Hi Chuck
I don't think I made any personal insults in the posting, merely, if this is what you are referring to, a comment that the funding of Microfinance Transparency might make it practically difficult for you to go too far beyond the issue of interest rates without risking a problem, which is a pity. So your comment that there are 'personal insults scattered throughout' is confusing to me.
Hi Chuck
I don't think I made any personal insults in the posting, merely, if this is what you are referring to, a comment that the funding of Microfinance Transparency might make it practically difficult for you to go too far beyond the issue of interest rates without risking a problem, which is a pity. So your comment that there are 'personal insults scattered throughout' my posting is simply not true.
My point is that you must see what is going on as well as I do, yet your field of vision never strays much beyond the interest rate question. You quite wrongly boil many of the problems down to consumers not being able to differentiate between different interest rates, as if correcting this problem will remedy all the ills that have become entwined with the microcredit model. This is simply not true as microcredit markets that do not have the high interest rate problems as in Mexico have abundantly shown. I pointed to several key examples where the microcredit sector has blown up not because of high interest rates, yet you did not respond to the point.
You go on to say that a 'a large portion of the industry has become something that we didn't intend to create'. I'm sorry, but those that created the new commercialised industry DID intend to create what we have today. Those who religiously believed in the myths of the free market aimed to create an industry based on market forces, and we have today exactly what they wanted - an industry based on market forces; the problem is that market forces if uncontained, as in most microcredit markets, actually do far more damage than any benefit they create.
You say that you don't wish to 'tear down everything that the entire industry does, because there is much we did, and much we can do, that can have a reasonable positive impact' without ever providing any real evidence to back up your point. What country or regional examples are you point to that show microcredit has 'worked'? I have been looking for a long time and I can't find any such examples, only a large number of uplifting anecdotes that prove nothing, any more than coming across a few winners at Sands Casino proves that gambling is a sensible strategy for poverty alleviation. You have taken Compartamos to task, and rightly so, and deserve credit for this, but supposing interest rates go down to, say, 50% or 60%, as in South Africa, will this start to create real benefit for the poor? I don't think there is any evidence for this whatsoever. The core problem in Mexico is the massive expansion of the most unproductive informal microenterprises ('changarros') which are absorbing far too much of Mexico's scarce financial resources compared to higher productivity formal SMEs. Indeed, lower interest rates might actually increase their influence in the economy, which will further damage Mexico's economy into the longer run. Reading the notes from the conference you did not mention this massive problem at all so far as I can see, just the high interest rates one.
Finally, at the risk of being accused of insulting you again, your decision not to publicly walk away from, or at least highlight and argue against, the individuals and organisations that created this huge mess is touching, but addressing poverty, deprivation and inequality might require that you do so. Remember, the people who are the so-called 'predatory lenders' in South Africa that you now seem to viscerally despise were in the early 2000s celebrated by the global microcredit movement as representing a new generation of pioneers pushing for financial inclusion (the 'mashonisas' you talk about in another posting are simply not the problem inn South Africa so I'm not sure why you raised that red herring once again). Attempting to now categorise these high-profile individuals and institutions as 'something other than microcredit', now that they are only doing to the max what markets suggest they should – exploit a market opportunity if they have one – is rather an evasive and unbecoming response to such a crushing problem in that country caused by the microcredit industry.
Posted by: milfordbateman@yahoo.com
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