Opinion: Commercialization Skews Microlending’s Purpose

The microfinance industry that has taken a “terrible wrong turn” as more lenders go public and charge high interest rates in search of profits, Muhammad Yunus, founder of the pioneering microlender Grameen Bank, writes in a New York Times opinion piece.

Mr. Yunus, who won a Nobel Peace Prize for his work to provide small loans to struggling entrepreneurs in the developing world, says microcredit is fostering “its own breed of loan sharks” who prey on poor borrowers.

Mr. Yunus dates the problem to 2005, when many microlenders starting shifting from nonprofit to commercial enterprises, subjecting themselves to demand for profits and leading to “mission drift.” He recommends that countries where microfinance is prevalent create dedicated regulatory agencies, as has Bangladesh, where Grameen started.

Plus:

* Felix Salmon, a business writer, analyzes the debate over microlending and philanthropy’s role, in a piece for the Reuters news service.

* A new organization seeks to help steer small loans to women entrepreneurs via the online microlending site Kiva, Bloomberg BusinessWeek reports.

The Financial Independence Through Entrepreneurship project was started with a $500,000 donation from Dermalogica, a California maker of skin-care products. The firm’s founder, Jane Wurwand, is stepping down as CEO to focus on the microfinance effort.