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Microfinance Leaders Debate Future

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One of the most authentic and principled debates in the anti-poverty sector today is about the practical and ethical limits to selling goods and services to the poor. From abstract panel discussions at the Clinton Global Initiative to the mean streets of India, radically different paths to ending poverty are being advanced by two prominent advocates for economic justice: Vikram Akula (India), Founder and Chairperson, SKS Microfinance Ltd, and Nobel Laureate Muhammad Yunus (Bangladesh), Founder and Managing Director, Grameen Bank.

One man believes in the goodness of mankind. The other in the goodness of market forces.

One man calls us to rise above our baser instincts. The other channels our greed into economic opportunity for the downtrodden.

Yunus opposes making profits off the poor. His pioneering banking innovation proved that uncollateralized small business loans to the very poorest women in the world are safe investments. Now he has concluded that even this powerful tool of economic opportunity should only be used when poor borrowers are also the owners of microloan institutions.

With saintly expectations, he challenges Western donors, social investors, governments and aid agencies to shun profit-making off the poor. Yunus warns that microfinance cannot return respectable financial returns and simultaneously remain responsive to the impoverished. Because we know that what is profitable is not necessarily fair or just, he echoes the Polish essayist Stanislaw Lec, "Is it progress if a cannibal eats with a knife and fork?"

In juxtaposition, SKS Microfinance serves 6 million impoverished Indian women. A recent and very profitable IPO -- generating $200 million for investors plus $150 million in new capital for the SKS mission -- compellingly argues for mobilizing private capital to fight poverty. While private capital in the service of the poor or, inversely, the poor in the service of private capital, may or may not be ideal, SKS's CEO is driven by the enormous gap between what is and what should be.

With so many poor people still unbanked, Akula is understandably pushing hard to "achieve scale" or, in simple English, reach more poor people. By most accounts, 2.5 billion adults in developing nations do not have a bank - no checking accounts, no savings, no ability to borrow for small enterprises. Astonishingly, 150 million poor people worldwide, mostly women, now have micro-business loans, but this achievement still meets just 10-15 percent of global demand.

Both voices command people of wealth to use capital wisely and compassionately:

Yunus has qualms that microfinance cannot serve two masters well: the poor and private capital markets. With evidence from 10,000 years of free market bad behavior on his side, only the most ardent market fundamentalists doubt that he is right.

Akula fervently questions a microfinance system which, crimped and corralled by limited philanthropic capital, is powerless to serve the next creditworthy poor person in line. If - as Yunus has argued -- credit is a human right, then clearly it should not be subject to the whims of fickle donors.

Yunus, a student of economic history, predicts greed will triumph over goodness. Akula is idealistically, if perhaps naively, betting that the invisible hand will touch the poor with tenderness.

I am rooting for Yunus, but investing with Akula. To invest with a conscience, check out MicroPlace and decide the debate for yourself.