Microcredit of dubious value

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times, April 29, 2004
Debate Stirs Over Tiny Loans for World's Poorest
By CELIA W. DUGGER

GORMA, Bangladesh — Nearly every woman in this village seems to have 
gotten tiny loans to invest in a miniature business.

None has made better use of the cash than Firoza Akhter, a shrewd, 
flinty young mother who put her profits from four loans into cows, 
goats, land, a sturdy house and private tutors for her daughter. "I can 
make money out of anything," she boasted in her wheezy voice, a gold, 
flower-shaped stud glinting in her nose. Hers is a shining success story 
for microcredit.

But while she came from humble origins, she was not among the poorest of 
the poor. Like many of the 50 million people who take part in 
microcredit programs, she hovered at the upper fringe of poverty.

Today there is a growing push for the nonprofit groups and banks that 
run such programs to reach deeper into the ranks of the poor, though 
there is little rigorous evidence juding whether the very poor benefit 
from microcredit, economists say.

Since 1988, the United States Congress has appropriated $2 billion for 
such programs. In new rules to take effect next year, it has put teeth 
into a requirement that half of American aid for these loans — defined 
as $1,000 or less in Europe and Eurasia, $400 or less in Latin America 
and $300 or less in the rest of the world — go to the very poor living 
on less than $1 a day.

The new rules have stirred strong opposition from other donors and a 
range of microfinance institutions, which contend that the industry may 
grow faster and ultimately help more very poor people by aiming at a 
wider pool that ranges from people who are struggling but not poor to 
those much further down the economic ladder.

"This limbo dance to serve the poorest is a distraction from a much 
broader issue of trying to reach a billion people who have no access to 
credit or a safe place to save their money," said Elizabeth Littlefield, 
a former managing director at J. P. Morgan who now heads the 
Consultative Group to Assist the Poor, an association of donors.

full: http://www.nytimes.com/2004/04/29/international/asia/29MICR.html

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