How much of microfinance’s popularity in the world of philanthropy comes straight from this story?
I was shocked to discover a woman in the village, borrowing less than a dollar from the money-lender, on the condition that he would have the exclusive right to buy all she produces at the price he decides. This, to me, was a way of recruiting slave labor.
I decided to make a list of the victims of this money-lending “business” in the village next door to our campus.
When my list was done, it had the names of 42 victims who borrowed a total amount of US $27. I offered US $27 from my own pocket to get these victims out of the clutches of those money-lenders. The excitement that was created among the people by this small action got me further involved in it. If I could make so many people so happy with such a tiny amount of money, why not do more of it?
It’s an amazing and moving story. But it’s a story about one giver and 42 beneficiaries in one village.
In 2007, the Grameen Foundation alone saw over $16 million in donations and claimed over 7 million clients served (see its annual report (PDF)). It works in 32 countries on 4 continents. And it’s still putting that $27 front and center.
We know little about microfinance’s actual impact, and much of what we do “know” comes down to myths (myth #6, in particular, seems oddly fitted to the story of the original $27). We’ve seen very little interest in general in pushing skeptically on the appealing stories charities tell.
Dr. Yunus’s original loan was interest-free, while today’s microloans charge interest in the 30%/year range. We know that the for-profit participants in microfinance have been participating for reasons other than one great story.
I don’t feel nearly so confident about the philanthropic participants.