Micro finance has become a major weapon in the fight against poverty. Many organizations that take Christian mission seriously are investigating micro-lending, or already have some sort of micro-finance program in place. With successes like Grameen bank, and Kiva, Christian organizations rightly see micro-finance as a viable means for fulfilling God's command to bring justice to the poor.
The traditional approach to micro-finance has been a not for profit model. Either the bank is owned by those whom it services like Grameen, or like Kiva it operates like an NGO, receiving donations/voluntary loans with a portion of money going to overhead.
However, some economists think that a market driven solution to ending poverty would be more efficient and faster. Micro-lending groups like SKS recruit investors, charge interest, and generally function like a commercial bank. They simply do most of their lending to the very poor. They offer collateral free loans, and they charge intrest rates commensurate with "credit rating," usually between 12-15%.
Those advocate for profit micro-finance argue that the process is more efficient because it incentivizes the initial investment. In other words people are more likely to provide money to the poor if they will make a profit, even a small one. It also increases the likeliness of recruiting large scale investors like hedge funds, mutual funds, and pensions. Thus, more money is available to more people a lot faster. The big question is when push comes to shove, will the business choose the interests of its clients or its investors.
What do you think? Should a Christian organization thinking about getting involved in micro-lending adopt a for profit or non-profit model? Which best demonstrates God's justice for the poor?
No comments:
Post a Comment