Comments on: Microfinance – and why it may not work http://www.planetd.org/2006/04/26/microfinance-and-why-it-may-not-work/ Critiquing the Politics, Policy & Practice of Development Sat, 13 Mar 2010 08:46:22 +0100 http://wordpress.org/?v=2.8.4 hourly 1 By: Mike Blondino http://www.planetd.org/2006/04/26/microfinance-and-why-it-may-not-work/comment-page-1/#comment-120498 Mike Blondino Sat, 25 Apr 2009 07:17:58 +0000 http://www.planetd.org/blog/?p=113#comment-120498 I don't like the idea of being negative on microfinance but the sheer interest alone has kept us looking for other alternatives. Please please keep the awareness of the challenges to microfinance in front of donors. In our work, we charge no interest, and we require no collateral. We allow people to work their way into business ownership. We generate our revenue from marketing product, and always allow our partners to gain as much of added value as they want. It is profoundly effective. If anyone of you has done or is doing research on microfinance I have a number of questions. One is, what is the accounting of payback, not the percentage of loans, but the actual cash paid to cash borrowed? Is the 98% rule reflect a capital loss for funds lended? Also what is the median annual percentage interest paid by a borrower? You can contact me through our website. Thanks so much, Mike. I don’t like the idea of being negative on microfinance but the sheer interest alone has kept us looking for other alternatives. Please please keep the awareness of the challenges to microfinance in front of donors. In our work, we charge no interest, and we require no collateral. We allow people to work their way into business ownership. We generate our revenue from marketing product, and always allow our partners to gain as much of added value as they want. It is profoundly effective. If anyone of you has done or is doing research on microfinance I have a number of questions. One is, what is the accounting of payback, not the percentage of loans, but the actual cash paid to cash borrowed? Is the 98% rule reflect a capital loss for funds lended? Also what is the median annual percentage interest paid by a borrower? You can contact me through our website. Thanks so much, Mike.

]]> By: JAMES ATTA PEPRAH http://www.planetd.org/2006/04/26/microfinance-and-why-it-may-not-work/comment-page-1/#comment-111511 JAMES ATTA PEPRAH Wed, 18 Jun 2008 10:02:35 +0000 http://www.planetd.org/blog/?p=113#comment-111511 I believe that microfinance will always work. Wether it will work or otherwise depends on a host of factors. Government should not directly get involve in lending as it is happening in Ghana now. The sub-sector needs to be regulated since most microfinance institutions mobilse deposits. The model should be demand driven and not supply driven. Practitioners should really identify what their clients need. there should also be monitoring and evaluation. Not just credit but there should be other services to supoort the credit. I believe that microfinance will always work. Wether it will work or otherwise depends on a host of factors. Government should not directly get involve in lending as it is happening in Ghana now. The sub-sector needs to be regulated since most microfinance institutions mobilse deposits. The model should be demand driven and not supply driven. Practitioners should really identify what their clients need. there should also be monitoring and evaluation. Not just credit but there should be other services to supoort the credit.

]]> By: ferdinand Brown http://www.planetd.org/2006/04/26/microfinance-and-why-it-may-not-work/comment-page-1/#comment-110043 ferdinand Brown Mon, 28 Apr 2008 12:02:56 +0000 http://www.planetd.org/blog/?p=113#comment-110043 i am student at the University of Education,Winneba and doing my project work.i have this topic <An assessment of the impact of micro Finance.A case study of Nwabiagya Rural Bank Limited Barekese Community.can u please give me some of the problems of micro finance or help me with the questinnires. i am student at the University of Education,Winneba and doing my project work.i have this topic <An assessment of the impact of micro Finance.A case study of Nwabiagya Rural Bank Limited Barekese Community.can u please give me some of the problems of micro finance or help me with the questinnires.

]]> By: Rubaaho http://www.planetd.org/2006/04/26/microfinance-and-why-it-may-not-work/comment-page-1/#comment-78358 Rubaaho Sat, 23 Jun 2007 13:36:40 +0000 http://www.planetd.org/blog/?p=113#comment-78358 I am working in the field of micro credit and from my experience (modest) i think microcredit benefits the lenders and merely keeps the micro borrowers busy generating income for the MFI'S. i think its the latest form of slaverly where the slaves (borrowers) are willing participants. Of course we know they do not have any other option other than accepting the loan. I visited one Sacco in Kampala yesterday and found a woman who wanted to borrow sh. 100,000 or US $60. She was asked to open an account with $12 and save collateral of $20. The net loan is $28 and she will pay $100 in the next 4 months.What is the actual cost of borrowing? This Sacco claims to lend at 1%pm but the real rate is above well above 15% per month. I am working in the field of micro credit and from my experience (modest) i think microcredit benefits the lenders and merely keeps the micro borrowers busy generating income for the MFI’S. i think its the latest form of slaverly where the slaves (borrowers) are willing participants. Of course we know they do not have any other option other than accepting the loan. I visited one Sacco in Kampala yesterday and found a woman who wanted to borrow sh. 100,000 or US $60. She was asked to open an account with $12 and save collateral of $20. The net loan is $28 and she will pay $100 in the next 4 months.What is the actual cost of borrowing? This Sacco claims to lend at 1%pm but the real rate is above well above 15% per month.

]]> By: Nabuli Miriam Lumu http://www.planetd.org/2006/04/26/microfinance-and-why-it-may-not-work/comment-page-1/#comment-68485 Nabuli Miriam Lumu Fri, 04 May 2007 10:01:57 +0000 http://www.planetd.org/blog/?p=113#comment-68485 Dear Sir/Madam, Please avail me with information concerning the" Lending activities and Finacial Performance of Microfinanace Institution in Uganda. Kind Regards, Nabuli Miriam Lumu Dear Sir/Madam,

Please avail me with information concerning the” Lending activities and Finacial Performance of Microfinanace Institution in Uganda.

Kind Regards,

Nabuli Miriam Lumu

]]> By: Microfinance as Business, Faults and All at The Discomfort Zone http://www.planetd.org/2006/04/26/microfinance-and-why-it-may-not-work/comment-page-1/#comment-41335 Microfinance as Business, Faults and All at The Discomfort Zone Fri, 03 Nov 2006 15:11:05 +0000 http://www.planetd.org/blog/?p=113#comment-41335 [...] I have been a long-time skeptic of Microfinance and my posts on the subject receive more than average traffic for this modest blog. I am disappointed, therefore, to have missed a CGD report titled “Microfinance as Business“, that seems to support, at first, my skepticism. [...] [...] I have been a long-time skeptic of Microfinance and my posts on the subject receive more than average traffic for this modest blog. I am disappointed, therefore, to have missed a CGD report titled “Microfinance as Business“, that seems to support, at first, my skepticism. [...]

]]> By: Dweep Chanana http://www.planetd.org/2006/04/26/microfinance-and-why-it-may-not-work/comment-page-1/#comment-41316 Dweep Chanana Mon, 16 Oct 2006 16:20:32 +0000 http://www.planetd.org/blog/?p=113#comment-41316 Marie, See http://en.wikipedia.org/wiki/Microfinance for an introduction to microfinance. Sunil, thanks for your comments. I particularly appreciate your comment that repayment is no development, a fact few people in the development field appreciate. Far too many times I have heard people say that since people are repaying money, it must be good for them. However, I would not go as far as saying that formalized microcredit is looting, any more than traditional money lending might be. If anything, the oversight and attention MF gets is likely to reduce chances of egregious exploitation (see <a href="http://www.nextbillion.net/newsroom/2006/10/12/indian-state-caps-microloan-interest-rates-at-15-percent" rel="nofollow">NextBillion</a>). The benefit of formalized credit is that it can be managed and regulated better, and has more access to capital to expand availability, if necessary. I suspect both mechanisms have pros and cons. However, what do you mean by 'management by the poor' of informal financing mechanisms? How is that different from community credit unions? Marie, See http://en.wikipedia.org/wiki/Microfinance for an introduction to microfinance.

Sunil, thanks for your comments. I particularly appreciate your comment that repayment is no development, a fact few people in the development field appreciate. Far too many times I have heard people say that since people are repaying money, it must be good for them.

However, I would not go as far as saying that formalized microcredit is looting, any more than traditional money lending might be. If anything, the oversight and attention MF gets is likely to reduce chances of egregious exploitation (see NextBillion). The benefit of formalized credit is that it can be managed and regulated better, and has more access to capital to expand availability, if necessary.

I suspect both mechanisms have pros and cons. However, what do you mean by ‘management by the poor’ of informal financing mechanisms? How is that different from community credit unions?

]]> By: Sunil Daniel http://www.planetd.org/2006/04/26/microfinance-and-why-it-may-not-work/comment-page-1/#comment-41314 Sunil Daniel Mon, 16 Oct 2006 13:50:32 +0000 http://www.planetd.org/blog/?p=113#comment-41314 I do agree with many of the points here especially about 'formalised microcreidt'. Formalised microcredit especially as done by NBFCs and MFIs are actually looting the poor in the name of development. For them repayment is enough, and they think that is development. I actually do not fully write off microcredit nor do I say it is a 'saviour' but I certainly feel that if microcredit is still done in the informal way, where the management is by the poor and not by an outsider who taps the interest, I feel that leads to sustaibnable development of the poor. I am doing it. I dont believe in a assocsiation like BRACs controlling the show and take service charges or whatever. The poor should do it by themselves. I still appreciate the concept by Dr. Yonus but do not agree to his way of the structure of functioning. I do agree with many of the points here especially about ‘formalised microcreidt’. Formalised microcredit especially as done by NBFCs and MFIs are actually looting the poor in the name of development. For them repayment is enough, and they think that is development. I actually do not fully write off microcredit nor do I say it is a ’saviour’ but I certainly feel that if microcredit is still done in the informal way, where the management is by the poor and not by an outsider who taps the interest, I feel that leads to sustaibnable development of the poor. I am doing it. I dont believe in a assocsiation like BRACs controlling the show and take service charges or whatever. The poor should do it by themselves. I still appreciate the concept by Dr. Yonus but do not agree to his way of the structure of functioning.

]]> By: marie http://www.planetd.org/2006/04/26/microfinance-and-why-it-may-not-work/comment-page-1/#comment-41313 marie Sun, 15 Oct 2006 14:28:49 +0000 http://www.planetd.org/blog/?p=113#comment-41313 How does "Microfinance" works?? How does “Microfinance” works??

]]> By: Microfinance wins the 2006 Nobel Peace Prize at The Discomfort Zone http://www.planetd.org/2006/04/26/microfinance-and-why-it-may-not-work/comment-page-1/#comment-41310 Microfinance wins the 2006 Nobel Peace Prize at The Discomfort Zone Fri, 13 Oct 2006 12:51:00 +0000 http://www.planetd.org/blog/?p=113#comment-41310 [...] Yunus’ work shows that just the opposite is true. That solutions to poverty are complex, at best, and must fit the situation. Even microfinance, hailed globally as a solution that works, works differently in different regions and even fails in certain communities. There are other problems with microfinance. And as with all ideas that become holy grail in the west, the presumed success of microfinance has a downside. It prevents a true evaluation of the impact of this model. It also prevents us from questioning if the problem is a lack of finance, or something more fundamental. Most of all, it is ironic, unfortunate, and dangerous that ‘civil society’ proponents of microfinance take its apparent success to validate a simplistic solution to a complex problem. [...] [...] Yunus’ work shows that just the opposite is true. That solutions to poverty are complex, at best, and must fit the situation. Even microfinance, hailed globally as a solution that works, works differently in different regions and even fails in certain communities. There are other problems with microfinance. And as with all ideas that become holy grail in the west, the presumed success of microfinance has a downside. It prevents a true evaluation of the impact of this model. It also prevents us from questioning if the problem is a lack of finance, or something more fundamental. Most of all, it is ironic, unfortunate, and dangerous that ‘civil society’ proponents of microfinance take its apparent success to validate a simplistic solution to a complex problem. [...]

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