Remember a few years ago, when economist Muhammad Yunus was awarded the Nobel Peace Prize for his work on “microlending”–the practice of making small loans within poor communities to help the people in those communities build small businesses?Yes, well, the big banks noticed. And now they’ve taken over. And Yunus is appalled.
Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100 per cent or more.
“We created microcredit to fight the loan sharks; we didn’t create microcredit to encourage new loan sharks,” Mr. Yunus recently said at a gathering of financial officials at the United Nations. “Microcredit should be seen as an opportunity to help people get out of poverty in a business way, but not as an opportunity to make money out of poor people.”
The global average interest rate for microlending is a loan-sharkey 37%. In Mexico, the average is 70%. One bank charges 125%.
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