Micro Finance, Mega Bucks
As I sit here at APMAS (Andhra Pradesh Womens' Self Help Society) editing their annual report whilst trying to keep up with the inevitable deluge of acronyms for which the NGO sector is famous, but also keeping an eye as ever on world events, I noticed this article in the FT about the Microfinance sector. It brought to mind a discussion I had with one of my colleagues here yesterday. My question was could the current credit squeeze, or something like it in the future, impact borrowers within Self Help Groups (SHGs) here in India? The answer seems to be no. For the moment. This is because, while private sector funding is undoubtedly sizable as a portion of total capital inflows to the sector, much of the seed capital available for institution building and outright lending within the sector comes from NGOs or state owned lenders. The hope for the future, and in a few cases the reality now, is that these institutions, which bridge the gap between major lenders and the small SHGs, are self sustaining both managerially and financially. The FT article gets to the very heart of the issue by asking if a project which began as poverty alleviation - in other words a Social Capital building/aid exercise - can really remain true to its original aims if corporations (and even financial 'institutions' like hedge funds) begin to become a part of the sector infrastructure. In a future where it is hoped by some, and perhaps feared by others, that lenders like Venture Capitalists and other speculators are the primary source of capital to such a sector I think the likelihood of the vicissitudes of global capital markets directly, and harshly, impacting these extremely poor sectors of the population is high. Just because they can make a profit doesn't entitle these organisations to take over. That would be like confusing development with growth all over again.
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