Microloans: like throwing coins in a fountain?
Promoted by everyone from Nicholas Kristof to Natalie Portman, microfinance was a hot topic in 2007. In 2008, the New Yorker cuts through the hype to take a realistic look at both the potential and the limits of microlending. The problem, writes James Surowiecki, is that while microloans are highly effective on an individual basis, at an aggregate level they fail to make poor nations wealthier.
Enter angel investors and venture capitalists. They provide capital to the small- and medium-sized enterprises (SMEs) that do act as an engine of national economic growth by generating jobs and wealth.
Could such investments be the next big trend in development? Surowiecki notes that Google.org, the Soros Economic Development Fund and the Omidyar Network are establishing a firm in India that will invest exclusively in SMEs. If Google is already on board, maybe by this Christmas the hot gift won’t be a microloan but a stake in an Indian SME.
Read more:
- “What microloans miss,” James Surowiecki, The New Yorker
- “Microloans and the holidays: A good mixer,” Lisa Torjman, MaRS Blog
- “You, Too, Can Be a Banker to the Poor,” Nicholas Kristof, New York Times
- “Hollywood joins royalty to seek $200m for microfinance,” David Wightonin, Financial Times
Kathryn provides market intelligence services to MaRS Advisory Services clients and to The Innovations Group at the University of Toronto. She is a graduate of the University of Toronto's Faculty of Information.
