Scott Anderson

Friday Roundup – 9/23/11: Microcredit Rethought

(Above,’s recent visual representation of five years of microloans and repayments globally. The video can bee seen below).

This week Muhammad Yunus told NextBillion writer Sadna Samaranayake if he could do it all over again, he would not have let the “profit-makers” join the microcredit movement. But would there have been a movement without hard-nosed margin seekers in the first place?

By now, Yunus must have grown just a little weary of the question, which I guess could be boiled down to: What went wrong? Or, framed another way, has microcredit ever really been effective? Several recent studies have attempted to answer that, and their conclusions haven’t always satisfied the critics or proponents of microlending. (Dean Karlan and Jonathan Zinman’s study of Filipino loan recipients published in Science this summer, for example, showed increased loans did not equal business expansion, but they did have other social benefits like strengthened community bonds).

The financial crisis and seemingly endless market uncertainty has slowed the pace of growth. As MicroRate reported in its Annual State of Microfinance Investment study, microfinance investment vehicle assets grew 12 percent in 2010, their lowest gain in six years.

Considering that slowdown, maybe now is the perfect time to reflect. After all, hardened skeptics grudgingly acknowledge microcredit is here to stay. So how do we make it better? The questions need to be asked continually, not only to microcredit’s father, but to every for-profit and every NGO extending a loan to anyone with a business and a drive to profit their way out of poverty.

How can lending be more effective? How can physical and digital access be extended to the right borrowers? How do you evaluate success? How do we avoid another crisis? How do we balance, as one writer put it, good intentions with a critical industry structuring?

For the next few days, we’ll be taking a closer look at microcredit models, access and viewpoints from several thought and action leaders. We would never describe this series as the definitive analysis of microcredit. Rather, we hope to provide a few views from a periscope peeking up from choppy financial seas.

Intercontinental Ballistic Microfinance from Kiva on Vimeo.

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