link: http://blog.inc.com/the-kiva-connection/2008/08/microfinance_goes_back_to_its.html
August 1, 2008
Microfinance Goes Back to Its Roots?
Posted at 12:41 PM
Major leaders of the global microfinance movement gathered this week at the Microcredit Summit Campaign
in Bali, Indonesia to discuss some of the pressing issues that have
affected the microfinance sector over the past year. A major issue of
debate among Summit participants, which included Nobel Peace Prize
winner and father of microcredit, Muhammad Yunus, was what to do about the growing commercialization of microfinance.
If you have been following any of the news on microfinance lately,
you know that there has been a lot of attention paid -- both good and
bad -- to the movement in the past couple of years. Microlending has
become extremely popular, and as a result, an increasing number of
commercial banks and for-profit institutions are now marketing loans to
the poor. Many of these institutions have taken advantage of uneducated
borrowers in the developing world and charge very high interest rates
that are often unclearly stated in the terms of the loan. Leaders of
the microfinance world believe that these kind of profit-seeking ventures
are at odds with the underlying mission of microfinance, and the issue
has sparked much controversy in the industry over the past year.
As part of the Microcredit Summit earlier this week, I listened in
on a global conference call that addressed the need for greater
transparency among global lenders in the microfinance market. The
purpose of the call was to announce the launch of Microfinance Transparency,
a non-governmental organization designed to publicly report the
interest rates of lending institutions worldwide. The US-based
initiative is headed by industry expert Chuck Waterfield, and is backed
by Muhammad Yunus, founder of Bangladesh-based lending institution Grameen Bank,
and by Summit Campaign director, Sam Daley-Harris. The organization
already has a substantial list of endorsers, including co-founder and
executive director of Kiva, Matt Flannery.
During the call, Waterfield described Microfinance Transparency as
an "information clearing house," with the goal of establishing
truth-in-lending standards to parties in both the developed and
developing world. Several lending institutions -- that together
represent more than 20 million borrowers -- have already agreed to
report their interest rates to Microfinance Transparency. According to
Waterfield, the first batch of data collected will be published on the
organization's Website
at the end of October. Ultimately, the site will become a searchable
database for anyone seeking information on microfinance lenders.
The main message that came through during the call -- and that was
repeatedly emphasized by Muhammad Yunus -- was that if microfinance is
going to achieve its founding mission of helping the world's poor get
out of poverty, then it must operate within a fair market environment.
What do you think? While it remains to be seen how effective
Microfinance Transparency will be in leveling the playing field, do you
think the industry needs a self-regulating organization to bring it
back to its roots? Or do you think that in order for microfinance to
truly reach all the world's poor, a competitive and commercial
environment must exist?
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