Obama’s criticism of Wall Street banks extends to microfinance sector
Microfinance banks and their owners are no better than Wall Street banks and their owners. So says Jonathan Lewis a microfinancier, social entrepreneur and commentator.
In an excellent article in the Huffington Post, Lewis makes the point that Barack Obama’s criticisms of the “bandits” of Wall Street (in the run up to passing stricter regulation of banking practice) are just as applicable to the profit-seeking microfinance business.
He explains why the neat solutions offered by microfinance are attractive but that the reality in many cases is predatory behaviour, exploitation of the poor and misuse of the market and funds.
“Microfinance is not a cure-all, an economic development elixir. Microfinance does not build roads, schools or clinics; it has not stopped a war or cleared a mine field, nor does it preserve pristine rivers, protect endangered species or restore cultural treasures.
The public brand of microfinance is impoverished micro-entrepreneurs, mostly women, valiantly raising families while operating tiny businesses. For a nation [US] whose self-image extols the self-made man, the maverick Western sheriff and the college drop-out who becomes the richest man in the world, the narrative is seductive. It converts the self-employed poor, victimized by the formal economy, into an icon of economic opportunity.”
One interesting by-product of all the recent criticism is position taken by Muhammud Yunus of Grameen Bank who is quoted in this article. He is trying to distance himself from this criticism by balling out other banks as excessive profit takers. But he has failed to respond to criticism of his own organisation and the overblown claims of microfinance that he continues to peddle.
As I have recorded, there are increasing critiques, exposes and research papers which seriously question the claims of microfinance, its supporters and banks. It will be interesting to see how Yunus positions himself as what Lewis calls the, “whiff of hypocrisy and the odor of malfeasance” in the sector becomes a huge stink.