Far Below Subprime, the Credit News Is Good
, September, 06 2007 -
While lending in the subprime mortgage market in the U.S. has turned sour, the credit business at an even lower level of borrower is booming.
Microloans of as little as $50 and rarely more than a few hundred dollars are proving to be an effective remedy for world poverty. They are also becoming attractive investments.
Repayment rates are superb, rarely lower than 96%, with a track record that beats that of most commercial banks, and demand is soaring.
This double bottom line of business development and poverty reduction is gaining notice from the banking sector, especially in India, where Citigroup , ICICI Bank and others are actively supporting microfinance in ways that are likely to eventually bring in new regular accounts as poor families work their way up the economic ladder.
The consulting firm McKinsey & Co. estimates that as many as half of the 3 billion poor people in the world could be eligible for microloans. A recent report by the World Bank estimates that microfinance meets only around 15% of the credit needs of the world's low-income families. Microfinance is a growth industry.
Investors, including those who wish to make a profit while having a positive social impact in the alleviation of global poverty, are certainly taking notice of the attractiveness and effectiveness of microlending.
It is easy to see the natural affinity between microfinance and people who are involved in the financial markets. The key to solving world poverty is wealth creation.