Mission drift in microfinance institutions

Aug 28, 2008 Letters

DEAR EDITOR,
Microfinance, a “trickle-up” market-based approach to poverty alleviation, is a hotly contested subject in the field of development.

Most microfinance organisations in less-developed countries tackle the effective exclusion of the poor from financial capital by providing credit at low interest rates to foster entrepreneurship and development.

Although each loan is small, they provide clients with enough accessible capital to start a small business and purchase raw materials.

The income generated through these businesses can positively affect the financial statuses of borrowers and their families, thereby lifting them out of poverty.

The most famous case of microfinance is that of the Grameen Bank of Bangladesh, founded in 1976 by Muhammad Yunus, who went on to receive the 2006 Nobel Peace Prize jointly with the bank.

In his acceptance speech, he noted the extreme poverty and inequality present in the contemporary world, but asserted that a world free of poverty can be attained because poverty is not an invention of the poor; it is a structural problem within a given economic and social system, promulgated by the “institutions and concepts that make up that system [and] the policies we pursue.”

Microcredit organisations do their part in attempting to change that system by expanding the reach of financial institutions and offering credit to those who need it most.

Yunus argues that maximizing profit and “doing good to people and the world” are “mutually exclusive, but equally compelling.”
Jenna Barzelay