Today's NYT offers yet another set of indictments against microfinance. The charges are: 2) interest rates are unfair and exploitative, 2) banks are making profits off ventures originally meant to be charitable; and 3) loan pricing is not transparent enough to consumers.
As a lender myself, I too have questioned the high interest rates charged by the major lenders - at Compartamos, the average rate is 84% - but let's be honest, lending in micro-amounts to the poor is an expensive proposition. It's considerably more expensive to lend 10 loans of $100 than 1 loan of $1,000 especially if none of those people has any credit history, nor employment history, or even access to a bank. If I lend someone $100 for 1 monts divided into two payments at an 18% interest rate, I will make 75 cents and that probably doesn't cover my costs. I don't doubt there is abuse in the system - just as payday lenders and other loan sharks abuse financially illiterate American consumers, but interest rates that seem high by our American standards are not necessarily exploitative.