Are Big Bank Microloans Now Scamming the Poor?

Adriana Zehbrauskas for The New York Times. In Mexico City, Maria Vargas has borrowed larger and larger amounts from Compartamos, a Mexican firm, over the past two decades to expand her T-shirt factory to 25 sewing machines from 5. Beyond the Veil| Microloans are hot. Now that the mortage markets and credit card lending opportunities are in a slump, the world’s big banks are jumping on microfinance. The Noble-winning founder of microfinance Dr. Muhammad Yunus is concerned.

Big banks now dominate the field, with some charging interest rates of 100 percent and more. Dr Yunus expressed grave concerns about the future of microfinance, when he spoke to us during last September’s Clinton Global Initiative Conference.

Today Dr Yunus is quoted in the NYTimes as saying:

“We created microcredit to fight the loan sharks; we didn’t create microcredit to encourage new loan sharks,” Mr. Yunus recently said at a gathering of financial officials at the United Nations. “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.” Read on Big Banks Draw Profits From Microloans to Poor