Microfinance | Time to take the credit | Economist.com - The Diigo Meta page

• 16 Mar 07
  

  Anders Tunold Kråkenes

  It would be better for the poor if the IFIs and donors left the best credit risks to profit-seeking lenders and concentrated instead on those still stuck outside the system. By subsidising microfinance groups that do not need it, aid bodies and philanthro

  microfinance economics development

  • Aid money is better spent where commercial cash fears to tread—such as on the  next generation of microfinance institutions. Subsidies are often needed to lend  to the rural poor, where small, scattered populations make it hard for  commercial lenders to cover their costs. Donor funds could be used to invest in  technology such as mobile payments, which promise to cut the cost of providing  microcredit.
  • By subsidising microfinance groups that do not need it, aid bodies and  philanthropists discourage private money, which cannot compete with their soft  terms. In the long run, this harms microfinanciers, because it slows their  integration into the financial-services industry and thus hampers their  transformation into lenders able to stand alone.
  • It would be better for the poor if the IFIs and donors  left the best credit risks to profit-seeking lenders and concentrated instead on  those still stuck outside the system.

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