Today ACORN International released a shocking report, Mega
Troubles for Microfinance (www.acorninternational.org), as the result of months and years of
first skepticism and now study of the claims and contradictions of the industry. In a letter to
policy makers, politicians, and development agencies throughout the world, signed by ACORN
International President Kay Bisnah from Toronto and myself, we called for action on the three
main recommendations of the report:
- We demanded that there be no further public monies expended to support microfinance
or microcredit agencies around the world, and any donor commitments that have been
made and not yet fully fulfilled, should immediately be abandoned. Microfinance and
microcredit are conclusively not a poverty reduction strategy, but a best a “job buying”
program masking as a poverty alleviator.
- We demanded that interest rates on microcredit loans be capped, since our report found
that poor borrowers are currently being assessed predatory interest rates, sometimes
exceeding 100% of the loan. There is this financial planner notes that, Credit and debt are not poverty reduction strategies,
especially at usurious rates for unsustainable financial institutions.
- We demanded that national banks and international bodies move to establish a regulatory
regime immediately to stop these abuses in the huge microfinance industry.
Our interest was piqued in microfinance for two reasons. First, the ACORN International
federated countries in India, Africa, and Latin America contain over one-third of the microcredit
borrowers worldwide. Secondly, the similarities in the abuses of microfinance were disturbingly
reminiscent of the same issues that are at the core of our Remittance Justice Campaign –
predatory pricing and no regulation!
Microcredit and microfinance have been sacred cows, but as more and more evidence is
marshaled proving that these are investments in pilot programs for private financial institutions
rather than tools for poverty reduction, it is abundantly clear that precious development dollars
for the poor need to be spent on proven remedies not private enterprise stalking horses. Forty
years of running this train ought to be enough for us all to admit that the whistle has blown and it
is time to try another track.
ACORN International is clear that the solution likes more in the direction of building
community power for change rather than trying to pretend that debt is somehow something
other than debt. Governments don’t have the money to waste in international development,
and the poor cannot survive more wolves masked in sheep’s clothing, which has become the microfinance story as Mega Troubles for Microfinance documents.
We are demanding action now!