Last week, eBay announced, or at least declared, that they had bought MicroPlace, an online peer-to-peer market place for microfinance investments. MicroCapital is worried that more risky capital in microfinance will make the quality of the institutions go down. Are they right? That depends on where and how the funds go. If the funds are placed without regard to institutional performance and are targeted toward the same large and secure MFIs, which get most of the funds in microfinance today, then it’s probably not a good idea. But if MicroPlace can figure out a way of reaching the small and medium-sized MFIs, and at the same time doing it on the basis of reliable information about their performance, then the critique is probably not as justified. As I describe below, they will most likely focus on the large MFIs, just like the others. I have drafted a suggestion for doing things differently in a business plan on another market for capital in microfinance: Interest for Change. So far, that’s just an idea, so bold comments are very welcome.
More on the eBay/Microplace story below.
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A question about microfinance in Thailand was posted in a comment here on the blog, so here are a couple of inputs on that issue, which I found when I looked into the matter before going to Bangkok in March 2007. I am not an expert on this issue, so these are just a couple of thoughts.
Brett Coleman wrote a nice paper on Microfinance in Northeast Thailand, where he finds evidence of poverty reduction but also great inequalities in who benefits. He deals with the MFI called “Small Enterprise Development (SED)”, which seems to be one of the more important, apart from the government supported savings banks. Details are: Coleman, Brett E. (2006), “Microfinance in Northeast Thailand: Who benefits and how much?” in World Development, vol. 34, iss. 9, pp. 1612-1638.
Furthermore, some organizations held a conference in 2002, and actually signed a Declaration on Microfinance, “laying out a road map for regional cooperation and development of microfinance as an important and powerful development tool.”
Finally, former prime minister Thaksin launced some programs with inclusive finance components, some of which became known as thaksinomics. This included subsidized credit to farmers and product promotion through the OTOP-program (One Town One Product). The latter is highly visible around Thailand today.