Wednesday, August 18, 2010

Interesting. I just made a micro-loan to someone in Nicaragua via Kiva and saw a warning about the No Pago movement.

Got some details here and here.

Couple of thoughts.

I'm clearly not usuring at this point. I'm not making any profit off my micro-loans. So that's no justification for not repaying me!!! ;-)

It's possible that the partners are. Don't know if Kiva allows or controls this. 28% does sound pretty high.

Here's an issue (from that second link) :
It’s now commonplace for people to take out a loan from one MFI [Micro Finance Initiative], fall into arrears and then go to another one and another, bailing themselves out of debt with one by getting into debt with two more. This phenomenon is generalizing because while a micro-financing operation may evaluate that a person has the capacity to pay, it might not be able to learn whether that client has other creditors, so its evaluation is inadvertently inadequate. For example, we had a woman in ASOMIF who was a kite maker and seemed to be doing very well, but in the end got in debt with all 19 of our affiliates

Quoted in the first link :
Many loan officers were incentivized based on the growth of their portfolio alone.
In other words, micro-finance as "sub-prime mortgage".

I've tended to feel sympathetic to Daniel Ortega. I'll be disappointed if this really is cynical patronage-politics.

Overall, micro-finance is clearly now big and influential enough to attract carpetbaggers : unscrupulous lenders, attacks from politicians who see it as a rival to their patronage, and even feckless borrowers. I guess that's a sign of success. Even if it means we have to take off the rose-tinted specs. when looking at it.

No comments: