developing world vast numbers of people have lost their jobs or seen their incomes fall. Many are being forced to sell their meagre belongings to pay for food. Ideally state handouts would plug the gap in their finances, but in many countries the public coffers are empty. Often people are too poor a credit risk, or live too remotely, to get help from banks. Microcredit, a form of lending tailored to them, should be part of the answer, but the industry is flunking one of its biggest tests.
In the 1990s and 2000s microcredit was one of the next big things in development finance. In 2006 Bangladesh’s Grameen Bank and its founder, Muhammad Yunus, won the Nobel peace prize. The industry’s champions developed a grand ambition. Letting the poor borrow and invest, they argued, would unleash their inner entrepreneur and allow them to earn their way out of poverty. A new model emerged.
Today the lending portfolios of microfinance institutions are worth a combined $124bn. But the industry is in trouble. Covid-19 is straining its finances. Repayments, usually done in cash and in person, have plummeted, yet the banks and investors which provide thes have cut lending, often by at least half. Nearly one-third do not have enough cash to meet outflows this quarter. If only this were the industry’s only problem.
As the industry has grown in size it has also grown in complexity. From insurance to leasing, a lengthening suite of services has turned microcredit into microfinance, adding new players to the fray. A mishmash of regulators have struggled to keep up.
An expanding body of academic research suggests that microfinance consistently falls short of its boosters’ admittedly high expectations. Among the economists who have plucked at its laurels are last year’s Nobel prizewinners, Abhijit Banerjee and Esther Duflo. They and others have found that its effects on investment, revenue and consumption are small and uncertain. The result is waning interest in the industry from blue-chip investors and donors.
Maybe it’s because we gifted $2 Trillion to the wealthiest 500 people with TaxScam when corporate profits, cash on hand, and the overall economy were all at high water mark two years ago. GildedAge Woke and the whole doubling of wealth during a pandemic will have consequences
Before the time of digital currency, in order to make the counterfeits look real outlaws spent enormous effort to get the plates right and the serial numbers as accurate as possibly achievable.
Terrible shame -- this is the origin of much of our, creativity / New Ideas / think-outside-the-box / Think Different -- hard to get that going again after a crunch.
I Hope! Good Luck from Germany, Greetings from Germany, e - mobil...the Nature Comeback
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President Trump took early action to help curb the spread of the virus from other countries to the United States, providing important time for response and preparations.
So the U.S. loans people money they won't be forgiven for and cannot pay back. Then they worry about private loan sharks because their institutional lenders are in trouble. Great. Should have just gone with UBI...
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