Big banks want in on microfinancing
A poverty-stricken girl cleans the wind screen of a car on a street in Pakistan where more than 25 percent its 150 million population live below the poverty line.
TEXT OF INTERVIEW
Scott Jagow: There's a big conference in Europe today on microfinancing. That's when you give people, usually women, in developing countries very small loans to help them run a business. It might be something as simple as selling crafts on the street. But some of the world's largest banks are attending this conference. They want to get into microfinancing. Michaela Walsh founded Women's World Banking back in 1975. I asked her why the big banks want a piece of this.
Michaela Walsh: It can be a very profitable business. It is more labor-intensive than say commercial credit. Our role is to make sure that microfinance doesn't become consumer credit.
Walsh: You know, in 1975, no woman had a bank account in most countries of the world unless it was cosigned by a male. And so that has radically changed and the banks recognize how important that sector of the economy can be to their own productive contribution to the local economy.
Jagow: How is it profitable when the loans are so small?
Walsh: Well, it has to be profitable or it is not a real partnership. Women's World Banking alone has 23 million borrowers.
Walsh: So instead of saying we're going to give out five or six large loans, we have found a way to make sure an industry can grow where very large numbers of small loans are given out across the world. It creates a lot of need for personal identification in a partnership relationship.
Jagow: How much are you worried that the big banks coming in will sort of strip that personal aspect away from microfinancing?
Walsh: I think at one level, very worried. Personally, I have always had a concern that small loans that are given in a local community, whether it's rural or urban, and when paid back there needs to be some kind of a guarantee that those profits and those benefits are reinvested in that local community and not just computerized and centralized in a capital city or in a global network. Recently Harvard University and two other universities did a study saying that because the large banking institutions have the capacity to get out more loans, that we ought to put more and more money into the big institutions. My concern about that is we need to make sure those loans are not consumer loans and that they are going to be shared with local women's institutions to ensure that woman are making the decisions about how to run microfinance in the most effective way to serve the largest number of clients.
Jagow: Michaela Walsh was founding president of Women's World Banking. In Los Angeles, I'm Scott Jagow. Thanks for tuning in and enjoy your Monday.