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| Volume 5, Issue 1: July, 2007 | ||||
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E-news Main Page In This Issue Compartamos IPO: Microfinance Doing Good, or the Undoing of Microfinance?SAVE THE DATE! The Asia/Pacific Region Microcredit Summit 2008 Archived Issues Vol 5 Iss 1 Jul '07 E-News Information |
Remarks by Carmen Velasco, Co-founder and Co-executive Director, Pro Mujer, Inc.Capital has become necessary for many productive activities regardless of sector or size. Globalization and technological developments have broken through past barriers and helped to expand capital. This has also generated a social and economic asymmetry that continues to concentrate wealth and expand poverty. This economic marginalization has a negative impact on development because it provokes political and social exclusion and lack of access to basic social and financial services. Credit is a powerful instrument that serves large as well as small entrepreneurs. Commercial banks operate in the free market and should serve everyone. However, the asymmetry of the poor and wealthy leaves the poor with little or no power, while the power of the banker is increased. In this way, a vicious cycle continues to create more poverty and fuel the grievous question commonly asked in Mexico, "Are we poor because we don't have money, or is it that we don't have money because we are poor?" Commercial banks, with legitimate reasons, cannot solve this problem. Microfinance institutions make an attempt, with the integral vision of sustainable human development and a completely different objective from the banks: rather than seeking the profitability of capital, they look to generate progress among the marginalized by lowering interest rates to a minimum that guarantees the sustainability of the institution and also assures a "social return," an improvement in quality of life for the borrowers. The use of Microfinance to maximize profits without taking action to assure a ‘social return” can be very profitable. Microfinance can generate high revenue through usurious interest rates because the poor often have no other option. Profitability, through sacrifices made by the poor, is possible in the short run, but it is socially, economically and politically dangerous and should be morally condemned. |