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.
Yunus joins politics in Bangladesh by launching his own party in the coming month, writes several newspapers. The connection between politics and microfinance has always interested me as many microfinance institutions survive in environments were involvement in politics is a necessity for doing business. At the same time, previous times’ rural finance has been infamous for being captured by politicians. Bangladesh is one of the most corrupt countries in the worlds, which does not make the connection less interesting. Right now it looks as if that is one of the likely conclusions in my thesis: Microfinance should not be public, but probably not entirely private either, in order to achieve it’s double goal of financial and social performance. The question is not whether or not there is a connection between politics and microfinance, but which connection and how it works. Yunus has made this question even more interesting by his move today.
Der faktisk en del danske studerende, der i tidens løb har beskæftiget sig med mikrofinans og en del af deres arbejde er tilgængeligt pp internettet. For nogle år siden skrev Mia Buthler Olesen om mikrofinans i en antropologisk perspektiv, lidt i stil med hvad Ana Marr har gjort i Journal of Microfinance. Olesen er dog mindre skeptisk end Marr, idet hun finder at mikrofinans godt kan have positive konsekvenser på kvinders empowernment. Silke Mechlenburgs opgave fra IU på RUC er et nyere bidrag. Hun finder at USAIDs mikrofinansprogram baserer sig på en snævert konomisk forståelse af fattigdom. Lytter man efter i krogene vil man vide at der også er en gruppe CBS-studerende, der skriver om fænomenet, ligesom nogen fra økonomi er på vej til Uganda for at se på det – og nogle andre ting :-)
Al denne aktivitet har givet anledning til et virtuelt netværk for mikrofinansstuderende – klik på linket til højre hvis du vil være med.
DANIDA has recently funded a study done Development Associates on the possibilities of funding a Global Guarantee fund for microfinance. Very interesting, because it highlights the important debate on how donors best can support the sector. The guarantee funds is an attempt to overcome the schism between sustainability and subsidization: Local banks, is the assumption, will not lend to MFI’s because they think it is too risky. But with a guarantee, they will start, and hopefully find out that they were wrong about the risk. This is nothing new. ACCION has had a Guarantee fund since 1984 and has recently revised their concept. If DANIDA uses their 2 decades of experience it’ll sure work great. But great idea, under all circumstances.
Who said microfinance was techincal? Here’s a pedagogical (an only a little rørstrømsk) film by the interesting US NGO, UNITUS.
Tom Peters, a business advisor, is sometimes quoted for saying: “No matter what business you’re in, you’re always in the communication business.” Communicating development issues is definetely a crucial task and I recenty contributed by co-writing an editorial on microfinance in Berlingske Tidende, a Danish daily. Co-authors were former Minister of Foreign Affairs, MP Mogens Lykketoft and Kasper Graa Wulff.