21 December 2009

MicroFinance or CrowdPonzi? ~ WSJ Questions...

WSJournal Pearl Memorial Intern Ketaki Gokhale writes As Microfinance Grows in India, So Do Its Rivals, noting that...
"Small Credit Lines Were Supposed to Trim the Practice of High-Interest Loans in Rural Areas, but Moneylenders Flourish"
What's worrisome to me is that the misaligned incentive scheme inherent in too many microfinance operations induce recipients to seek multiple loans to round-robin payback their debts. Sharky moneylenders contribute as well, with the net result being a vicious kind of "Crowd Ponzi" scheme. See also the related WSJournal microfinance slideshow.

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