I was wondering, as an extension to a thought initiated by a friend in a discussion: The gobal financial crisis that has engulfed the world has the western governments gear up for some collective action to set things right - regulations/controls/socialism/nationalisation are not bad words any more.
There was a blog post about the sub-prime crisis and lessons for microfinance back in June this year and nothing substantial since! My hypothetical question is - What if the Third World sub-prime bubble had imploded? Of course, I am referring to microcredit. What if microcredit had beaten the home loans in the race to a crisis? How do you think the governments of the world would have reacted? Would they have sanctioned the required millions (not even billions)? And what else?
2 comments:
Suvojit,
I think this question is a little leading, but I'll jump into it; I don't think governments would have sanctioned the required millions (or billions). I think that governments would maybe even argue that microcredit does not work because the low-income borrowers are not able to pay back, and are maybe even worse off as they are falling into debt traps.
A couple other reasons I don't think governments would foot the bill are:
1) Microcredit is a small part of bank's loan portfolio, and would not threaten the broader financial systems
2) Microfinance institutions, and the people they loan to, are less likely to be able to hold lobbying sway than deep-pocketed banks and financial investment firms
Surely leading - outright populist, in fact! But makes interesting thought if we thought what the west would advocate as a solution for a global microfinance collapse...
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