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Friday Night: Selling Out or Scaling Up?

NOW's next show in our Enterprising Ideas series takes a hard look at microfinance and the controversy surrounding a successful social entrepreneur in Mexico. Compartamos is a microfinance company that started out lending small sums of money to poor, indigenous Mexican women to start businesses. Today it's a for-profit bank with more than 600,000 clients in Mexico. NOW interviews people who passionately believe their lives have been transformed by the loan they received from Compartamos. Our production team also talks to critics of Compartamos, including Muhammad Yunus, who pioneered the microfinance approach to helping people out of poverty. NOW airs at 8:30 p.m. on Friday nights. UPDATE: Click here to watch NOW's report online.

Among other complaints, the critics charge the bank's interest rates are way too high. This criticism has been leveled against other microfinance operations, as discussed in an earlier blog here. If you miss Friday night's episode, you can watch it later online. Check back here for a link.

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Comments

Compartamos is vile and unethical. They need some good microcredits to compete with them.

I would suggest you check out kiva.org, where individuals can 'lend' money for use in microprojects they choose (no interest or profit). When money is repaid you can select another of take it back. It makes terrific gifts for kids and adults and would make a terrific program for NOW

re KIVA: I believe there is (as always) a middleman organization in-country that facilitates Kiva loans and charges interest; how much? Does anyone know?

A few questions came to mind which I realized you probably thought of but in the limited time of the show you can't cover everything. 1. Why do others in Mexico charge 100% interest also? Is it related to the cost of these programs in that ecocomy? 2. Whenever you do shows on Enterprising ideas, I suggest you emphasize how far a dollar goes in these economies---for instance if this bank had taken their profits and reinvested 75% or 100% of them in their lending efforts, how many more people would have been served? The problems around the world can be overwhelming but I take some comfort in how far a dollar goes overseas---it is truly mindboggling at times. The ROI (return on investment) on such investments is incredible and I think gives hope----whether one agrees with the critics of microcredit or not. 3. Another area to consider here is this new relationship between business and NGO's---there will continue to be these debates as these two groups start to interact with each other after their past history of sometimes sniping at each other. 4. Also did you find any other microcredit banks in the world making a profit and giving it back to shareholders----but doing it based on interest rates that were less than 100%? I think there is a place for investors perhaps. If you eliminate all profitmaking microcredit banks who pay shareholders something, that could account for a major reduction in how many people are ultimately helped by this tool. There may always be a place for some who do not share Yunus's belief in giving 100% of the profits back to the program for expansion. Again, given the vast ROI abroad, losing the for-profit motive here could adversely impact literally millions of people. 5. Your point about this bank not analyzing the results of their loans on the lives and economics of borrowers/their families except anecdotally was a good one. I see that ACCION has documented and studied how their loans are helping people.

Thanks again for a good show. Bill Parker

I was so pleased to see your report on this subject. Seems to me this is further evidence of the same corporate greed that infects every aspect of capitalism these days. Since the lessons of the industrial revolution, we have had laws in place to deal with the entrepeneurs that feel the can do anything to make themselves wealthy at the expense of the common good. Ronald Reagan, instead of changing the laws to accommodate his supply side economics, simply whispered to the regulators, "don't regulate" and that has precipitated scandal after scandal in all marketplaces, e.g., Keating's Savings and Loan, Michael Milliken, "soft" stock market crashes that benefit totally unregulated options markets and order takers, buyouts and mergers of small business to eliminate competition, just to name a few significant examples. The question is how long the rest of us will allow the Harvard business method to continue to sacrifice the quality of middle class life to the few that benefit from the deleterious effects on the common good, a phrase which remains only parenthetically in our Constitution.
Thanks for your ever present vigilance.

I was looking for information about this on Bing and found your article. I found it to be well explained. Thanks

I watched something concerning this on TV yesterday. Thanks for covering it in greater depth

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