If you’ve made microloans—very small, uncollateralized loans to those in poverty to spark entrepreneurship—through Kiva, the Microloan Foundation, or Lend for Peace your good deed may in fact be exploitative. According to Neil MacFarquhar writing for the New York Times, these websites acknowledge they can’t guarantee the interest rates they quote.
Microlending has become big business and, predictably, has drawn intense interest from the big banks. “Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100 percent or more,” writes MacFarquhar.
Muhammad Yunus, an Indian economist who started the microlending phenomenon in Bangladesh, has a decidedly different take on the usury activities of the big banks: “We created microcredit to fight the loan sharks; we didn’t create microcredit to encourage new loan sharks. Microcredit should be seen as an opportunity to help people get out of poverty in a business way, but not as an opportunity to make money out of poor people.”
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