I was thinking about micro-credit and how the promotors of basic micro-credit programs have what they think is a persuasive argument. “We get 95% (or more) of our loans completely paid off. Isn’t this reason enough for funders to be satisfied with their investment?” But when you think a moment about this argument, then intuitively you realize that one of the key reasons for such high levels of reported success is that the program is not really targeted at the poor. It targets people who are “safe”, being at a higher level of “poor”, and who have a greater sense of responsibility and want to make a success of whatever business or venture they are getting funding for.
But there are a huge number of people in the world, particularly in the Lean Economies who are extremely poor, lack skills and education, have problems with health, both physical and mental, resulting in a demographic that need additional support along with micro-credit loans. Do micro-credit providers add this component, or do they simply avoid support to problem people?
For promotional purposes, though, the purveyors of these schemes will find it easier to promote their fund-raising efforts if they can point to the very high repayment rates they get on the loans. It will be much more difficult for them to chase down funding if they have to report much lower numbers re: loan repayments. A whole new strategy is needed to explain a micro-credit program which is multi-dimensional with as much emphasis on teaching life skills, on training, on counseling than on loan repayment. Subsidizing micro-credit for the very poor could be a strategy. Is this being added to the mix for multi-problem and very poor potential recipients? I would hope that support for this demographic wouls be embraced and a strategy of fund development that takes this into account, be developed.
The attached link goes into great depth on some of the problems with micro-credit and its prospects. Before blindly embracing the claims of organizations regarding their excellent loan repayment records, donors should get a better understanding of the bigger picture.
Google World Bank article
Does Microfinance Still Hold Promise for Reaching the Poor?