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Businessweek Archives

Violence in Kenya and Pakistan Challenge the Microfinance Moldel.


Microfinance has been been one of financial innovations best able to empower people at the bottom of the pyramid to plug into economic growth and move out of poverty. But the recent political violence in Kenya and Pakistan??wo countries with deep microfinance operations??s undermining the effort. In Kenya especially, thousands of people who took out loans to build businesses have seen everything destroyed by mobs. They cannot pay back these loans. In the West, ??oo Big To Fail?is the motto for government policy toward big banks, which translates into bailing them out of bad loans because their bankruptcy would threaten the entire economic system.

I suggest that “Too Small To Fail” is appropriate as well, since the lending of money to small business people in towns and villages of Asia and Africa is essential to their upward mobility out of poverty, the spread of the market economy and political stability. We need large financial institutions to step up, write off the debt of people with micro-loans in Kenya and elsewhere and start lending them additional funds to rebuild their businesses and their lives.

Jacqueline Novogratz, founder of Acumen, has the best insight into

what is happening in Kenya that I have seen anywhere. She recently returned from the country, where Acumen has significant programs in place.

Just as we need more innovative insurance products to protect people in the US and Europe against the disruptive unemployment that is now part of globalization, we need new kinds of insurance for poorer people to protect them against the political and economic disruptions in their lives. In many ways, it is all part of the vast globalization process going on today.


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