Comments on: Financing failure https://www.policyforum.net/financing-failure/ The APPS Policy Forum a public policy website devoted to Asia and the Pacific. Thu, 04 May 2017 11:43:20 +0000 hourly 1 https://wordpress.org/?v=6.1.7 By: milford bateman https://www.policyforum.net/financing-failure/#comment-8924 Thu, 04 May 2017 11:43:20 +0000 https://www.policyforum.net/?p=17876#comment-8924 John, surely everyone knows that this author is talking about microcredit but, as many advocates do, simply refers to it as ‘microfinance’. So I can’t see why you pull the author up on this when just about everyone does it, including Muhammad Yunus, unless, of course, you wish to downplay the damage that the author reports is being done by the microcredit industry in Cambodia by fixating upon definitions. You then talk about microcredit lenders in Cambodia as having ‘jumped on the microfinance bandwagon’ when in fact they ARE the bandwagon (whatever you choose to call them). The biggest MFIs responsible for the crisis in Cambodia are all deposit-taking, deal with remittances, do payments, etc, so it is perhaps yourself that it trying to misrepresent what is going on here by saying that if only they offered other services (which they actually do, as I said) then all would be well since they would be doing microfinance. Your final point that credit is not the most beneficial in the portfolio of services being offered is correct, but you fail to comment on the central point of this article which is that the evidence shows the microcredit aspect of microfinance to be very deeply damaging. Even if savings are a good thing, the huge damage done by the (micro)credit aspect cannot make up for the triflingly good impacts registered on the savings side.

]]> By: John Conroy https://www.policyforum.net/financing-failure/#comment-8912 Wed, 03 May 2017 03:58:12 +0000 https://www.policyforum.net/?p=17876#comment-8912 Your headline (‘Microfinance failure’) and lead-in to this piece (referring to the failed ‘promise of microfinance’) is both misleading and misguided. The author himself refers to ‘microcredit’ as ‘the main element’ of microfinance, which suggests that microfinance has a portfolio character, in being composed of other financial services than simply credit, or lending.

My understanding is that in Cambodia, as in many other countries, private, for-profit lenders have learned from Grameen Bank and other not-for-profit microfinance institutions how to achieve high repayment rates (and substantial profits) on high-interest micro-loans made to the poor. They have jumped on the microfinance bandwagon, describing what they do as ‘microfinance’ when it is really only ‘microcredit’. This is misrepresentation (to which your introduction has contributed) because they operate solely as lenders, without offering many, or any, other financial services (eg, deposits/remittances/payments/insurance) which are among the other elements of microfinance, all important for securing the ‘ financial inclusion’ of the poor. In fact, credit is far from being the most beneficial element in the microfinance portfolio. Deposit services (savings accounts) are likely to be of far greater assistance to poor Cambodians than microcredit loans, for reasons which the author discusses in this piece.

John Conroy
Crawford School

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