As in many other things, the success of microfinance depends on the company, according to Roger Lecayo, Carlos Vidal, and Gladys Manzares. And in a world gone mad over microfinance enterprises, many microfinance companies are bound to be less effective, if not less “good-intentioned” than others. And, as Nicaragua’s history proves, this Central American country has been a prime target for those with less than honorable intentions.
When the question of whether or not someone is “worthy” of a micro loan depends on what they have by way of collateral, instead of what they plan to invest in and how much qualitative support they’ll have in managing their loan, it is unlikely that the poor borrowers will be able to repay it, let alone the loan and interest.
So if their collateral was their shack, they lose it.
In the world of mirofinance madness, small loan enterprises have been proliferating faster than mosquitoes in the rainy season. And many of them have just one requirement of their clients: collateral. And their collateral can be anything.
Imagine what that includes.
Be careful in selecting which microfinance companies to support. Many of them offer little more to their clients than a loan, when what capital-less pobres really need to succeed includes guidance on investment, capitalist principles, and planning skills. People who have never had money frequently could use some support in figuring out what to do with it to make it grow. Without such support, it is impossible not to default and lose everything as a result.
Finca is a professional and socially responsible microfinance company. Go to www.villagebanking.org/ to learn what they do, and why their efforts work all over the world.