some enterprising local or regional politicians, religious groups, or state parties in various countries around the world getting into microcredit for the wrong reasons.
Among blogs, check in at Bangladesh News, Rediff India Business, Captain Future, Deal Architect, My Cosmos, Inspirations and Creative Thoughts, A VC, Momentary Musings, Life and Times, JoGanY, TFS Magnum, RedState, and Economist's View.
Permalink: More Muhammed Yunus ...
Trackback: http://publish.creative-weblogging.com/publish/mt-tb.pl/39204
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Vote for More Muhammed Yunus ...:
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Rating: 7.50 out of 4 vote(s) cast.
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Response from:
tower defense
(04/05/09 7:37am)
I\'ve only seen a few stories mention issues surrounding this, so it doesn\'t seem to be a major problem at the moment, mostly because those starting the ball rolling with microfinance have higher interests than making money or securring power.
Response from:
Pienso...
Muhammed Yunus and Grameen Bank have won the 2006 Nobel Peace Prize for their efforts to create economic and social development from below. More links and comment over at Marginal Revolution and NextBillion. Update: More via Owen Barder (who makes
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