Comments on: Microlending: Panacea or Patchwork?

By: JessieB

JessieB — Thu, 22 Oct 2009 14:58:22 +0000

I used to live in Kenya, and I did a research project on microfinance in a rural town there that came to essentially the same conclusions as MIT (without being statistically valid, of course). Among 12 female entrepreneurs in various sectors, none of them used their microloans from a local MFI for their business. Immediate needs were just too great: school fees (in a country where school is supposedly free), food, health care, you name it. This is not to say that microfinance can’t work, but as others have pointed out, it’s not a one-size-fits-all solution.

But there’s more. Kaiser makes some excellent points, but like almost everyone else talking about the issue, he implicitly casts “the poor” as helpless individuals who need developed countries to “help ensure they have tools” to get out of poverty. Actually, what we need to do is stop imposing our own view of what works on societies totally unlike our own. Yes, individual freedom is important; yes, meeting basic needs is important. But we shouldn’t determine how countries achieve those ends for their citizens any more than we should give handouts. We can *partner* with countries, organizations, and peoples, but the aid model we have right now is too much like condescending “charity” to be successful long-term.

By: Fred

Fred — Wed, 21 Oct 2009 15:22:27 +0000

Since learning about microlending practices, it always seemed to me that websites that endorse such activities hype it as more than it truly is. Kudos to the author for an informative article on this practice.

By: Taj

Taj — Wed, 21 Oct 2009 04:36:02 +0000

The Boston Globe story essentially says Microlending is more hype than help. In many ways, Chris’s reaction piece accepts the premise and re-asserts the always welcome, but somewhat tired trinity of providing education, health care, and freedom. An alternative perspective might be to simply view microfinance as a financial resource for underserved populations, populations that traditional commercial banks avoid. It is a resource that we take so much for granted here in the developed world, that we can ask questions like “is microfinance The Silver Bullet?” Instead ask yourself: does my credit card keep me healthy? Does my savings account make me more educated? Will my business loan lift me out of my current socio-economic class? I answer no to all of these questions. However, access to credit, savings, and loans is part of what defines me as a middle class American. Microfinance is nothing more, nothing less, than a financial resource that addresses a market failure that currently leaves billions of people unbanked.

For anyone interested, I highly recommend The Economics of Microfinance by Beatriz Armendariz and Jonathan Morduch.

p.s. small nit-pick for Chris – mircofinance does not necessarily offer lower interest rates. Check out FAQ #6 at Kiva.org – Why are microcredit interest rates so high?

By: Bill S.

Bill S. — Tue, 20 Oct 2009 00:45:43 +0000

Ahhh, the ever elusive search for THE silver bullet. Did people really think that microcredit would solve all of the worlds problems? It’s a great tool for a specific purpose – help an entrepreneur start or expand a business. But that’s about all.

I’ve been an active lender on Kiva for a few years now and limit my loans to entrepreneurs (There are also people looking for personal loans). Meggan’s idea of having business aides also is an excellent idea. Some of the Kiva field agents can serve that function, but I don’t think it’s in their formal function.

By: Meggan

Meggan — Mon, 19 Oct 2009 18:07:10 +0000

Good point. I think that people maybe just wanted to say “we’re giving money to poor entrepreneurs –great, we’ve solved it!” and leave it at that. And the funny thing is that most people didn’t think of the whole “machine” aspect. I wonder how many lenders even thought about sending a business aid over to serve as a guide or anything like that. It’ll be interesting to see if lending actually continues after this or if these findings will be used as a scapegoat to abandon the project or if they (hopefully) make some needed changes.