Perspectives on Peace: An Examination of Post-Conflict Societies

http://www.nytimes.com/2010/11/14/business/global/14haiti.html?pagewanted=2&ref=americas

Here’s a less doom-and-gloom case; microcredit has helped many people in Haiti who would otherwise have no access to credit or resources. The article points to some issues with microcredit in unstable economic environments (either due to disasters or conflict); microbanks in Haiti have had to write off large portions of the loans they have extended due to the death tolls after the last hurricane. Issues such as this are part of the reason microbanks turn from non-profit to for-profit in order to sustain their activities; of course, this then opens the door for the problems currently seen in India.

Interesting. NYTimes wouldn’t let me access either of those links but I think I get the gist of it.

I was looking through Kiva’s website as my family was particularly interested in loaning to an enterprise in Uganda, and we were put off when we saw that the main field partner in Uganda charges an average of 53% interest rates to borrowers. Ouch.

I feel like there is enormous potential for microcredit if, like you say, the international community regulates it in order to maximize social benefit as opposed to profit. Maybe there could be a centralized international actor (such as Kiva which is given mandate under an IGO like the UNDP) to coordinate microcredit field partners in their activities. There could be strict regulations such as interest rates that don’t exceed say 15% (or whatever can give them a net profit, changing depending on circumstances, of course) and a screening process to minimize loan delinquency. THEN, based on the quality of the field partner which is evaluated based on the data, the partner is awarded the difference that they would make, were they a commercial bank.

This is effectively subsidizing microcredit so that the firm’s profit and the social benefit to the borrower are both maximized. It would be far cheaper, and promote more accountability than aid as charity.

It’s hard to tell how feasible it would be to have quality oversight, but I must say I’m impressed with how transparent the information is on Kiva. The website lists plenty of data on field partners, and only the best ones stay affiliated with Kiva, while the riskier partners are publicly shown to be so, before the worst ones are dropped from the system altogether. This is the kind of accountability-inducing system that has been missing from the aid world.

Weird….I just copied the link from NYT to post on the blog….you beat me to it!

Yeah it’s a really sad case…..I agree with you that this could lead to much wider implications with the future of microcredit lending. Many people will look at India and likely use it as a measuring stick for success without looking at the smaller countries that have truly benefited.

We were discussing this in class….apparently there are already some groups getting together and denouncing microcredit lending as idealistic and suggesting it does little for the economy. However, many of us agreed that this sort of thing is too early in its inception to be legitimately measured for any long term success.