Lining Up the Loan Angels

Newsweek: Lining Up the Loan Angels

April 9, 2007 issue – Fighting poverty has along and divisive history, but nothing's shaken up the pundits, wonks and windbags like microfinance. The United Nations declared 2005 the year of microcredit—small loans for the penniless—and last year's Nobel Peace Prize went to Muhammad Yunus, founder of the Grameen Bank, which pioneered such lending. Governments from Brazil to Bosnia have launched massive microloan programs, and commercial banks like ABN AMRO, HSBC and Citicorp are rushing down-market. Some 500 million poor worldwide have reportedly benefited from some $6 billion in microloans, which aficionados want to ramp up to $300 billion. "One day," Yunus predicted, "our grandchildren will go to museums to see what poverty was like."

That was then. Now a backlash is growing. Critics on the left charge that micro-finance privatizes social safety networks, while conservatives dismiss it as charity disguised as enterprise. Wonks weigh in with studies like "The Myths and Magic of Microcredit" and "Money Is Not Enough." Insiders turn on the industry. Loïc Sadou-let, a former World Bank economist who worked in microfinance in Guatemala, estimates that only about 300 of nearly 25,000 microlenders have reached financial "sustainability," meaning they are able to cover all costs. Now comes "Microfinance Reconsidered," a recent essay from the Cato Institute, a conservative U.S. think tank….

Interesting stuff (though I am undeterred). Never say I didn't give you both sides.