Muhammad Yunis won the Nobel peace prize for transforming the business of loan sharks into microcredit for poor women. A new generation of (male) market-oriented investors could be reversing the process.
The New Yorker offers a good read by reporter Connie Bruck on current developments in the business of microcredit—small loans for the poor. The feature paints in sharp contrast the old style of microcredit with its strong emphasis on lending to the poorest and the new style of free-market-based microfinance, returning again and again to the vision of eBay founder Pierre Omidyar that for-profit business can have the greatest social impact.
The article had a "he said, she said" feel, as nearly all of the proponents of microcredit are women and nearly all of the proponents of microfinance are men.
There some nice touches along these lines: the women clients of one microcredit program outside Mexico City are asked if men should be allowed to join the group. Definitely not: "They wouldn't be on the same wavelength," says one. Another adds, "There's a little machismo here. ... Some husbands don't really agree that we should be here."
Then later, talking to Carlos Labarthe of the largest microfinance lender in Latin America (which has no interest in lending to the poorest and charges interest rates of one hundred five percent), the reporter describes Labarthe as "a genial, expansive man who was wearing a white shirt, unbuttoned at the chest, and a large silver cross."
C.P. Zeitinger of ProCredit Holding, a beneficiary of an investment from the fund Mr. Omidyar started with Tufts University, is described thus: "Chain-smoking, irascible, erupting every so often in short bursts of indigatnion, Zeitinger is impatient with questions about microfinance's serving the poor."
But it's a typical 10,000 word New Yorker article, so there's a lot more to it than that. Two other notable points in the article:
- Even though there are the expected portraits of extremely successful beneficiaries of microcredit, the article does note that the vast majority of the microcredit clients do nothing more entrepreneurial than setting up a market stand or buying a few ducks. The really successful microcredit clients are rare, though they get most of the attention.
- In Latin America, the reason that the programs focus on women is that the men are away working in the US. (I saw the same thing in Africa, where most of the men were away working in the mines in South Africa while the women stayed in their village in Mozambique.)
Here are the players in the article, in order of appearance:
Muhammad Yunis, Grameen Bank (Grameen Foundation USA EIN 73-1502797 Form 990)
Pierre Omidyar, founder of eBay and co-founder (with his wife Pam) of the Omidyar Foundaton (EIN 77-0502810 Form 990)
Sergey Brin & Larry Page, co-founders of Google (cameo)
John Doerr, venture capitalist
Janet McKinley, donor
Alex Counts, Grameen Foundation (USA) president
Lawrence Bacow, president of Tufts University (Trustees of Tufts College EIN 04-2103634 Form 990)
Michael & Susan Dell (Foundation EIN 36-4336415 Form 990)
Dr. Rajiv Shah, head of financial program at the Bill & Melinda Gates Foundation (EIN 91-1663695 Form 990*)
Carmen Velasco, Pro Mujer (EIN 98-0115409 Form 990)
Lynne Patterson, Pro Mujer
Twenty unnamed clients of Pro Mujer (and their children)
Ilze Concepción Rodríguez Chávez, successful Pro Mujer client
Maria Otero, president of Acción International (EIN 13-2535763 Form 990), an early proponent of a more market-driven approach to microcredit
Jonathan Lewis, C.E.O. MicroCredit Enterprises (budget, currently converting from LLC to 501(c)(3))
Jonathan Morduch, professor of public policy at NYU (EIN 13-5562308 Form 990) Wagner Graduate School of Public Service
Robert Annibale, global director of Citigroup microfinance division
Stanley Fischer, former president of Citigroup International, now head of the Bank of Israel
Carlos Labarth, C.E.O. of Compartamos. Mexican microfinance operation, the largest in Latin America
Carlos Danel, also of Compartamos
Tryfan Evans, director of investments at the Omidyar-Tufts fund
C. P. Zeitinger, manager of ProCredit Holding
Ingrid Munro, founder of Jamii Bora, the fastest-growing microcredit institution in Kenya (no US presence, but it receives some funding through the US-based Unitus (EIN 87-0621367 Form 990))
Melinda & Bill Gates
*Why isn't the Bill & Melinda Gates foundation Form 990 available on Guidestar? It turns out that it is available on the foundation's financial reports web page. But hold on to your bandwidth, the complete PDF file is 98Mb. The file has been broken down into four slightly more manageable chunks. Even at that, the listing of investment holdings is 81Mb.