On Tuesday night while RESULTS members were being introduced the functionality of our new website, RESULTS Executive Director Aaron Oxley was chairing a meeting in the crypt beneath St Paul’s Cathedral titled “Christian Microfinance: Distinctively Different?”
The event was jointly organised by the Microfinance Club UK and the St Paul’s Institute and kindly sponsored by Stewardship.
The speakers at the event included three representatives of major Christian Microfinance organisations: Tom Sanderson from Five Talents, Makonen Getu from Opportunity International and Stephen Lockley from the World Vision microfinance arm, VisionFund. They all spoke about their various organisations and how they see microfinance, as provided by Christian providers, as something different from what secular organisations provide.
The presentations were followed by a rousing question and answer session that Aaron moderated, which really began getting into the details.
The kinds of issues discussed included:
- Do Christian microfinance organisations try to convert their borrowers to Christ?
- Do they only lend to Christians?
- Isn’t charging interest against the principles of Christianity?
- How do you treat those who cannot pay? Shouldn’t we forgive debts?
To learn the answers to these questions and more, take a few minutes and watch the video of the event. The good people at the St Paul’s Institute have made the entire event available in five parts. You can see these and a lot of other interesting events on Christianity, ethics, and finance here.
Saved as a favorite, I enjoy your blog! :)
I watched this series with a particular interest in the reference to Christians charging interest. Alas I did not hear much detailed discussion on this topic. While I think most people accept that charging interest is reasonable, whether Christian or otherwise, there must be boundaries, particularly when the clients are not always financially literate and do not benefit from bankrupcy and consumer protection laws. The US-based NGO MFTransparency publishes APRs using actual field data for hundreds of MFIs, and I recently compared these for the 7 available MFIs operating in Africa within the Opportunity International network. I am unaware of any of the institutions featured in this debate, or more broadly, defining the point at which interest rates become extortionate, but I generally find that most people become rather uncomfortable with rates in excess of 100%. According to MFT, Opportunity charges rates up to the following levels (APRs):
Ghana – 161.4%
Kenya – 134.0%
Malawi – 128.3%
Mozambique – 152.7%
Rwanda – 107.5%
Tanzania – 109.0%
Uganda – 105.1%
This includes all costs (tax, forced savings etc). I have three main concerns about these rates. First, I find them sufficiently high to be of limited positive impact on the poor. I do not dispute that some poor entrepreneurs may generate such massive returns that they can repay such rates and still profit, but I fundamentally question whether, en masse, such interest rates are beneficial to the poor. I would refer to the evidence presented by academics such as Duvendack, Roodman, Bateman, Stewart etc. that suggest microfinance is having little impact on poverty at large. Could the cost of credit be a possible explanation?
Secondly, the institutions in this meeting are all advocates of transparent pricing, endorsing movements such as the Smart Campaign etc., and yet I am unable to find the actual APRs on any websites of any microfinance funds. So, if such rates are acceptable, why do such institutions not publish these openly on their websites such that their own investors can determine whether these are ethical or not? I personally would not like to finance any microfinance institution charging rates over 100%, but unless I am presented with the data, how can I make an informed decision? Where is the transparency here? Surely it is not whether I, or Opportunity, or Results, or even the poor find these rates acceptable, but whether those donating to organisations such as Opportunity find them acceptable?
Finally, I am no theologian, and I imagine the issue of usury is a complex topic. But I did a brief search for biblical references to usury:
Exodus 22:25 “If you lend money to one of my people among you who is needy, do not treat it like a business deal; charge no interest.”
Ezekiel 22:12 “In you are people who accept bribes to shed blood; you take interest and make a profit from the poor. You extort unjust gain from your neighbours. And you have forgotten me, declares the Sovereign LORD.”
I re-iterate my premise that charging interest is reasonable, even for a Christian entity. A literal adherence to these Old Testament verses would drive all Christian entities out of microfinance. But at what point do we cross the red line to extortion? If 160% charged by Opportunity is reasonable, what about 500%? Would they ever charge 1000%? But if they absolutely insist that rates of these levels are both benefitting the poor and are biblical, why don’t they publish them on their websites so their investors can decide for themselves?
http://blog.microfinancetransparency.com/an-opportunity-for-the-poor/