Without this form of finance, covid-19 means more people in need will turn to loan sharks. They risk falling into debt spirals
developing world vast numbers of people have lost their jobs or seen their incomes fall. Many are being forced to sell their meagre belongings to pay for food. Ideally state handouts would plug the gap in their finances, but in many countries the public coffers are empty. Often people are too poor a credit risk, or live too remotely, to get help from banks. Microcredit, a form of lending tailored to them, should be part of the answer, but the industry is flunking one of its biggest tests.
In the 1990s and 2000s microcredit was one of the next big things in development finance. In 2006 Bangladesh’s Grameen Bank and its founder, Muhammad Yunus, won the Nobel peace prize. The industry’s champions developed a grand ambition. Letting the poor borrow and invest, they argued, would unleash their inner entrepreneur and allow them to earn their way out of poverty. A new model emerged.
Today the lending portfolios of microfinance institutions are worth a combined $124bn. But the industry is in trouble. Covid-19 is straining its finances. Repayments, usually done in cash and in person, have plummeted, yet the banks and investors which provide thes have cut lending, often by at least half. Nearly one-third do not have enough cash to meet outflows this quarter. If only this were the industry’s only problem.
As the industry has grown in size it has also grown in complexity. From insurance to leasing, a lengthening suite of services has turned microcredit into microfinance, adding new players to the fray. A mishmash of regulators have struggled to keep up.
An expanding body of academic research suggests that microfinance consistently falls short of its boosters’ admittedly high expectations. Among the economists who have plucked at its laurels are last year’s Nobel prizewinners, Abhijit Banerjee and Esther Duflo. They and others have found that its effects on investment, revenue and consumption are small and uncertain. The result is waning interest in the industry from blue-chip investors and donors.
Deutschland Neuesten Nachrichten, Deutschland Schlagzeilen
Similar News:Sie können auch ähnliche Nachrichten wie diese lesen, die wir aus anderen Nachrichtenquellen gesammelt haben.
Teachers concerned over COVID-19 safety as schools reopen, new cases are reported'I didn't sign up to fight a virus in a classroom. I signed up to teach English.' A middle school teacher describes the risk she faces every day in the classroom, saying, 'I'm risking my health, my life and the health and lives of my family.'
Weiterlesen »
Vaping Increases Covid-19 Risk For Teens And Young AdultsVaping is linked to a substantially increased risk of Covid-19 among teenagers and young adults, according to a new study led by researchers at the Stanford University School of Medicine.
Weiterlesen »
Opinion | Untangling the Media Myths of Covid-19From WSJopinion: The media has handled the pandemic dishonorably and with clear partisan bias, writes gerardtbaker
Weiterlesen »
Mexico to conduct trials for China, U.S. COVID-19 vaccines, eyes productionMexico aims to conduct late-stage clinical trials for COVID-19 vaccines in development by U.S. and Chinese companies, two of which might base some of their vaccine production in the country, the foreign ministry said on Tuesday.
Weiterlesen »
Big Ten, Pac-12 Pull Plug on Fall Football Amid COVID-19 ConcernsAbout an hour after the Big Ten's announcement, the Pac-12 called a news conference to say its season would be postponed until the spring.
Weiterlesen »
Medical organizations call for HHS to update Covid-19 testing prioritization guidelinesThe American Medical Association and other health organizations urged US Health and Human Services Secretary Alex Azar to update Covid-19 testing prioritization guidelines, with resources still limited & many patients still waiting over a week for results
Weiterlesen »