Derek Newberry

BizWeek Takes a Shot at Explaining Microfinance

bizweek logoIt was bound to happen- BusinessWeek caught the microfinance bug today, publishing an extended overview of this booming industry in India.? Rather than simply explaining the microfinance movement and describing how it works, the author gets into some of the structural imbalances spurring market demand for credit in small amounts.

The article contrasts India’s prosperity on a national level ?its economy has clocked 8%-plus growth over the past three years? with the unequal distribution of these gains ?roughly 30% of India’s 1-billion-plus population lives below the poverty line? to illustrate the reason why representatives of ICICI bank would be traipsing around rural India handing out $100 at a time.I did hope to see a little more honest criticism of microcredit’s darkside.? Although the spate of suicides related to lender usury is addressed, this is condensed into a brief section that ignores some of the complexities of the debt debate.? In particular, I’ve heard that in Bangladesh, MFIs like the Grameen Bank found that some of their clients were paying back money borrowed from other MFIs.? It bears mentioning how widespread this practice is and what can be done about it.

Otherwise, it is clear that microfinance initiatives are maturing from providing simple lending schemes to offering services such as savings accounts and insurance to segments of the BOP market.? As organizations and governments become further involved with these services, we need to engage in broader assessments of the successes and failures of microfinance.