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Microfinance
Mueni Maina Kiiru, Joy
Mueni Maina Kiiru, Joy
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Mueni Maina Kiiru, Joy
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ethics in finance
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no27-kiiru.pdf
Adobe PDF, 151.12 KB
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"In the first place, proponents of the model assume that many poor people can become micro-entrepreneurs. Entrepreneurship skills and managerial capability are assumed as given, thus the ability for microfinance to create employment even if self-employment. Secondly, even if the first assumption were correct, the model continues to assume that there is going to be a vibrant market for goods and services and that it will be possible for all micro-entrepreneurs to gain access to markets for their products; otherwise how else can incomes be improved from entrepreneurship if there were no markets? Thirdly, the supporters of this model also assume that as long as the poor can repay at market rates, or slightly above market rates, it is a good indication that they are doing well financially. Ironically, one of the major reasons why it was felt so justified to bring more ‘formal’ financial services to the poor was because it was assumed that the local money lenders were exploiting the poor by charging extortionate interest rates. Yet the poor were paying even then! The point is that microfinance should be understood as a resource reallocation policy tool and, just like any other such policy, it is important to keep close watch of the underlying assumptions, for if they are not valid, the policy objectives may not be realized. The main objective of this essay is not to challenge, prove or disapprove anything, but rather to bring to light the realities of what the poor people have to cope with in order to repay their loans promptly. The goal is to bring the social and financial costs associated with microfinance instalments to the awareness of the policy maker."(pg 65)
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2007
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With permission of the license/copyright holder