This blog has repeatedly reported on the success of microfinance organizations such as Nobel-prize-winner Muhammad Yunus’ Grameen Bank and ACCIÓN (see 26 Mar 07 and 26 May 06 posts). Up to this point, the organizations who have worked to make loans to the world’s poor have been nonprofit organizations. Now, however, The Economist reports (“Doing good…“) that CompartamosBanco is a private for-profit business who is aiming to make money making loans to the poor.
Having for-profit businesses service loans shows that microfinance is expanding. The profits from these loans can be used to offer more and more loans to the the world’s poor. However, for-profit firms do charge high interest rates. Interest rates at CompartamosBanco are currently 79%. These figures are so high because it costs $152 to service the average $450 loan.
While Muhammad Yunus is somewhat troubled by the advent of for-profit microfinance, ACCIÓN has partnered with CompartamosBanco on some projects.
Should microfinance be a for profit business? What is your opinion?