Criticism

Repayment of Loans

One of the major criticisms against the field of micro-finance concerns the repayment of loans. Muhammad Yunus admits to the risk of such investments, “’[borrowers] don’t have collateral, they don’t have guarantees, they don’t have lawyers, nothing. How risky can you get? Still, our money comes back,’” (Parker, 1). Currently Grameen Bank holds a repayment rate of 98%, which is impressive even for a traditional bank (Parker, 1). World wide, “developing countries MFIs report unusually high repayment rates of 95% to 98%, which is higher than the rate for student loans and credit cards in the United States” (Hawser, 25). Yunus contends that these borrowers have no incentive not to repay their loans (they would be sacrificing their only chance) and in turn trusts them with credit. Additional security, provided through the group-loaning method, helps to maintain this impressive repayment rate. Robert Annibale, the global director of  the Citigroup Micro-finance Group comments on the process, “‘most micro-financing of Grameen-inspired MFIs is done through lending to groups of five to 20 women co-guaranteeing one another…so if one of the women has a problem meeting a repayment, other women in the group often help her to make that repayment’” (Hawser, 26).