2012.2.25

Microlending Thinks BIGGER

/Page 33-36, TIME, February 20, 2012/

Introduction

In Japan, social security is taken for granted, and almost all people are provided some kind of social security service, including national medical insurance, welfare aid, and financial help by parents in you are student. But in most of other regions of the world, there is not, and that fact makes poor regions stay poor. Microfinance was believed to be the most promising aid for such a radical poverty. However it has lost its way and now it is running for its own profit. 

Briefing

• What’s Microfinance? 

It literally means small loan, which has introduced exclusively for poor individuals  to improve quality of their lives by investing mainly in education, medicine, and small business. In early years after its introduction, it successfully provided the expected effects to the poor regions all over the world. 

• What’s the problems with today’s Microfinance?

It sounds great system to exterminate poverty, but recently it was found out that the effects was overestimated and possibly even harmfull for the poor. One of the risks of receiving Microflending is to loose the will to save money and depend only on the service. Moreover, the bigger Microlending business grows, the larger number of for-profit institution arose, and the smaller number of the poor have access to the reasonable lending service. 

• What innovation is expected?

The problem is too many profit-driven lenders. Considering this, the Indian government has put the restriction on Microcredit by capping the interest rate of the loan. Given such a regulation, some for-profit lenders in India are trying to reduce the operation cost by introducing mobile phone payment service. This trend will spread over other regions where Microlending is big business. 

Opinion 

I suppose Microcredit is not necessarily useful for the poor, because most people in developing countries has their own financial network between relatives, neighbors, and friends. In rural area, many sociologic and economic research says, such a network is robust and working well; therefore, Microlending service might have better to focus on the urban poor making their lives alone.