[p2p-research] anti-microfinance movement in nicaragua protests usury

Michel Bauwens michelsub2004 at gmail.com
Tue Nov 17 06:46:24 CET 2009

it's hard to understand for a layperson why there needs to be such a high
interest rate ... if the normal bank would charge it, and of course they do,
I also call it usury .. there's an enormous discrepancy between what they
pay, and what they charge us, resulting in super-profits (before the
meltdown that is <g>). Why does microfinance need to charge so much?

If I follow  your own reasoning you end up with 1200 minus 100, is 1100, a
annual profit of 10% ... I must admit that sounds reasonable .. why the loss
if there is no default, currency exchange losses?


On Mon, Nov 16, 2009 at 8:16 PM, Ryan Lanham <rlanham1963 at gmail.com> wrote:

> Not quite the whole picture as I have seen it.  As I have mentioned before,
> I lend a lot on microfinance sites.  My most common is MyC4.com ...a Danish
> non-profit working in Eastern Africa mostly.  I know a fair amount about the
> field.
> I often lend at rates up to 20%.  So far, I have lost 10% of my funds--that
> is, I have a negative ten percent return...if I had 1000 euros, I now have
> 900.  Why?  Not defaults.  In general, people pay because it is a very good
> deal for them.  The great deal for the borrowers is that the currency risk
> is bourne by the lender.  So I lend in Euros...they borrow in local
> currency.  As the local currency falls versus the Euro (since most global
> currencies most closely track the dollar or simply fall until worthless
> anyway...) the lender borrows current dollars without any risk of ever
> paying back even the full amount borrowed much less interest.  If I were a
> local person, I'd buy all the tangible low-depreciation assets I possibly
> could through microfinance.  That is, you want to buy printing presses,
> machine tools, farm tools, etc.  You don't want to buy carrying
> stock...which is what most of the loans are for...retail trade.  The most
> common developing world business is unfortunately buying a manufactured good
> from the developed world (e.g. a cell phone) and then marking it up.  Not a
> horrible business, but not a very productive one either.  On a GDP basis,
> there is much greater benefit to be had by buying raw materials and then
> making something...the Chinese learned this because they have excellent
> economists...thousands of them now.
> I don't make such loans to make money..those who try to do so have long
> since left the field...far easier for me to lend money to GE or J.P. Morgan
> if I want to make money.
> So to call what is going on "usury" is a bit much.  Drying up these loans
> will only cut capital to the poor...one of the last places where it is
> useful.  El Salvador may have different issues, but the article paints with
> a broad (and seemingly ignorant) brush.  What they are saying is certainly
> not the case in Africa...or most of Asia.  If a person wants to assure they
> are loaning in a manner favorable to the poor, I recommend MyC4.com which I
> have personally witnessed do a great deal of good.
> Ryan
> On 11/16/09, Michel Bauwens <michelsub2004 at gmail.com> wrote:
>> http://www.commoner.org.uk/blog/?p=220

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