Anuj, Chuck and Colleagues,
Anuj suggests at the top of his post, go cooperative.. When the interest rate debate sparked by Compartamos was emerging a few years ago I remember that during a panel discussion at SEEP Dave Richardson pointed out that that the Mexican credit union movement was reaching the same population as Compartamos profitably at a fraction of the cost and offering savings and a return on investment to boot. Similarly I have seen that savings groups which are the micro version of credit unions outcompete MFIs by offering a safe convenient place to save and easy access to small loans managed by the groups with the profits returning to the members. Do the math. Save two dollars each week in a savings group and have access to small loans over the year with no collateral at risk and when the year is over receive back $100 plus a share of the interest or receive a $100 loan pay it back plus and have no savings to show for your efforts. As the interest rate in Bolivia has decreased year by year with the competition between the many microfinance players, savings groups and credit unions could also drive down the interest rate of the institutional players by offering a lower cost, more flexible and more convenient alternative. It's up to us to grow this alternative.
See "In Their Own Hands: How Savings Groups are Revolutionizing Development" which will be launched on September 15. Check out the book website intheirownhands.com.
Jeff
Jeffrey Ashe
jaashe@aol.com
-----Original Message-----
From: Anuj Jain ajain@stfx.ca [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com>
To: MicrofinancePractice <MicrofinancePractice@yahoogroups.com>
Sent: Fri, Sep 12, 2014 2:59 pm
Subject: RE: [MFP] Microfinance's position - Greed is good!
And the answer is….. 'go cooperative'! J
Hi Chuck,
the battle is far from over.. and I would like to believe that majority of us still on the same side as yours… as a watchdog, it is great to have you amongst us..
millions moons ago, when it was unimaginable for many NGOs to think of becoming for-profit micro-lending institutions; we encouraged, pushed and even incentivized them to do so.. for access to credit was an important agenda… we had all the right intent and purpose in our hearts…
but legislation is a funny thing.. once we open the door for profit to be made for selling pub goods or services without moderation, market will attract all kinds of players.. that is how it is.. period.. perhaps a lesson is learned that the government of the land must watch and protect the interest of its hapless and gullible citizens.. international players and donors, when they intervene too much without realizing the limited capacities of the regulators, the fallouts can indeed be drastic.. India went the other way and clamped down on interest rates… industry predicted doom, but seems to be adjusting to the new realities with time.. self-regulation without accountability did not work in India either, as we saw prior to 2010..
For unregulated environments, where do we place the responsibility (or blame)? Are multilateral and bilateral institutions, and international investors have a share?.. many of us, in our sincere effort to create pragmatic solutions, advocated for deregulated interested rates.. we believed in the market God – let the 'market' decide.. and that may very well work, eventually.. but in the meantime, the definition of microfinance is no longer in the custody of civil society, even though that's is where it had germinated… wish, we had copyrighted it when we had the chance J…
anuj
I'm reaching the decision that I'm wrong on something I believe passionately about.
I believe the microfinance industry needs to stake out a clear position that we do not make excessive profits off of the poor, that we do not charge usurious rates to the poor. Others do that, and they have that choice. But to me, responsible practice means we restrain ourselves and make no more than moderate profits.
I've been saying that over and over for 7 years. But the industry disagrees. We still do not have a good definition of "responsible price" and we do not have any industry position on responsible profit vs. profiteering.
Last month, Compartamos became the 22nd MFI in the world to be certified as meeting the SMART principles, despite prices of 105% and profits of US$1M a day.
I made my case last week, at the Micro Credit Summit in Mexico. My views are summarized in this article by NextBillion:
I have recorded my position in this 15-minute video here:
I know there are many people who share my views. But we are outvoted. (Oh there are no votes taken on these positions.)
Self-regulation has a serious risk of really being self-interested regulation. Until open debate and objective decision-making takes place, I see no change possible. But what open forum is there for debate and decision-making on these topics? I certainly haven't seen one.
So maybe I'm wrong on all of this. But without discussion and debate, I can't be convinced that I'm wrong.
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