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Small Loans Grow in a Big Way
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As the microfinance industry grows, there are efforts to prevent abuses. Transcript of radio broadcast:
23 December 2008
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This is the VOA Special English Development Report.
Microfinance
is becoming a big business. It started as a way to provide very small
loans to people in developing countries so they could begin to move
themselves out of poverty. A few hundred dollars could mean a lot to a
poor entrepreneur with a promising idea.
 | | Mohammed Yunus |
Bangladeshi economist
Mohammed Yunus won the Nobel Peace Prize in two thousand six for his
work with banking for the poor. He formed the Grameen Bank in nineteen
eighty-three. Today there are microfinance providers all over the world.
And
anyone can be a microlender through a site like Kiva.org. You choose a
project and provide at least twenty-five dollars of the amount
requested. Three out of four loans have gone to women, which is common
with microfinance.
Kiva spokeswoman Fiona Ramsey says the site
has grown even with the economic downturn. The total value of loans
made through Kiva, she says, is nearing fifty-two million dollars.
The
downturn has not had a big effect on loan repayments either. The
current repayment rate is ninety-seven percent. But Fiona Ramsey says
that because of the credit crisis, microfinance organizations are
finding it harder to get loans from banks.
Kiva works with
microfinance organizations in forty-two countries. These "field
partners" keep the interest charged on the loans. The average term is
twelve months. And the average interest rate is almost twenty-three
percent.
Returns like that help explain why microfinance now
includes big banks and other lenders. Mohammed Yunus has said he
worries that lenders may be more interested in profits than poverty
reduction.
He supports a new effort based in the United States
called MicroFinance Transparency. The aim is to prevent abuses by
letting borrowers compare pricing information from different lenders.
Its creator, Chuck Waterfield, calls it "an industry-based
truth-in-lending effort."
Borrowers, he says, are often misled
about the true price of a loan. "For twenty years we set the price to
cover the cost. Now, some organizations are setting the price to
whatever they can get away with," he says.
The first step is to
publish information collected from eight countries. Chuck Waterfield
says information from Peru, Bosnia and Cambodia will appear in February
at the Web site mftransparency.org. He says the others, including at
least one country from Africa, will follow a few months later.
And that's the VOA Special English Development Report, written by Karen Leggett. I’m Jim Tedder.
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