Gira Con Me: Microfinance

Grameen Bank of La Plata focuses on giving loans to improve a borrower’s life holistically. This is precisely because microfinance is founded on the idea of solidarity as collateral. It is a solid attestation to the fact that you can strip people of all financial and material possessions, and they can still create value from solidarity, respect, and trust.

This focus on improving the lives of borrowers holistically gives microfinance its strength in an emotional and personal aspect, but it is also a significant weakness when it comes to intellectual or financial senses, because oftentimes, this focus on solidarity and trust inhibits the bank from doing the financially sound thing.

And this polar contrast is perhaps perfectly exhibited by Oscar and Anna. Thursday, July 5 marked the grand opening of a new Grameen center in Arana. But it has been a topic of contention for quite some time between the individuals at the bank with different ideologies. Anna questions the bank’s new presence in Arana. It is a crudely constructed neighborhood that has arisen from the remains of an abandoned oil factory. On any given day, you’ll see more cows, horses, and stray dogs than you will see people. Yes, the potential market is too small. Yes, there isn’t enough potential for diversity to avoid competition between the borrowers. Yes, managing risk will be a challenging if not impossible task. Yes, it is inefficient to stretch the bank’s resources out to reach such an isolated area. Yes. Yes. Yes. But the need is there, and that is why they must go, Oscar says – the poorer the borrowers, the better.

As its name entails, microfinance is still concerned with finance. And risk management is undoubtedly a key concern here with these high risk-profile borrowers. It is just that oftentimes, personal and emotional concerns trump financial soundness. And so Grameen has a 94% repayment rate excluding interest, and is still not self-sustainable. How can we find a balance?

Abandoned railroad station, now a home.