A Survival Guide to Microfinance's Next Year

For a few months, I've thought that microfinance was going to be in for a bit of rough patch when it comes to brand. With a new, front-page story in the New York Times yesterday talking about abuses in the field, it appears the time may have come. Unfortunately for all of us, I believe the growing media critique to be often as much about what makes for a compelling narrative as it is about improving the fight to end poverty.

Microfinance has played a tremendously important role in the social change space over the past few decades, culminating in the last half decade or so since Muhammad Yunus won the Nobel Peace Prize. Kiva is one of the best demonstrations we have of the power of the web to build connections between people who never would have been connected before.

But microfinance is not a panacea. Indeed, no microfinance expert would say it is. Even within microfinance, there are a myriad of approaches -- from nonprofit distributed funds that focus on the capacity side of the equation to local financial institutions to now, bigger banks getting in on the game. What's more, there are many who would argue that microfinance aimed at entrepreneurial business just isn't for everyone.

The indignation of yesterday's Times article was about extreme interest rates. That is a fair thing to be nervous about, and combative towards. Of course any time you're dealing with credit for the poor -- whether in the developed or developing world -- there are going to be financial incentives for exploitation. On our shores, Payday Loans keep millions on the dole of creditors, and are increasingly the subject of legislation.

Yet if the article had a lot of great information, the tone played just a little too much into what makes for a good story for my taste. The media loves a hero, but it REALLY loves a fallen hero. Microfinance has had such an unassailable position for the past few years, the temptation to now tear it down in the services of link bait and copies sold is not insignificant. This came out in subtle ways in yesterday's piece, particular in a paragraph that seemed to sneak Kiva's name into the piece, not because of any specific example of Kiva dealing with predatory lenders among its ranks, but to put the notion to the reader that their $20 donation just might be something fraudulent or exploitative.

As I said above, I think there will be more of this sort of story this year. It will be great if it means that more people get smart about how microfinance is part of a larger process of creating change, and gives people a better ability to support the best organizations supporting providing credit to the poor. But it will be just another media tragedy if it becomes nothing more than a new narrative that allows people to disengage.

To keep track of the microfinance story with a critical eye that is neither media hungry nor sensationalist, I recommend checking out David Roodman's open book blog.

Photo credit: mckaysavage