EIB<\/a>.<\/p>\n\u201cMicrocredit originally was meant to help the poor to escape the poverty cycle,\u201d Carboni recalls in his report. Microcredit \u201cwas designed to short circuit the poverty trap that condemned poor people excluded\u00a0from the banking system to rely on usury loans or accept slavish working conditions.\u201d<\/p>\n
Hence, Carboni concludes microfinance addressed primarily the needs of micro entrepreneurs and vulnerable people.<\/p>\n
Western governments, through their financial agencies, have for the last three decades been pouring funds into local microfinance initiatives in emerging markets, and helped to turn the original niche sector into a multi-billion-dollar business.<\/p>\n
It was in this context that the EIB started its own microfinance activities. Carboni pointed out that though the EIB\u2019s microfinance portfolio still represents a very small fraction of its total budget, it has been growingly steadily through the years.<\/p>\n
\u201cSince the EIB\u2019s first operations in Morocco, back in 2003, the average deal size has been increasing constantly and is now expected to hit 10-50 million dollars,\u201d Carboni told IPS. According to the EIB\u2019s own figures, the bank has, since 2003, committed some 881 million euros to microfinance activities, in nearly 50 countries.<\/p>\n
\u201cNowadays microfinance encompasses a wide range of financial services, from micro-insurance to mobile banking, and seems to have lost its original vocation: instead of helping the poorest the question has been turned upside down and it is now how to make money out of them,\u201d Carboni added.<\/p>\n
Due to these changes, microfinance is no longer contributing to self-reliant development processes based on domestic resource mobilisation and local institution building, but has instead become \u201cin some cases a significant blockage for the development of the poorest by dragging them into speculative market dynamics and generating a renewed dependency on international financing and actors\u201d.<\/p>\n
Carboni\u2019s primary critiques of microfinance in general, and of the EIB\u2019s activities in the sector in particular, are that there is a general lack of strategy and vision. \u201cThe EIB just follows the markets,\u201d Carboni said.<\/p>\n
He also lamented the fact that in countries with limited capital markets, \u201cthe EIB is simply involved in investment projects, rather than in reaching out to the poor.\u201d Furthermore, he said, \u201cthe accountability chains are long and obscure, and the management of portfolio is insufficient.\u201d<\/p>\n
Sinclair called attention to the lack of regulation on microfinance. \u201cThe ultimate investors are not in practice protected by any meaningful regulation, have a limited idea of what their funds are being used for and rely entirely on the funds to reassure them,\u201d Sinclair writes in his book.<\/p>\n
While none of the private financial corporations questioned by Sinclair\u2019s book have reacted, the EIB issued a statement in which it \u201crecognise(d) the challenges posed by the lack of standardised\u00a0social performance measurements used by both microfinance investors and donors\u201d.<\/p>\n
But the EIB added that, as an active member of the Social Performance Task Force (SPTF), it has contributed to the establishment of the Universal Standards for Social Performance Management.<\/p>\n
The SPTF, a coalition of over 1,000 academics, agencies, donors, investors, and others active in international microfinance founded in 2005, formulated a common social performance framework and an action plan to improve the industry\u2019s social performance.<\/p>\n
The SPTF\u00a0defines social performance\u00a0as the\u00a0effective translation of a microfinance organisation\u2019s mission into practice in line with commonly accepted social values.<\/p>\n
The EIB also recalled that it has endorsed the Client Protection Principles in microfinance, which are incorporated in all microfinance contracts to encourage improved social responsibility and have helped improve best-practices across the microfinance industry.<\/p>\n
_______________________<\/p>\n
Julio Godoy, born in Guatemala and based in Berlin, covers European affairs, especially those related to corruption, environmental and scientific issues. Julio has more than 30 years of experience, and has won international recognition for his work, including the Hellman-Hammett human rights award, the Sigma Delta Chi Award for Investigative Reporting Online by the U.S. Society of Professional Journalists, and the Online Journalism Award for Enterprise Journalism by the Online News Association and the U.S.C. Annenberg School for Communication, as co-author of the investigative reports \u201cMaking a Killing: The Business of War\u201d and \u201cThe Water Barons: The Privatisation of Water Services\u201d.<\/em><\/em><\/p>\nGo to Original \u2013 ipsnews.net<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"New evidence suggests that even microcredit was not protected from the greed that characterises modern international finance. Two recent studies show that microfinance was simply another profit making scheme for global private finance corporations, such as the Deutsche Bank, Citigroup, and Standard Chartered, who started pouring money into microcredit initiatives. In his book, \u2018Confessions of a Microfinance Heretic\u2019, released Jul. 9 [2012], former investment banker Hugh Sinclair claims that such banks and funds use microcredit, through local operators, to charge usurious interest rates \u2013 of up to 200 percent \u2013 on even the smallest loans.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[146],"tags":[],"class_list":["post-20600","post","type-post","status-publish","format-standard","hentry","category-economics"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/20600","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=20600"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/20600\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=20600"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=20600"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=20600"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}