David Roodman

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Microfinance visualized | 

It’s hard to actually follow the advice of the slogan to “Visualize World Peace.” But below is a pretty cool video that allows you visualize reducing poverty — or at least watch microloans flying all over the world.

Thanks to David Roodman at the Center for Global Development for pointing this out (and for noting that Kiva’s microfinance program is not quite as advertised. But this video at least gives you a good sense of how popular these micro-loans have become … and it’s fun to watch. I think they could’ve picked better music, however. The William Tell Overture?):

Intercontinental Ballistic Microfinance from Kiva on Vimeo.

Four answers to the question: Does microfinance work? | 

That, in a nutshell, was the question posed to a panel of microfinance experts at a Seattle forum earlier this week, sponsored by Global Washington and aimed at examining “The global implications of India’s microcredit crisis.”

The answer: Yes and no. Of course.

It’s actually an important, if impudent sounding, question given that microfinance has long been heralded as the most powerful weapon in the fight against poverty. It’s especially interesting in Seattle because this community is one of the leading international hubs of the anti-poverty scheme.


Tom Paulson

From left, Rick Beckett of Global Partnerships, Chris Wolff with Accion Int’l, Peter Bladin of the Grameen Foundation, David Roodman and moderator Steve Davis

I think it’s fair to say microfinance is no longer regarded without question as a panacea for poverty. In fact, as I have written ad nauseum, it is in something of a crisis. Continue reading

Has India jinxed microfinance? | 

Flickr, prolix6x

Indian woman cooking rice

The anti-poverty scheme known as microfinance is in crisis, or maybe several crises.

The political sacking of Muhammad Yunus as head of the pioneering Grameen Bank, allegations of loan-shark profiteering by some microfinanciers and suicides of poor people caught in “debt traps” have led to a drumbeat of negative media stories about microfinance.

The drumbeat is loudest in India where the crisis is most intense. But it has reverberated worldwide, including in Seattle. Continue reading

Microfinance pioneer Muhammad Yunus ousted? | 

World Economic Forum

Muhammad Yunus

Update as of Friday afternoon: Still not clear.

Muhammad Yunus, the Nobel Peace Prize winning economist who created the anti-poverty loan strategy known as microfinance, has reportedly been ordered by the Bangladesh government to step down from his pioneering institution the Grameen Bank.

I say reportedly because the news, at the moment, is kind of schizoid — because the politics in Bangladesh are, uh, unpredictable and, well, because being told to do something is one thing and doing it is another.

Yunus has been in a political battle for a while which, depending upon your perspective, is either just an unjustified power struggle or the result of a broader crisis in microfinance.

The New York Times and Time magazine say Yunus has been ousted. The Associated Press and Forbes say he’s been ordered out, but plans to stay.

David Roodman, a microfinance expert at the Center for Global Development and one of those with his finger on the pulse, is also questioning whether some of the media reports might be jumping the gun to claim he’s actually been ousted.

As Roodman noted Monday, the board of the private bank refused to follow the dictates of politicians to vote him off the board and U.S. politicians have come to Yunus’ support.

My money is on Yunus putting up a fight. We’ll see.

Five reasons why microfinance is in crisis – and why it matters | 

Flickr, TW Collins

The popular anti-poverty scheme of providing small loans and other financial services to poor people, generally known as microfinance, is in crisis.

“In one sense, you could say it’s a coming of age,” says Alex Counts, CEO at the Grameen Foundation, a leading non-profit microfinance organization with offices in Seattle and Washington D.C.. “Controversy often comes along with growing in size and impact.”

You could also say microfinance is actually suffering from several different crises: An external appearance of a crisis based on a damaged public image; a related, but slightly different, internal “identity crisis” and, at least according to one leading observer, a cash crisis in reverse — too much money.

Here are five reasons for the crisis:

  1. Microfinance has grown rapidly, from a simple anti-poverty program into a major player in the financial industry.
  2. Some now view microfinance primarily as an investment opportunity, with reducing poverty as either a secondary goal or not really the goal at all.
  3. Microfinance is a multi-headed creature with no agreed-upon strategy or approach.
  4. There is no consensus on how to measure “social performance” — for donors to tell the difference between a program focused on poverty reduction from one focused on maximizing profit.
  5. The evidence that microfinance does bring people out of poverty is mixed. Some say it has helped millions of poor people, mostly women. Others say it hasn’t and is, in fact, a debt trap for the poor.

All of these points, and most of the arguments, tend to circle back to the pioneer of microfinance, or microcredit, the Nobel Peace Prize-winning Bangladeshi economist Muhammad Yunus.

Tom Paulson

Muhammad Yunus visits with fans Seattle Town Hall May 2010

Yunus used to be golden, uniformly regarded as almost the patron saint of the anti-poverty movement. He still is seen as such by many of his supporters.

But Yunus is also in a bit of trouble these days, fighting off a push by politicians in Bangladesh to force him out of the Grameen Bank (his pioneering microfinance organization). The push comes after a film-maker’s allegations of corruption and the increasingly popular refrain among critics that these microloans hurt rather than help the poor — even driving some debtors to suicide.

Many in the microfinance industry see the power struggle in Bangladesh as more of a political sideshow, unjustified but more importantly unrelated to the real challenges facing the field. Continue reading

Microfinance flap keeps getting weirder | 

World Economic Forum

Muhammad Yunus

There is a crisis in the anti-poverty scheme microfinance, centered in India but reverberating globally.

I posted on the local implications of this mess in October, before it exploded in India but back when there were signs of trouble. I’ve tried to keep up as it has gotten more intense and weirder by the moment.

In the latest (even weirder) turn of events, the Nobel Peace Prize-winning pioneer of microfinance, Muhammad Yunus, has been accused of embezzling funds based upon allegations made by a Norwegian documentary filmmaker who has taken a critical look at the whole microcredit movement. Continue reading

India’s imploding microfinance industry update | 

Flickr, TW Collins

The debate about microfinance in India is not really about whether or not it’s in crisis or at risk of imploding. It’s about why it’s in crisis and imploding.

Jonathan Lewis, a social investor and microfinancier, goes over the basics in the Huffington Post and can’t seem to make up his mind if India’s (or more precisely, the state of Andhra Pradesh’s) experience with microfinance is “Mendacious or Magnificent.” Lewis says the media:

“… are reporting on the impending implosion of microfinance in India, particularly in the state of Andhra Pradesh where subprime microlending has caused, or so it is alleged, a measure of microloan debt bondage, debt-induced suicides and rich profits for international investors, mostly Americans.”

Lewis criticizes this “hysteria,” says it is unsupported by the facts and makes the case for microfinance as still a viable means for fighting poverty.

David Roodman, a microfinance expert with the Center for Global Development, actually went to India to find out for himself, as he reports today in “When Indian Elephants Fight.” Continue reading

Don’t be too quick to blame politicians, or the poor, for India’s microfinance crisis | 

Flickr, TW Collins

As loyal readers of this blog know, I’ve been watching and reporting on the increasing turmoil in the Indian microfinance industry for a while now.

How this flap in India plays out could have profound implications for a number of Seattle organizations and many others elsewhere that promote microfinance as a tool for reducing global poverty.

Today, the New York Times reports that “India Microcredit Faces Collapse from Defaults” and says:

India’s rapidly growing private microcredit industry faces imminent collapse as almost all borrowers in one of India’s largest states have stopped repaying their loans, egged on by politicians who accuse the industry of earning outsize profits on the backs of the poor.

This approach reminded me of the early days reporting on America’s sub-prime loan crisis. Continue reading