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Preying in the Poor or Filling a distinct segment? Classes from Payday Lending on Profits in Microfinance
May 22, 2008

The microfinance that is international - cheered and arguably hyped for the power to relieve poverty through use of microcredit - originated centered on a social objective to offer monetary solutions such as for example tiny loans to your bad and underserved. Nonetheless, the explosion that is recent of providers (in certain circumstances, non-profit MFIs going public, for instance the now-infamous Compartamos IPO, in other instances, a surge in predatory micro-lenders) happens to be met with a mixture of applause, doubt and perhaps, disgust. Now, some microfinance leaders are talking out concerning the risks industry faces if it loses sight of the social objective, fearing the probability of an influx of profit-seeking actors providing credit services and products that are in fact more welfare-harming than welfare-enhancing. My real question is: Has someone else noticed some eerie similarities between these debates over earnings from microcredit additionally the debates inside the United States over payday loan providers?

First, the crux of this debate that is current microfinance has ended everything we could phone "ethical" interest levels and therefore earnings for micro-credit institutions.