A Global Surge in Tiny Loans Spurs Credit Bubble in a Slum
Thursday, August 13, 2009
RAMANAGARAM, India — A credit crisis is brewing in “microfinance,” the business of making the tiniest loans in the world.
Microlending fights poverty by helping poor people finance small businesses — snack stalls, fruit trees, milk-producing buffaloes — in slums and other places where it’s tough to get a normal loan. But what began as a social experiment to aid the world’s poorest has also shown it can turn a profit.
That has attracted private-equity funds and other foreign investors, who’ve poured billions of dollars over the past few years into microfinance world-wide.
The result: Today in India, some poor …