[FT Letters:] Microfinance's `iron law' - local economies reduced to poverty ... in nearly 25 years of academic and consulting work in local economic development, my experience is that microfinance programmes most often spell the death of the local economy. Put simply, to the extent that local savings are intermediated through microfinance institutions, the more that country or region or locality will be left behind in a state of poverty and under-development. This is an "iron law of microfinance". Focusing on isolated cases of microenterprise success simply does not add up to economic development. The reason microfinance is supported is overwhelmingly political/ideological - the economic rationale is simply not there ...
... in nearly 25 years of academic and consulting work in local economic development, my experience is that microfinance programmes most often spell the death of the local economy. Put simply, to the extent that local savings are intermediated through microfinance institutions, the more that country or region or locality will be left behind in a state of poverty and under-development. This is an "iron law of microfinance". Focusing on isolated cases of microenterprise success simply does not add up to economic development. The reason microfinance is supported is overwhelmingly political/ideological - the economic rationale is simply not there ...
That is why his focus is now upon "Social Business" carried out on a "Not for Loss" basis, as he puts it, to address the problem identified in the letter. But he's scratching his head to find an enterprise model that works..... "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
