What Would Leland Stanford Do?

Publication Date: Jun 2007
Published by: MicroCredit Enterprises LLC
Document Type: Microsoft Word

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An editorial commentary submitted to the microfinance community about the Compartamos IPO

This editorial commentary argues that Compartamos’s initial public offering (IPO) is a warning that microfinance is going awry. The commentary makes the following points in support of its argument:

• A responsible social investor needs to realize that in microfinance markets the poor people bear all the costs;
• Microfinance investment decisions should be made with careful due diligence and a realistic understanding of local market conditions;
• Microfinance institutions (MFIs) should lower the rates for customer-borrowers instead of profiteering on behalf of shareholders or investors;
• The Compartamos IPO brings into focus a lack of transparency for social investors;
• Social investors have an obligation to determine if their investments are being repaid with predatory interest rates;
• MFIs that depend on private market financing will be under pressure to de-emphasize holistic, all-inclusive anti-poverty microfinance programs.

The editorial commentary concludes that:

• There is more to microfinance than making money;
• There is something unseemly about wealthy individuals and institutions earning excessive returns off the unbearably poor;
• The Compartamos IPO is a radical departure in core purpose, objective and intention; Microfinance should remain a platform for wiping out the scourge of poverty.