BizJournals Portfolio
Home >   Business Views, Opinions and Blogs >   Business Blogs >   Market Movers >  

Muhammad Yunus Vs Microlending Loan Sharks

Market Movers

by Felix Salmon
Main
Buying Berkshire   Marion Maneker, Art-Market Blogger Extraordinaire

Recent Blog Posts

Links

Jul 30 2008 5:54pm EDT

Muhammad Yunus vs Microlending "Loan Sharks"

BusinessWeek's Steve Hamm has a good overview of the latest dust-up in the world of microfinance, where industry Top Dog Muhammad Yunus has started lashing out at for-profit microlenders like Mexico's Compartamos, accusing them of "moving into the same mental mind-set as loan sharks".

This afternoon I got a press release from respected microfinance institution Acción, coming down strongly on the Compartamos side of the fight, and quoting the letter to our peers from Compartamos defending their high interest rates. But although Compartamos's interest rates have come down a bit since last year, when I criticized the bank for placing shareholders above borrowers, I'm still far from convinced that the for-profit route is as socially beneficial as the likes of Acción would have us believe, especially in Mexico where it's easy for small for-profit lenders to complacently let their interest rates drift up towards and even past the extortionate nationwide norms. Yes, Compartamos is right that by Mexican standards it's not all that bad - but that's precisely the problem, and it's Mexican standards which need to be changed.

I have no problem with for-profit microlending in theory, but at the same time I think the burden of proof is on the for-profit microlenders to demonstrate that they can deliver better, cheaper services to the poor than their non-profit counterparts can. No one has done that yet, and until they do, I'll still prefer the non-profit model to the for-profit model.

blog comments powered by Disqus
Real Business, Real Results
Out of the 'Family'

Did anyone at Microsoft ever watch the (gasp!) offensively funny show Family Guy?

Cruz Missile Lands

Ex-Morgan Stanley exec Zoe Cruz is now heading her own hedge fund. Are Wall Street's leaders done?

Scandal Chic

Martha, Bernie and Skilling know that what you wear for court can go a long way in public perception.

spotlight on

Health Care

Bad to the Bone No More

Companies such as General Mills say they're stepping up efforts to change employees' bad behavior and promote healthier lifestyles. Read More