Microfinance Practice: Re: SV: [MFP] Microfinance's position

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.

Chale Espinosa A

E-Mail: chalespinosa@yahoo.com

chalespinosa@gmail.com

BienesRaicesNicaragua@facebook.com

USA : 251-219-4808

Nic : 505-8-851-3355

Skype: chalespinosa

twitter: @chalespinosa

http://www.facebook.com/BienesRaicesNicaragua

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,

Bjørn

BJØRN STIAN HELLGREN | MICROFINANCE MANAGER

SKIPPERGATEN 5 | POSTBOKS 414 | 4664 KRISTIANSAND | TLF. + 47 38 12 75 02 | MOBIL + 47 954 94 857

BjornStian.Hellgren@... | www.strommestiftelsen.no

__._,_.___

Posted by: Chale Espinosa A <chalespinosa@yahoo.com>

Reply via web post

•

Reply to sender

•

Reply to group