The recent articles in The Wall Street Journal, “Backlash in microlending: three agents in India are arrested for harassing borrowers” and “India’s major crisis in microlending: loans involving tiny amounts of money were a good idea, but the explosion of interest backfires,” illustrate that in the microfinance sector it all comes down to priorities: does the organization prioritize shareholders’ return or clients’ success?
Payday lenders, loan sharks, pawn shops and some financial institutions are also in the “microfinance industry,” but they are making their own interests paramount, and in the process, overlooking the clients they serve. This is causing a backlash among government authorities and actually harming some clients.
At HOPE International, we believe these recent articles expose an ugly underside of the microfinance movement. While we actively support creating profitable microfinance institutions, we believe a gulf is growing between a client-focused approach to microfinance and an approach that focuses on shareholder return rather than life change.
Several features distinguish the “brand” of microfinance that HOPE International provides:
- Channeling Profits back into the Community – When HOPE grows a profitable microfinance institution, profits are funneled directly into startup programs and into the communities of its clients. In HOPE’s program in Ukraine, profits go directly to youth programs that provide spiritual and educational training.
- Focusing on Training – HOPE is committed to providing biblically based business training in order to educate its clients to be wise stewards of their money and to avoid over indebtedness. According to Innovations for Poverty Action, a research nonprofit based in New Haven, Conn., borrowers who received a microfinance loan alongside business training achieved much higher levels of success than those who received only microfinance loans.
- Savings – HOPE offers innovative programs enabling families to begin saving funds so that household consumption needs are paid through savings and not interest-bearing loans.
- Christ Focus – While microfinance provides economic empowerment, HOPE recognizes that it is only Christ who changes lives. HOPE is committed to reaching its clients with a holistic approach to poverty alleviation.
Having offered our millionth loan this year, we celebrate HOPE’s success – more than that, as we look forward to offering our next million loans, we celebrate how Christ-centered microfinance will continue to transform hearts and lives.