Tuesday, September 15, 2009

Is Microfinance Any Different from Coca-Cola?

In class today we discussed why people might choose to use microfinance services. One hypothesis was that they do not choose microfinance because it is necessarily "good for them" but rather because they "prefer it" -- just like people prefer coca-cola.

I asked "what aspects of microfinance are like coke, in that they give pleasure but are not necessarily good for the client?"

We discussed some possible answers, and here is my list based on things we wrote on the board:

  1. Microfinance brings professionals to otherwise unvisited places and the poor enjoy the attention, or they are convinced they are getting something good by the marketing skills of the professionals.
  2. The clients are forced to join because of peer pressure, and/or can not leave the program because of peer pressure.
  3. The clients are caught in an indebtedness trap and can not free themselves from the microcredit program (they are addicted to the program).
There are other non-financial reasons for using microfinance, such as "plus" services, or social prestige, but these seem to be good for the client in some way.
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1 comment:

Adam Rein said...

I would like to clarify one point on my Coca-Cola argument.

I did not mean to imply that MF has no positive impact on the lives of its customers. However, it calls into question the use of evidence that "95% of MFI customers are retained for over 7 years" to imply that MF must be good for them. Just because people prefer to stick with a product, we cannot infer that it is improving their lives.

September 18, 2009 at 4:14 AM

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