Friday, January 7, 2011
The New York Times reports that in many developing countries microfinance is experiencing a political backlash. In the wake of reports that for-profit microcredit businesses are using strong-arm tactics to obtain loan repayments and possible over or poor lending that fail to create businesses capable of repaying the loans, governments from Asia to Latin America are imposing new restrictions on such businesses and urging borrowers not to repay their loans. In part these developments may reflect the tension between nonprofit microcredit organizations that, without a profit motive, may be more careful in targeting loans and working with borrowers but lack access to sufficient capital to meet the borrowing demand, and for-profit microcredit businesses that have access to that capital but then face the profit-making pressures that can lead to unwise lending practices and excessive growth. Article, anyone?