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High Interest Rates Are an Amorality in Microfinance
David Hulme and Mathilde Maitrot’s article on amorality of money in EPW (“Has Microfinance Lost Its Moral Compass?”, 29 November 2014) is timely and well-researched to illustrate one of the successes in development turning into an amoral affair. Though similar observations are made time and again by many, including the United Nations, it gains importance when microfinance institution (MFI) sympathisers join the chorus. According to the authors,
David Hulme and Mathilde Maitrot’s article on amorality of money in EPW (“Has Microfinance Lost Its Moral Compass?”, 29 November 2014) is timely and well-researched to illustrate one of the successes in development turning into an amoral affair. Though similar observations are made time and again by many, including the United Nations, it gains importance when microfinance institution (MFI) sympathisers join the chorus. According to the authors,
The main argument made here is that the lending practices of MFIs at the community level have drifted away from their declared poverty reduction mission … because of a pure focus on the short-term financial performance of credit officers (Hulme and Maitrot 2014a: 80).
The authors discuss many reasons at length for the failing of these MFIs and the forgetting of their poverty reduction goals. Also, they suggest that the major reasons for such a failing revolve around the inappropriate MFI programme design, management mechanisms, malpractice or bad behavior of field staff, a purely commercial approach, and, above all, the short-term gains made in recovering loans. Interestingly, the authors relegated the high interest rates charged by MFIs1 to an endnote and did not take it up in their discussions (2014a: 84). This comment is on ignoring the high interest rates in looking out for morality in microfinance.
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