More on the Debate Over the Commercialization of Microfinance

Without a doubt the most recurrent theme on this site with regard to the growth of microfinance is the question of whether commercialization is a good thing for microfinance or not. The scuffle between Yunus and the founders of Compartamos last summer exemplified the two sides of the debate. Is commercialized microfinance a dangerous road to go down, or will it result in the provision of microfinance to many hundreds of millions who would not have had access to loans. Yes to both, I think.

“Yet this is also a dangerous moment. Microfinance is a way of harnessing market forces to bring basic financial services to the poor, but many microfinance institutions do much more than that. Using donor funds or reinvested profits, coupled with their reach into remote villages, they provide subsidised education, healthcare and business advice. There is a risk that commercial logic could threaten these subsidised services by repelling donors or poaching the best customers. Tim Harford, in the Financial Times“

The Financial Times just published an excellent overview of the debate by reporter Tim Harford. Any introductory course in microfinance should include this article in its reader.

“The Battle for the Soul of Microfinance”