This is an interesting article in the NYT about a microfinance lender in Mexico that is a for-profit, publicly traded company. You always hear in discussions of charity microlending that the default rates are incredibly low. Special measures are taken, such as lending almost exclusively to women and having the women form groups whose loans (and defaults) are pooled. And obviously, the transaction costs on making many small loans would have to be much higher than fewer, bigger loans. Nonetheless, I always wondered why the market didn't attract for-profit lenders, if the repayment rates were really so good.
Well, in this case it has. The non-profit lenders, and the man who came up with the idea, economist Muhammad Yunus, are opposed to the encroaches of for-profit companies that will be run for the benefit of their investors. As long as the for-profit lenders don't get the government to lean on their idealistic competitors it seems to me it would be all to the good--the funds of "ethical" investors can be put to work in underserved markets, and the original, non-profit orgs should be able to offer better rates in areas where they compete.
As I typed this entry, I wondered, do these organizations ever get protested against on gender fairness grounds? "You dickheads will just drink up the money" isn't a very conciliatory response, even if it's well-founded...Desultory googling yields this possible link between access to microfinance and becoming the victim of domestic violence for women in Bangladesh, but that wasn't exactly what I was thinking of. Except insofar as I was thinking about dickheads. The microfinance discrimination far exceeds anything like variable rates for car insurance; from everything I've read they just basically don't loan money to men. This may not result in serious injustice to the male would-be entrepreneurs as a class if men have access to traditional sources of credit closed to women in a society, but it could still be pretty unfair in any given case. It strikes me that the sort of people who would strongly object to this are the same people who would laud accurate, dispassionate risk assessment in other financial areas, but making up imaginary political opponents with contradictory views is unseemly, so I'll stop there.
UPDATE: mere seconds later, I am moved to ask, day-um, what's in that cheese? That looks gooood. Mmm, mysterious queso.