For Profit/Non Profit Model

I was going to publish a post today on Muhammad Yunus’ Op-Ed in the New York Times this weekend but I’m still trying to figure out my own opinion on a number of Yunus’ points. Don’t get me wrong, putting a cap of Cost of Funds + 15% on interest rates is pretty stupid. 1, we don’t all live in Bangladesh where population density is so high that even microfinance operating costs are low. 2, this strikes me a bit like price-setting but without controlling the apparatus to force it to work anyways. With a cap on rates in areas it is expensive to operate, microcredit would simply dry up. There wouldn’t be any private profit-making but only because there wouldn’t be much/any microcredit activity.

But I think Yunus has a point on, at least partial, community ownership of microfinance institutions. And I think he also has a point with regards to the role NGOs once saw themselves in the financial lives of their borrowers and the role new for-profit MFIs see for themselves. With all of that said, I’m undecided on whether private, for profit funding for microfinance is a net good. And regulation has a decidedly mixed record in the sector. So I’m going to take a few more weeks to think about this all and try to post on it in 2 weeks.

In the meantime, a few questions I haven’t thought about much but am curious about:
1. Why does Bangladesh have a significant number of big, multi-sectoral, and domestically created community based organizations whereas few African countries do? Or am I suffering from a selection bias in those orgs I know of? BRAC and Grameen come to mind quickly.
2. When will more South Asian NGOs and companies make big pushes into Africa and will they kill off less efficient, locally grown organizations/companies? Is this a good thing?
3. Will the Jets beat the Steelers next week?
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One Response to For Profit/Non Profit Model

  1. Ben- looks like India is not heeding your advice: “Interest cap for Indian small loans” (http://www.bbc.co.uk/news/world-south-asia-12235997)

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