Thursday, March 20, 2008

What Microloans Miss

What Microloans Miss
by James Surowiecki
The New Yorker
March 17, 2008

This is a fascinating article about microfinance loans and the lack of financial support for small businesses in poor countries. The author calls this group the "missing middle," because they don't receive microcredit loans meant for individuals but neither can they get loans from large banks. The NGWF is working to help the cooperative through this funding no-man's land, although hopefully this article will spur larger debate and investment in this area...

An excerpt: "What poor countries need most, then, is not more microbusinesses. They need more small-to-medium-sized enterprises, the kind that are bigger than a fruit stand but smaller than a Fortune 1000 corporation. In high-income countries, these companies create more than sixty per cent of all jobs, but in the developing world they’re relatively rare, thanks to a lack of institutions able to provide them with the capital they need. It’s easy for really big companies in poor countries to tap the markets for funding, and now, because of microfinance, it’s possible for really small enterprises to get money, too. But the companies in between find it hard. It’s a phenomenon that has been dubbed the 'missing middle'.”

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