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Debate: Microlending

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What are the pros and cons of microlending?

Background and context

Microlending, or Microfinance as it is also known, refers to the provision of small loans to those living in extreme poverty, who are excluded from other sources of finance due to their lack of assets. Microfinance was originally pioneered by Charities who saw it as a way of providing the poor with a route out of poverty, and were not constrained by the need to make a profit, which meant that the risk of lending to this class of borrower did not deter them. However, over time commercial lenders have also moved into Microfinance, which has led to the question of whether it is ethical for rich world banks to make money from lending money to the poorest people on the planet.

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Is it ethical for commercial companies to offer microfinance?

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Yes

  • Commercial lenders have far more capital than charities. Commercial lenders have far more capital than a charity can hope to match, and by engaging in this sector they offer the benefits of credit to far more of the worlds poorest people. This offers those people a chance to escape from poverty, and in some cases this chance would not be available without commercial organisations.


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No

  • Commercial lenders charge extremely high interest rates, sometimes as high as the loan sharks from which microfinance offers an alternative. It is unethical for the rich to become richer by charging this much for debt from the people least able to afford this level of repayments.
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Yes

If the poor people are provided with some money then the poor people can actually make their living.This thing will be very effective in third world countries.Because in third world countries most of the people are poor and if they are provided with money they can actually improve their living standards.Therefore if the poor people are actually provided with a little amount of money they can also start a small business by which hey can take care of themselves and their family.

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No

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Yes

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No

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See also

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