Monday, November 29, 2010

Microcredit crisis?

"Loan officers learned that they could line up customers more quickly in villages where their competitors already operated, for there the women would have been educated in the mechanics of microcredit—and might want new loans to service old ones. So loans were heaped on top of loans."

From David Roodman's guest post over at Aidwatchers on the microcredit crisis described well on the link by Vivek Nemana.

One thing I have been worrying about with microcredit is that most loans are to start or continue simple businesses like selling food, making clothing, or opening a small store and at some point there is no more room for new business (see previous post).

After visiting a small village in Mexico with 4 rural convenience stores with little to no business for each one, I have to wonder if the opportunities to continue to make returns of 50% (a typical interest rate) for microcredit are still there.

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