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April 24, 2009

Global Philanthropy Forum
Grameen Bank Founder Says He's 'Nervous' About For-Profit Microcredit

While microcredit has grown in popularity in recent years, the increasing number of for-profit efforts that provide loans to poor people is a concern, said Muhammad Yunus, a Bangladeshi economist who founded the Grameen Bank.

Mr. Yunus pioneered the idea of providing small loans to poor people to start their own businesses in the 1970s. In 2006 he and the bank won the Nobel Peace Prize for their antipoverty efforts.

Since then microcredit has blossomed around the world. But Mr. Yunus said he is “nervous” that many nonprofit lending groups are converting to businesses and big commercial banks see money-making opportunities in cultivating low-income borrowers.

While some of these institutions say they only want to make a small profit with microcredit, usually “people aren’t satisfied with a little money,” he said. Over time, these business enterprises will become too focused on the bottom line, and not the customer, he predicted.

He said if an institution is charging somewhere upwards of 15 percent interest on a loan, they have perverted microcredit’s charitable intentions.

“You’re no longer in the microfinance area,” said Mr. Yunus, “you are in the loan-shark area.”

— Ian Wilhelm

Friday April 24, 2009 | Permalink

Comments

1. Would Mr. Yunus rather these microlenders never entered the arena in the first place? They appear to be helping in a sustainable way—”…teach a man to fish…” thinking. You can’t expect there to be lending as impactful as we’re seeing if there is no profit involved. There would not be the manpower. Mr. Yunus’ “nervousness” appears to be nothing short of pessimism—or perhaps the type of jealousy one encounters after observing another do what one began.

   — Josh    Apr 27, 03:40 PM    #

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