Small Loans and Big Ambitions

With the advancement of microfinance institutions to a level of sustainability and even profitability, people have begun to raise questions of ethics regarding making money off of the poor. Counter to neo-liberal principles, various countries have imposed rules upon lending institutions such as interest-rate caps to regulate the industry, as well as proposals to step in with the offer of subsidized loans. Such moves have been coming together to inhibit its growth, and could possibly even put profitable microlenders out of business. For-profit investment from the private sector has been lacking due to the fear by international banks of attracting the negative stigma of profiting off of the poor, and international financial institutions (IFIS), which have made the microfinance revolution possible in the first place, are now seemingly inhibiting further development of the industry by crowding out commercial lenders. The question remains if the world of microfinance can successfully re-invent itself. Will it be able to attract for-profit investment, and reach the next stage of evolution by becoming a sustainable and profitable enterprise?

Original article can be found in The Economist of March 17th 2007!