Relevant to My Interest

LiveMint had a comment about the main microfinance issue of the day: interest rates.

Microfinance proponents such as Grameen Bank founder Muhammad Yunus have objected to these high rates. But Yunus’ formula of a less than 10% interest rate spread for an MFI to be in the green zone of socioeconomic acceptability has had few takers other than Grameen itself. Mexico’s Banco Compartamos, for instance, has made its fortunes charging rates in excess of 85%.

85%!  You can see why some people have an issue with this.  I'm not talking about dumb guys like "Vincent Van Noir" from the other day, because I don't care what they think.  More like this guy, who's not dumb.

In fact, Yunus’ formula loses out for its poor practicality. Large numbers of very small loans demand high rates, and artificially lowering rates may disincentivize MFIs from expanding their reach to the very poor.

This analysis pretty much matches where I think I'm at on this issue.  Microfinance institutions are charging high interest because they need to make money.  When you have small-dollar, short-term loans, high rates are the only way to do that.  A lot of the opposition to this system seems to come from people who have a reflexive distrust of the profit motive.  I don't.

Here's an opposing view.