Credit For All

For Muhammad Yunus, founder of the Grameen Bank who just won the Nobel Peace Prize, access to credit is a human right. Providing credit to the world’s poor, Yunus believes, clashes with the profit-maximizing goal of conventional banks. However, entrepreneurs, such as eBay chairman Pierre Omidyar, are looking to transform microfinance institutions into revenue-driven businesses that raise money in the capital markets instead of depending on donations.

That conflict – between “pure do-gooders and profit-minded do-gooders” – is the focus of Connie Bruck’s article “Millions for Millions” in the latest issue of The New Yorker.

There’s nothing wrong with the desire to both help the poor and make money doing it. However, as Bruck’s article points out, the microfinance debate transcends the question of motivation and comes down to whether the core mission of microfinance institutions — alleviating poverty — can be distorted by the pursuit of higher profits. “The Yunus faction worries about “mission drift,” saying that, as the drive for profitability increases, only the so-called “less poor” (as opposed to the very poor) will qualify for loans,” Bruck wrote.

When Yunus started giving out credit to the poor, he didn’t discriminate between the “very poor” and those “less poor.” The bank he founded serves everyone, beggars included. And it’s essential for microfinance institutions, whether commercial or nonprofit, to make that same commitment and never default on it.