Microfinance: The World’s Best! …no Worst! Idea

Close to five years ago, I charged into employment with HOPE International, riding the surge of the microfinance movement. At that time, the only press you could find on microfinance lauded the concept. The idea of helping poor people borrow and save money was not just pitched as a good idea. It was the world’s best idea.

Because the concept was so potent, so preeminently powerful, some industry leaders claimed it would single-handedly put poverty in a museum. Every major news source in the country (NYTThe EconomistNewsweekCNN, etc.) featured a steady stream of microfinance stories, all with the same message: We have discovered poverty’s cure-all—our silver bullet. There was literary and conversational “dancing in the streets” as we celebrated the discovery of the one-stop solution which would solve our world’s problems. The clear verdict: Microfinance eradicates poverty.

During early 2007, however, the news soured. The dancing turned to questioning as those bold proclamations were challenged. Research findings painted a less than glamorous picture of the impact of microfinance. Journalists (from these same publications) discovered microfinance clients who had taken out loans from one institution to pay off loans at another. Last month, it was revealed that some lenders’ high-pressure loan delinquency practices actually drove over 50 Indian microfinance clients to commit suicide, sparking agrowing unrest in the Indian microfinance sector. The clear verdict: Microfinance perpetuates poverty.

Here is my question: Why are we so desperate to label microfinance as either a panacea or pandemic? Might the reality be that microfinance is neither? When the Toyota acceleration debacle hit mainstream or NWA Flight 255 crashed, nobody suggested that the automobile, airplane, or transportation system in general were detrimental to our society. Similarly, when Waiting for Superman hit theaters this month, highlighting the sad reality that many of our nation’s public schools are failing our country’s youth, even the biggest of educational critics do not suggest that all schools be shut down.

On the flipside, we share a belief that for every pastor scandal or denominational split, there are many more positive examples of churches truly making a positive impact on our world. The reality is that no single idea, concept, industry or poverty alleviation strategy is perfect or devoid of abuse and corruption.  We all know hospitals, airlines, car manufacturers, schools and churches which are successful – and probably a few which have failed.

Microfinance is not a new idea – we all benefit from the core concept every day. Savings accounts, business training, loans, and insurance products are tools we all use every day. I am personally grateful for Graystone Bank and Wells Fargo, both of which have provided an immeasurably positive benefit to my life. I also know countless successful entrepreneurs across the globe whose businesses were fueled by mentoring, biblically-based business training and access to capital.

It is just as wrong to talk about microfinance eradicating poverty as it is to lump payday loan shops, ruthless money lenders and usurious banks with sound, values-driven, client-focused microfinance initiatives. Not all microfinance is created equal! Sadly, a nuanced and balanced perspective does not make headlines, but my encouragement is to critique every extreme story, on both sides, in the court of commonsense and sound judgment.

Please let me know if you have questions about any of the recent articles or news stories on microfinance. I’d love to dialogue with you!

About these ads

One response to “Microfinance: The World’s Best! …no Worst! Idea

  1. Pingback: What you haven’t heard about the microfinance meltdown in India — Marshall Birkey Blog

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s