Blanca Méndez works at Oikocredit’s international office in Amersfoort, a lovely, green city in the heart of the Netherlands. We at MicroPlace know her as we work closely with Oikocredit on a daily basis to source many of the listings that you see on MicroPlace.  Blanca recently went to South America and wrote a series of blog posts on this trip. You can see all her posts here.

Not only do microentrepreneurs stay loyal to a microfinance institutions (MFI) for years: they stay loyal for generations. I did not realize it until I met Juana Mayta Wanka, her son Leonardo Torres and his wife Karina Cori in La Paz, Bolivia. 

It was not easy to find their house. With much effort, the car rode up the very steep hill on the border of La Paz city. “There, that is the bakery,” said the FIE loan officer. While the loan officer rang the doorbell, I looked around for a bakery sign. The view down to the city was amazing! I was trying to find Oikocredit’s office in the jungle of buildings 500 meters below, when the small door opened, and Doña Juana greeted us a lovely smile. She is 63, but she crossed the garage and walked up the stairs to the second floor much quicker than all of us.

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Mr Aziz offers me the obligatory cup of tea in his office and, even though I have already had five cups of tea that day, I graciously accept as “no” is just not an option in a Pakistani business meeting.  It would be like saying, “No, I don’t think I will breathe any of your oxygen for the rest of the meeting as you smell bad.”  It’s an insult mixed in with breaking some law of physics.

As my tea is served, Mr Aziz tells me that the PPAF, the Pakistan Poverty Alleviation Fund started in 2000 with the intention of breaking from the traditional microfinance mentality in Pakistan which was too non-profity for him.  He’s seen too many NGOs offer a boatload of services to poor people - how to read classes, free bednets, the kitchen sink - and just tack on microfinance as an afterthought.  The PPAF is business oriented, keeping a hard eye on the bottom line.  (more…)

The worldwide median for microfinance borrower interest rates was 30.9% in 2005.  Holy cow!  That’s a lot more than you and I would pay if we went down to our local bank and took out a loan (unless “your local bank” is code for your maxed-out credit card).  So what is going on here?  

Microfinance has sometimes been critiqued for charging high interest rates to really poor people.  One counter-argument is, “well, look at the only other options poor folks have – informal money lenders who can charge up to 100% per month.  At least it’s better than that!” 

I say, “not good enough!”  People should have access to the most competitive rate possible, regardless of their wealth.   So the question then is, “are microfinance institutions charging their customers the best rates possible?”

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