The New York Times published an article yesterday that I would call "fascinating" if I didn't find that word so vomit-worthy. You can read the full text here.
Of special interest is the comparison of microlending in India to subprime mortages in the U.S:
"...But microfinance in pursuit of profits has led some microcredit companies around the world to extend loans to poor villagers at exorbitant interest rates and without enough regard for their ability to repay. Some companies have more than doubled their revenues annually.
Now some Indian officials fear that microfinance could become India’s version of the United States’ subprime mortgage debacle, in which the seemingly noble idea of extending home ownership to low-income households threatened to collapse the global banking system because of a reckless, grow-at-any-cost strategy..."
I knew before about the unethical policies of some microfinance institutions (MFIs), described above, but had never put the problem in such a relatable, American context. The comparison makes a lot of sense, and it is pretty sobering.
What the article doesn't talk about are the good works of many MFIs around the world that extend loans, with interest rates, that are ethical (and it's fine that the NYT didn't talk about them, since those organizations have received plenty of attention over the past few years). It's often said that poor people don't want charity, they want dignity- and they are often very willing to pay interest for it (and with higher payback rates than traditional loans in the Western world). So, I like the idea that there is void to be filled between non-profit and for-profit. As some of those close to me know, I am interested in a career in "corporate social responsibility," specifically because I think everyone in the world would benefit from more ethically-driven companies. Many MFIs have hit this "sweet spot" already- between "charity" to the poor and exorbitantly charged loans, and I hope that we continue to see an increase in socially responsible business in the mainstream. In the meantime, this article serves as an example of what happens when we lose that balance.
I came across a great quote on this topic just now on Kiva's site: "It is true that programs serving very poor clients are somewhat less profitable than those reaching better-off clients, but this may say more about managers' objectives than an inherent conflict between serving the very poor and profitability."
This is the heart of what I want out of a career. I want to be involved in business that provides a social service that I really believe in. And I believe that employees are happiest when they believe in their work as well. At the same time, I have not been impressed so far with the non-profit sector; as a generalization, I think the grant process is inefficient and inept at quality assurance. So I think that socially responsible business has potential to be extremely successful in ways beyond the "bottom line." Here comes that terribly overused word: sustainability. I think that businesses, in the long run, and perhaps in immeasurable but crucial ways (such as employee satisfaction and local & worldwide reputation) are better off when they consider policies beyond making that extra dollar. And I think that the world's poor are better off when they interact with efficient organizations that rather than simply provide free services, are truly invested in ensuring the success of their programs because of a profit motive.
I've got a lot to learn when it comes to business, but that's what I inherently believe and I hope that I can prove it true.
Sorry for the spin-off from the original purpose of this post, which was that I highly recommend the above NYT article.
On that note, off to GMAT studying :)
