Thursday, December 07, 2006

Microlending. Good for them but not for us.

Wednesday's WSJ ran a story titled, "Silicon Valley Moguls Support Microlenders, Just not in the US," in which the profitability of social good ventures is highlighted as the central question. Because of higher costs and legally-required lower interest rates, US-based microlending programs can do a lot of good, but they can't do it at a profit. In other parts of the world, where double-digit interests rates are a bargain for borrowers (instead of the usury they would be here) and operating costs are so low, these services not only provide capital to those who need it but they turn a small profit in doing so.

The story highlights Eric Weaver of San Jose, CA-based Lenders for Community Development. "People tell Mr. Weaver that microlending doesn't work in the US. Says Mr. Weaver, ?What they mean is that itÂ?s not profitable here.?

?For many of the super-rich of the dot-com era, profitability has become a philanthropic litmus test.

1 comment:

Paul Botts said...

I saw that article but eventually realized that it actually didn't support its own headline. The article is simply about a single example of a microlender in the U.S. not being supported. That Eric Weaver is being told that he should be profitable as an excuse for not funding his project doesn't actually prove that any broader trend or conclusion is at work. Its pretty sloppy, facile journalism actually, the Journal is usually better than that.