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David Roodman's Microfinance Open Book Blog

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Aside from a quick pictogram, I've said little about this week's story in the New York Times about high and opaque prices in microcredit.

A few thoughts:

  • The event showed me the continuing power of a reporters at such outlets to shake up the public conversation, and I suppose public perceptions. Neil MacFarquhar is clearly not an expert on microfinance, but he was able to storm into the area and have an impact. If I had blogged out of the blue on Hezbollah, the subject of a book by MacFarquhar getting great reviews, the story would be different.
  • High interest rates and lack of transparency of pricing are serious concerns in microfinance, and I am glad we have a free press to force all concerned to think about the boundaries of acceptable behavior and hold trespassers accountable.
  • I had an insider's reaction: we already went over that when Compartamos went public in 2007. This is not new!
  • I do think, as I implied in my initial reaction, that the fresher story is around why the big microfinance institutions (at least those in the SYM50) are on average losing money.
  • And I agree with Nathaniel Whittemore:

    Yet if the article had a lot of great information, the tone played just a little too much into what makes for a good story for my taste. The media loves a hero, but it REALLY loves a fallen hero. Microfinance has had such an unassailable position for the past few years, the temptation to now tear it down in the services of link bait and copies sold is not insignificant. This came out in subtle ways in yesterday's piece, particular in a paragraph that seemed to sneak Kiva's name into the piece, not because of any specific example of Kiva dealing with predatory lenders among its ranks, but to put the notion to the reader that their $20 donation just might be something fraudulent or exploitative.

    The passage in the NYT is:

    Questions had already been raised about Kiva because the Web site once promised that loans would go to specific borrowers identified on the site, but later backtracked, clarifying that the money went to organizations rather than individuals.

    (Love that passive voice omitting who raised the questions!) Really, what is the point of bringing this up? What's it got to do with whether interest rates are too high or opaque to borrowers, or profits too high for lenders?

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CGD blog posts reflect the views of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.