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Should MFIs be allowed to fail?

Posted on August 13, 2011 by Tara Thiagarajan in Microfinance, OpEds, Writing. Comments Off on Should MFIs be allowed to fail?

Cataclysmic events are no strange beast to the banking business. As for microfinance, the sector will survive even as some players drop out.

Sure, I say. I’m taking a contrarian position in the industry and here’s why. Let’s look at why people have loved the microfinance industry, at least in the past.

First, there was enough propaganda that it was alleviating poverty to make you feel good about association. And proponents will still argue that if some of the struggling MFIs are allowed to fail, it will crush the dreams of financial inclusion and, thereby, a chance to ‘better the lot of the poorer sections of society’.

This simply does not hold. Six years into this, it is starkly apparent to me that financial inclusion in the form of high interest loans does not better the lot of anyone very much. There is … Read More »