Archive for: The New York Times

After reading Neil MacFarquhar’s article “Banks Making Big Profits from Tiny Loans”, I was shocked to hear about how exorbitant are the interest rates that some microfinance institutions (MFIs) around the world are charging their borrowers and saddened to hear that the focus of these institutions has clearly drifted from helping the poor.  However, in my experience, founding Wokai, a China-focused microfinance organization (www.wokai.org), I have to point out that high interest rates is not a universal problem.  In fact, China is facing the opposite issue: interest rates charged by MFIs are too low.

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The New York Times  just picked up on the buzz caused by David Roodman’s blog post pointing out that Kiva  doesn’t lend directly to poor borrowers. Likening the revelation for many individual lenders to the scandal in the 1990s when many child sponsorship organizations amended their disclosures after the Chicago Tribune revealed that the money they were raising was not necessarily going to the specific child whom the marketing efforts implied was being reached, the article points out that Kiva has already amended the language on its Home page. It no longer promises: “Kiva lets you lend to a specific entrepreneur, empowering them to lift themselves out of poverty”. Instead it more accurately describes its role as: “Kiva connects people through lending to alleviate poverty.”

As Deb Burand has pointed out, the lending model also has implications for microfinance institutions. Deb highlighted the issues MFIs should consider when engaging with online lenders in a paper published by CGAP last year.

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