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Microlenders, Honored With Nobel, Are Struggling

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http://www.nytimes.com/2011/01/06/business/global/06micro.html?ref=business

Microcredit is losing its halo in many developing countries.

Microcredit was once extolled by world leaders like Bill Clinton and Tony Blair as a powerful tool that could help eliminate poverty, through loans as small as $50 to cowherds, basket weavers and other poor people for starting or expanding businesses. But now microloans have prompted political hostility in Bangladesh, India, Nicaragua and other developing countries.

In December, the prime minister of Bangladesh, Sheik Hasina Wazed, who had championed microloans alongside President Clinton at talks in Washington in 1997, turned her back on them. She said microlenders were “sucking blood from the poor in the name of poverty alleviation,” and she ordered an investigation into Grameen Bank, which had pioneered microcredit and, with its founder, was awarded the Nobel Peace Prize in 2006.

Here in India, until recently home to the world’s fastest-growing microcredit businesses, lending has slowed sharply since the state with the most microloans adopted a strict law restricting lending. In Nicaragua, Pakistan and Bolivia, activists and politicians have urged borrowers not to repay their loans.

The hostility toward microfinance is a sharp reversal from the praise and good will that politicians, social workers and bankers showered on the sector in the last decade. Philanthropists and investors poured billions of dollars into nonprofit and profit-making microlenders, who were considered vital players in achieving the United Nations’ ambitious Millennium Development Goals for 2015 that world leaders set in 2000. One of the goals was to reduce by half the number of people in extreme poverty.

The attention lavished on microcredit helped the sector reach more than 91 million customers, most of them women, with loans totaling more than $70 billion by the end of 2009. India and Bangladesh together account for half of all borrowers.

But as with other trumpeted development initiatives that have promised to lift hundreds of millions from poverty, microcredit has struggled to turn rhetoric into tangible success.

Done right, these loans have shown promise in allowing some borrowers to build sustainable livelihoods. But it has also become clear that the rapid growth of microcredit — in India some lending firms were growing at 60 percent to 100 percent a year — has made the loans much less effective.

Most borrowers do not appear to be climbing out of poverty, and a sizable minority is getting trapped in a spiral of debt, according to studies and analysts.

More at the link.

Micro malinvestment?

It appears the theory is if you lend enough money to enough people you will get sustained growth providing you keep lending.

Greed takes over and people just want the bonus for lending out as much money as possible.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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