A Different Perspective on the Debate Between Nonprofit and For-Profit Microfinance Organizations
Abstract
Microfinance for-profit organizations flooded the market in the early 2000's when microcredit demonstrated profitability. Ever since, an intense debate arose contesting the morality of profiting from the poor. Many for-profit micro finance institutions were accused of predatory lending through high interest rates and aggressive marketing and payment collection. In this paper, I examine the validity of the arguments for and against for-profits by extensively comparing the different target audiences of the charity sector and the private sector and the main arguments of each side. I conclude that, although the ability to serve the poor is compromised by profit motives, for-profit micro finance organizations are serving a different market - and a much needed one - than nonprofits. Therefore, for-profits serve a function that, as of right now, nonprofits are not able to.