Is Microfinance the New Subprime?
That’s the provocative title of a new article in the Harvard Business Review by financial journalist Barbara Kiviat and New York University economist (and author of Portfolios of the Poor) Jonathan Morduch.
The subtext of the question is the implication that, like those sub-prime mortgage loans in the U.S. that turned out to be a catastrophic house of cards, some approaches to microfinance are starting to also look like another way for financial whizzes to make money off poor people.
I’ve been posting for the past few weeks on this increasingly heated debate surrounding “profit-maximizing” microfinance and the resulting turmoil in the field. It’s a debate that many organizations in Seattle, where microfinance is big, are watching keenly. Continue reading