Micro-Financing: Profit vs. Altruism

Muhammad Yunus, who founded Bangladesh's Grameen Bank in 1983, won the Nobel Peace Prize in 2006 for his promotion of micro-financing, and it was, quite possibly, the most rational choice for that prize since Norman Borlaug won it for the Green Revolution in 1970. (Look for another sensible choice for the Peace Prize circa 2040.)

Today, however, the Wall Street Journal has an article about micro-financing in which Yunus is quoted as criticizing an entrepreneur (Vikram Akula) who wants to turn his $1 billion micro-financing firm into a competitive, pubicly traded company. “‘Microcredit should not be presented as a money-making opportunity. It is an opportunity to make an impact on poor people's lives,’ Mr. Yunus said in an interview.” The headline on the story by Eric Bellman is, inevitably: “IPO Pits Profit vs. Altruism.”

Now, a dispute over the morality of micro-financing companies might seem beyond the concerns of the Business Rights Center, but in fact the issue raised in the Journal story is absolutely foundational to the BRC. For there lies at the heart of our enterprise the unshakeable conviction that money is not a moral pollutant of action. MINAMPOA

Micro-financing, it is true, is not a product of capitalist economic philosophy, for the lender does not simply seek out that potential borrower who bodes to give him the highest, risk-discounted return on his capital. Rather, micro-financing is a product of capitalist social philosophy. It is an attempt by those who possess capital to bring their fellow citizens (and thus their nation) into a way of life based on the “producer” or “supply-side” ethic. Such a transformation would of course be entirely to the advantage of captialists, and in order to achieve it owners of capital might quite rationally forgo the monetary gains they could make by lending to more conventional producers.

But micro-lending ought not to be an act of sacrifice on the part of the financiers. There would probably be no point in offering a micro-loan to someone in North Korea, even if the person himself were certain to benefit.

And so I wish Vikram Akula well. Some warn that profiteers may take micro-lending and turn it into a subprime crisis. That is possible. The opportunity for exploiting unsophisticated borrowers is clearly high in this field. But to paraphrase what I said in MINAMPOA : If a person seduces a borrower into borrowing what he should not, in order to make a profit, the moral evil does not lie in his desire to make a profit. It lies in his deceit of another human being. He would be no less evil if he deceived the person for love, or sex, or status, or power.