All,
Please be sure to read below in Chale's email. At first it may look like an email with no content but he placed his comments in the body of my email. I find it a productive and mature response.
Lots o' typos from my iPhone
Lots o' typos from my iPhone
On Sep 17, 2014, at 7:47 PM, Chale Espinosa A chalespinosa@yahoo.com [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:
USA : 251-219-4808Nic : 505-8-851-3355Skype: chalespinosatwitter: @chalespinosahttp://www.facebook.com/BienesRaicesNicaragua
From: "Chuck Waterfield waterfield@microfin.com [MicrofinancePractice]" <MicrofinancePractice@yahoogroups.com>
To: MFP <MicrofinancePractice@yahoogroups.com>
Sent: Wednesday, September 17, 2014 11:08 AM
Subject: Re: [MFP] Microfinance's position - Greed is good!
Ah, thank you Chale for a clear position statement that doesn't insult the positions that others have proposed.I think you clearly state what *some* of the industry believes is the position of the *entire* industry. But there are many of us who disagree. Many of us don't, in fact, say that microfinance that works legally and seizes market opportunities is "bad". We DO say that not all of us choose to have profit maximization as our main goal, and we do not want to be pooled together with those who do. Fair.This is not a debate between for-profit business and pro-subsidy camps. This is a rather rare argument that there should be a position of self-restrained capitalism. There are alternatives to the flawed argument of "greed is good until the magic of the perfect market forces us to equilibrium". Do agree, its and should not be a free for all even the money lenders show restrain in some cases, there are exceptions.I've been doing this for 30 years and watching the changes. Most of the early MFIs and funders were not attracted by profit opportunities. Also agree with your assessment, may have been bit naive but did have good intentions. Most coming into the market now are. Yes, they are totally profit driven and some are worst than the money lenders they were to replace or expunge out of the market place. The industry that was created earlier has now broadened and blurred. No, they are clear, in most cases $$$ The new entrants say "it's just a financial business" as you say. But those who disagree are seeking a way to make it clear that our actions are more aligned with self-restraint (what some might call responsible practice, though I argue that the current definition is flawed). There are some who may still have the idea, but, in many cases MFI were and are also family business.As an example, you might saying coffee growing is "just an agricultural business". But there are different ways to grow coffee, and there are ways to identify those who are meeting self-restrained capitalistic behavior. A certification process arises. Then the general public can seek the certification. Starbucks can continue to buy non-certified coffee if they wish (which they did, for years). Please keep in mind that most of MFI lend to urban small business very few are engaged in lending to the Ag sector.In short, when people say to me "So, you spent 30 years in that microfinance… it's just a financial business, making profit off the poor by charging a bit less than the moneylenders, right? How rich did you get?" I hope to have an answer that makes it clear that I was working with and supporting a different approach to financial business.Agree not all who worked in this field became wealthy but many did and are still living a good life. The justification as I remember was we charge less than the money lender, true, but they are some worst because when a borrower default they take them to the cleaners literally because the MFI's are owned by many who share in the spoils.Many that MFI's that initiated their lives with grants, very low interest loans 2% with grace periods 10 - 20 yrs and no capital are now large MFI's becoming regulated financial intermediaries. In the end its a financial business that needs to be regulated to avoid excesses .Saludos cordiales - ChaleChuck WaterfieldOn Sep 17, 2014, at 12:22 PM, Chale Espinosa A chalespinosa@yahoo.com [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:Microfinance is not a development tool, it was originally sold as a way to reduce poverty and is not. The MF sector is another financial intermediary, profit driven, that competes with moneylenders in providing liquidity to its clients at interest rates that are higher than the regulated financial intermediaries and lower that moneylenders and are commensurate with risk taken.Its a financial business.USA : 251-219-4808Nic : 505-8-851-3355Skype: chalespinosatwitter: @chalespinosa
From: "clementwan@yahoo.com [MicrofinancePractice]" <MicrofinancePractice@yahoogroups.com>
To: MicrofinancePractice@yahoogroups.com
Sent: Tuesday, September 16, 2014 11:07 PM
Subject: Re: SV: [MFP] Microfinance's position - Greed is good!Thanks Mr. Hellgren -I would certainly be more sympathetic to the hand wringing if I believed that it was a sincere concern over the "poor"/clients over "interest rates, collection (mal)practices or less communicated fees" rather than a thinly veiled ideological attack on markets and a general discomfort over profitability.(1) To understand my view, in your own experience, do you believe that the issues of "interest rates, collection (mal)practices or less communicated fees" are restricted, or even mostly restricted to for profit concerns over not for profit ones? For what it's worth, in my experience this has been far from the case.(2) Why do clients keep returning and why the high levels of client retention at Compartamos? Are their clients such gullible wall flowers that they will borrow for the sake of borrowing without a fundamental belief that the loans will have a benefit greater than their costs?So why the specific attacks on microfinance institutions like Compartamos? If the concern is about "interest rates and less communicated fees" - why not have a wider discussion on regulations that require transparency of product costs? If it's an issue of collection malpractices - why not a discussion on the enforcement of fraud and illegal practices?Instead, the focus is on "profits" - something almost entirely irrelevant to the above concerns unless you believe that with "'excess' profits (whatever that means) must come some form of thievery, manipulation or immorality." I believe it's this focus that is very telling of the motives and concerns of those attacking firms like Compartamos who are able to attract and retain more clients and are able to do so quite a bit more efficiently than their competitors.To borrow one observation from TechCrunch Disrupt - "The missionaries make more money than the missionaries" (Scott Dietzen) - it's for profit firms that are mission driven to change the world who are often also the most profitable. Unfortunately some in the not for profit space lack the imagination to believe that profits and development objectives can be compatible throwing out phrases like 'profitability on the backs of the poor'. On the other hand, it's very possible (if not even probable) that microfinance firms like Compartamos are proving that they're not only compatible but essential.On the defining of "microfinance" - I don't think clients care what you call it. They want a product/service that meets their needs and that they believe can offer them a path to a better life for themselves and their families.Best regards,Clement
---In MicrofinancePractice@yahoogroups.com, <bjornstian.hellgren@...> wrote :Yes, this seems like a tired discussion but I can't help but think that the discussion remains alive because it is still a needed discussion. The way I'm reading Chuck and others is that we are still seeing clients being taken advantage of, be it due to interest rates, collection (mal)practices or less communicated fees.The question is really whether microfinance has lost its way or actually found its way in becoming a market driven tool in development. This is a market that needs to be further developed, regulated, increasingly transparent, etc. and it seems like there's a way to go still. The world needs efficient financial institutions, serving a growing number of people with relevant and targeted products.That said, there is perhaps a need for a re-branding of microfinance. Currently, the terms "microfinance" feels too broad and is open for anyone's definition (like saying that anything below 4,000 RD is labelled microfinance). In my head, the VSLA's for example represents something else than Compartamos – but both are happily placed under the microfinance umbrella.Best,BjørnBJØRN STIAN HELLGREN | MICROFINANCE MANAGERSKIPPERGATEN 5 | POSTBOKS 414 | 4664 KRISTIANSAND | TLF. + 47 38 12 75 02 | MOBIL + 47 954 94 857
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Posted by: Chuck Waterfield <waterfield@microfin.com>
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