questioning the value of mfi networks

Several weeks ago, an analyst David R. planted seeds of doubt in my mind about the power of microfinance. I continue to believe that:

• The attempt to quantify the social impact of an organization is a powerful force. The exercise itself makes the MFI be honest about what they are, or are not, achieving within their mission. It is much better than attempting to provide ancedotal evidence of change happening within a community, though its measurements could still be flawed. (double bottom line)
• MFI networks have the opportunity to share best practices amongst different individual micro-lending organizations. This includes ways to create a sustainable business model through micro-savings, micro-lending, micro-insurance and other banking services to the poor. In addition, the networks can share lessons learned about the types of successful businesses the poor can adequately start and how they can make money to alleviate poverty within their families. In essence, Grameen can serve an important role within the MFI space even though they do not do the direct lending.
• I also believed he was unrealistic in his perspective on the "dedication" of non-profit employees. Of course, I expect non-profit employees to be dedicated to their cause, be paid less than a 'corporate' gig, and be more conscious of how they spend donor dollars. But as investors/donors, I believe we fail to remember that there are individuals working at these organizations. Individuals who want to have growth & development within their careers. Thus, to have a sustainable non-profit, there is a requirement to build the human capital at that organization.
• His view on "exorbent" interest rates also differs from my perspective. As mentioned previously, "high" is a relative tearm. Though we may look at a 60% APR as high in developed markets, when compared to the 20% A DAY rates in some emerging markets, these interest rates aren't so high. Combine that with the fact that some of this "rate" is more like a fee for service that the poor receive to have better businesses (e.g., education programs, business development, etc) , that rate seems a lot smaller. Where I would agree is perhaps there should be a clearer delination between those fees being charged versus the interest rates.

Ultimately, David stated that he would prefer to give to organizations like Doctors Without Borders which are clearly just giving services from educated individuals. There are no complications with accounting, minimal operations, and a simple business model. The KISS principle is often the preferred method in my book, but something remains powerful in encouraging someone to learn to do for themselves rather than weight for handouts. And the fact that these are loans and not grants, requires the poor to take on this responsibility. The biggest downer after spending 4 months at Grameen is realizing that progress out of poverty is a multi-generational affair. And these parents taking micro-loans will likely always be poor, but through these loans, there is a little more hope that their children will be able to get the education that leads them out of the cycle of poverty.

Which will lead them onto the next challenge, how to get out of poverty without destroying themselves in the process....