Story on SKS Microfinance

On Seattle Times: Making a profit while helping the poor

Tata Motors to provide Microfinance in Singur

From Financial Express

Tata Motors have acquired land in Singur in West Bengal, India to set up an automobile factory. The land acquisition was politicised and handled poorly by the state Government as well. Tata now have to demonstrate that their intentions are honourable and they will help the local residents move up in their lives.

Tata Motors will be setting up an Industrial Training Institute (ITI), to train the local residents on basic mechanical and electrical techniques. They are also likely to provide microfinance through local Self-Help Groups, "to those driving van-rickshaws (cycle-carts) and upgrade them to motorised vehicles and earn higher income from providing transport services."

Two articles on Kiva

Microcredit: You Too Can Be A Banker by R.Siva

Anyone can lend a hand via Web. Supporters say loans transform lives of poor by Daniel Dale

Microcredit is a debt trap

Abul Barkat of the University of Dhaka says Grameen's microcredit is a debt trap and 80% of the beneficiaries are caught in it. That is, each of the women is borrowing frome one microlender to pay another and keep getting into an endless trap.

The key reason for the failure, he says, are the high interest rates — 25 to 65 per cent — and high costs of operation of the Grameen Bank model.

Time Magazine article on Microcredit

General article with the usual quotes on Microcredit, what it can do and where critics say it has failed. The example with which the story starts and ends is more interesting.

When Melecio Penafiel wanted to expand his tailoring shop in Guayaquil, Ecuador, last May, he didn't go to the bank or ask his relatives for help. His seed money arrived via the Internet. Using the website Kiva.org a Bay Area software engineer named Nathan Folkert lent Penafiel the $500 he needed to buy two new sewing machines, fabrics and thread for higher-quality suits. Folkert has never met Penafiel but says making the loan "felt like I was giving him a shot at the American Dream."

...

Penafiel was able to pay back his Kiva.org loan five months later, and had a little left over to cover his six kids' school fees. It isn't quite the American Dream, but it's a start.

Microfinance 2.0

I generally dislike 'Web 2.0' or 'Microfinance 2.0' kind of titles.

An interesting account from Alex Counts of Grameen Foundation. The title talks of "New Tools, New Goals and New Ways to Lift People out of Poverty", and the article says

In fact, Counts, whose non-profit Washington, D.C.-based group supports the Grameen Bank, outlined what could be called Microfinance 2.0 -- a new generation of more accurate tools that can be used to overhaul the loan making system and apply the infrastructure of microfinance to other social woes.

but unfortunately, there is nothing in the report about the "tools" or "goals" or "ways".

How the poor manage to live...

Slate looks at how the global poor - where entire families spend either $2 or $1 a day - manage to live.

You can get an interesting research report The Economic Lives of the Poor (PDF), which is worth reading, if you want to look at the spending pattern of poor across the world.

Will microfinance wipe out poverty?

Newsweek takes a look at what the critics have said about Microfinance. To quote:

The row over microfinance arises from colliding views on everything from the power of money to human nature. If there is any consensus, it's about the paucity of reliable data. No one knows how many microlenders exist or how solid they are, much less how their millions—or is it hundreds of millions—of clients fare. Some forecasts have projected a future market as (absurdly) large as 3 billion customers, or nearly half the current world population. All sides are arguing in the dark.