NextBillion.net - Development Through Enterprise - Microfinance Misses Its Mark - Comments

Micro Credit

GM Samy — Tue, 18 Sep 2007 06:58:48 -0400

It is simple. The local money lenders charge interest at 90%, where as micro credit is available at 24%. Though the end use and misuse of credit continues, micro credit is simply cheap.

microcredit is not a one for all solution....

bal k joshi — Fri, 29 Jun 2007 02:40:34 -0400

Hey Rob, Greetings from Nepal. After a long time I had some time to visit NextBillion. Thank you for posting this article. Though I have not been a big fan of Mr. Karnani’s past commentaries, on this particular case I found myself agreeing to his approach. Microcredit in Nepal is not a new concept. Its been around since the late 60s. In-fact there is a myth in Nepal that Mr. Yunus got his inspiration during his visit to Nepal. Who knows if the myth is true? Back to the topic, for some reason I fail to see a connection between Microcredit and poverty reduction. Having lived in America in Nepal, I continuously ask my self a question. What does America has that Nepal does not have; in other words what does the developed nation has that the underdeveloped does not have? Will that be a place to start? Is America today where it is because of credit access or because of systems, processes, leaders that have built to create a sustainable social and economic environment? My personal life experience has now convinced me that the connection between poverty and economic system is country ability to recognize leaders that can create opportunities for the general population. Going forward world needs to continue to create leaders that creates environment that fosters social and economic growth. I think microcredit is not a one for all solution but just a part of the solution in creating an environment that fosters poverty reduction. Cheers!

Microfinance misses its mark

Rob Katz — Tue, 19 Jun 2007 08:39:29 -0400

Subbarao, just so you know this is a news story, not an original blog post, and its author is Aneel Karnani, a business school professor at the University of Michigan. His claims are controversial, to be sure -- but check out the full article and see what you think. I'd welcome your response in full-length form, if you're interested in that. Contact me here.

Microcredit - good, bad and ugly?

Subbarao Seethamsetty — Sun, 17 Jun 2007 23:04:55 -0400

Bob, you are so off the mark I don' know what to say. "Your" analysis says... ? who exactly are you? Jobs are better than free enterprise? Worker productivity is better than self-employment? Where do you live? and what is your agenda? What is the threat that you are afraid off. The only folks that are against microcredit in Bangladesh are the mullahs who are loosing their influence because the gentry are becoming economically free. I don't understand your point of view in the face of millions of lives transformed for the better. Subbarao

power

lance durham — Thu, 07 Jun 2007 00:18:00 -0400

unfortunately, increased labor productivity is no panacea. why? because it DOES NOT lead to higher wages. why? (1) because monopolistic moneylenders and factory owners take the increased profits from the increased labor productivity (2) because the price of the output drops in response to the increased supply.

an interesting thing about 'labor productivity' is that we think of it as output per workerHour, but the manager thinks of it as $ worth of output per $ worth of worker wages. in other words, there are two ways to increase 'labor productivity'...you can either increase the $ worth of output or decrease the $ worth of worker wages. therefore, one of the best ways to increase 'labor productivity', from the manager's point of view, is to cut wages to the bone and to run a sweatshop. so, from a certain point of view, managers are already focused upon 'labor productivity'.

increasing labor productivity (output per workerHour) only makes higher wages possible, it does not guarantee higher wages by any means. ...what does guarantee higher wages is a worthy question.

Microfinance Misses Its Mark

Rob Katz — Wed, 06 Jun 2007 08:21:06 -0400

June 6, 2007 - 07:00, Stanford Social Innovation Review

Microfinance Misses Its Mark

Story Link: http://www.ssireview.org/articles/entry/microfinance_misses_its_mark/

Teaser:

To understand why creating jobs, not offering microcredit, is the better solution to alleviating poverty, consider these two alternative scenarios: (1) A microfinancier lends $200 to each of 500 women so that each can buy a sewing machine and set up her own sewing microenterprise, or (2) a traditional financier lends $100,000 to one savvy entrepreneur and helps her set up a garment manufacturing business that employs 500 people.

Microcredit is the newest silver bullet for alleviating poverty. Wealthy philanthropists such as financier George Soros and eBay co-founder Pierre Omidyar are pledging hundreds of millions of dollars to the microcredit movement. Global commercial banks, such as Citigroup Inc. and Deutsche Bank AG, are establishing microfinance funds. Even people with just a few dollars to spare are going to microcredit Web sites and, with a click of the mouse, lending money to rice farmers in Ecuador and auto mechanics in Togo.