Microfinance: Halfway into 2011

2011 has certainly been an active year within the microfinance industry, and not necessarily for the right reasons. It brings to mind endless revelations and discussions within the media on large International Public Offerings at questionable levels and aggressive commercial techniques employed by microfinance institutions. These include very high interest rates plus clashes with regional and even national political authorities in the Asian sub-continent.

Lastly, there was an influx of negatives headlines that labelled people who were once hailed as “saviours of the poor”, as the “bloodsuckers” of today.

What do we make out of all this?

First of all, we accept that there are elements of truth within the matter. The wealth generated in the International Public Offering of SKS in India has led a number of microfinance institutions to head brashly into destructive and unreasonable expansion plans. Ultimately SKS’ social mission and vision, or lack of them, could and should be questioned. However, It is important to realise that it is only the approach taken by some microfinance institutions that is spreading a bad name for the entire industry.

Microfinance is not and has never been a panacea. This crisis should be seen as a much needed wakeup call for not just the microfinance industry, but also the donors and investors. The crisis makes a strong case for social performance and governance and highlights the need for developing tools to assess the true impact of microfinance on poverty alleviation, social empowerment and livelihood improvement.

This is also a good opportunity to highlight the hard work and positive efforts of many microfinance institutions. They are, ultimately the sole providers of financial services for an otherwise unbanked population. These microfinance institutions have continued to secure, to some extent, regular cash flows for those who would otherwise be left to fend for themselves.

Let us also utilise this chance to demonstrate how things can be done differently. This is what Green Shoots Foundation stands for: making an impact where it matters and where no one else is present. Making a difference in terms of poverty alleviation and helping the poor secure a better future for themselves and their families.

Let us persevere in 2011.

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