This past August, I wrote about a compelling effort by the St. Vincent de Paul Society in Illinois which is making "payday" loans available to the working poor in lieu of their reliance on loan sharks.
Yesterday's New York Times reported that big banks have now caught on to the idea and find it a profitable business. Of course, satisfying shareholders on the backs of the poor raises some interesting questions, especially since "the microfinance industry, with over $60 billion in assets, has unquestionably outgrown its charitable roots."
Actors like Natalie Portman andMichael Douglas lent their boldface names to the cause. Muhammad Yunus, the economist who pioneered the practice by lending small amounts to basket weavers in Bangladesh, won a Nobel Peace Prize for it in 2006. The idea even got its very own United Nations year in 2005.
But the phenomenon has grown so popular that some of its biggest proponents are now wringing their hands over the direction it has taken. Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100 percent or more.
“We created microcredit to fight the loan sharks; we didn’t create microcredit to encourage new loan sharks,” Mr. Yunus recently said at a gathering of financial officials at the United Nations. “Microcredit should be seen as an opportunity to help people get out of poverty in a business way, but not as an opportunity to make money out of poor people.”
By coincidence, the lastest installment of the NCR series "Women Religious: Lives of mercy and justice" features a microfinance program run by Sr. Adelia S. Oling in the Philippines: Nun lifts the lives of thousands.