Saturday, November 04, 2006

To Profit or Not To Profit, That Is The Microfinance Question

"Muhammad Yunus always has said that credit is a human right," Labarthe said, his voice tinged with sarcasm. "Well, I don't believe that. Opportunity is a human right, education--but credit is for the one that has an opportunity to make something productive with that."--Carlos Labarthe, co-CEO of Compartamos.

Microfinance and microcredit are all the rage among do-gooders right now. On October 13th Muhammad Yunus won the Nobel Peace Prize for his work with the Grameen Bank, which provides credit to the rural poor of Bangladesh. On October 31st, FRONTLINE World aired a story about, a nonprofit facilitating peer-to-peer loans over the Internet, and The New Yorker's October 30th issue featured, "Millions for Millions," by Connie Bruck which explores the different, and often contrasting, philosophies around the commercialization of microfinance, focusing in particular on Muhammad Yunus and Pierre Omidyar, the founder of eBay and the Omidyar Network:
"For Yunus's allies, it demonstrates how the emphasis on profit can blind lenders to social values; the other side worries that rates lowered for political rather than economic reasons probably aren't sustainable."
As Jacqueline Norris of the Acumen Fund blog writes in, "A Place for Profits in Microfinance?" the debate is complex:
"[M]ost microfinance organizations actually charge high interest rates to cover high transaction costs, and, once specific volumes are met, tend to be very profitable organizations. Other companies – certainly many of those supported by Acumen Fund – take years of subsidy before they move to break-even and financial sustainability."
Bruck was clearly not impressed with Omidyar who she reports:
"Omidyar told me that in the two years or so since he became involved in microfinance he had not visited a microfinance institution or met a borrower. Just the opposite of Yunus's entry into microfinance: Yunus left theory behind to listen to the poor, and Omidyar seems to rely largely on theory."
In response to the portrayal of Omidyar in the article, Gayle Roberts of the Fundraising for Nonprofits blog posted that:
As a result of The New Yorker magazine's recent feature on Microfinance and the article review on Where Most is Needed, I took Omidyar Network off one of my client's prospects lists, as it had become clear they are just not a good fit."
I have mixed feelings when reading an article like this one. On the one hand, it is great to see a topic like microfinance as a lead story in a high profile magazine, on the other hand, the tone of the piece and the title on the cover wrap, "Battle of the Do-Gooders," makes me worry that revealing the dark side of do-good endeavors will become the new topic du jour of the media (i.e. USA Today reported on October 31st about a conflict over funding between Angelina Jolie and Cambodian Vision in Development). It would be nice to have a positive focus on positive news for just a bit longer. . . . either way, as Tess Thompson of the Arch Words blog, notes about the article,
"[T]he underlying question--What is the best way to help lift poor people out of poverty?--is well worth debating."
Photo credit: Money Money Money by Whatknot/Jack.


  1. Hey Britt,

    Thanks for the quote and link! Am in total agreement with you when you say, "it would be nice to have a positive focus on positive news for just a bit longer." In fact, it’s one of the reasons I like your blog so much, you are able to help us see the glass half full and then some. It’s a good model for many bloggers, myself included. I hope you will continue to keep us inspired.

    Also in agreement with your quote of Tess Thompson, but would hope that the first thing someone of good heart would do is to actually ask, engage and empower those who are oppressed in finding solutions. Dr. Yunus clearly has done this, and his results and recognition speak for itself.

    Much of what Omidyar has accomplished has great value, his Network for example is facilitating dialogue between thousands of people discussing possible solutions to important issues facing today's world. But as you know, without a fundemental alignment between donor's values and agency's mission, there's little reason to pursue a partnership. So please know, that it wasn't just the New Yorker article that lead me to lower my prospect rating on Omidyar, but the final piece that confirmed other research.

    Fundraising for Nonprofits

  2. I agree. "It would be nice to have a positive focus on positive news for just a bit longer."

    That's why I'm trying to recruit bloggers who focus on volunteerism and youth service, who will blog the topics of a conference I'm hosting on Nov. 30 in Chicago (

    If we can tell the stories of how tutor/mentor programs bridge the gap between poverty and the rest of the economic spectrum through the connections they make between kids and volunteers, we can encourage year end donors to search out tutor/mentor programs who can benefit from this year end generosity and the visibility a network of bloggers can provide.

    If you're able to do this please post a link to any blogs you write on this topic in the comments section of

  3. Great post, and lots of the do-good organizations make a fortune helping the poor.

    I think the best way to help the poor is to fix the corruption and problems that cause poverty in the first place. Giving and supporting organizations to help feed the most in need is great, but we need to also get involved in advocacy to fix the problems causing real poverty. :)

  4. Hi there! Please help our group fill out a survey on Muhammad Yunus. This survey is intended for educational purposes only. If you think that Prof. Yunus has hugely impacted an area that has hardly been recognized (for example, in the media), please add your thoughts in the comments section (Please leave your contact details in the same comment box!). Thank you very much!


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