Microfinance Legal Resource Materials
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Entrepreneurship Law Editorial Team
Books
Ray Boshara et al., REALIZING THE PROMISE OF MICROENTERPRISE DEVELOPMENT IN WELFARE REFORM (1997).
Abstract: Examines the use of microenterprise development as a welfare-to-work strategy and identifies ways that microenterprise promotes self-sufficiency. Concludes with policy recommendations for welfare reform.
Susan R. Jones, A LEGAL GUIDE TO MICROENTERPRISE DEVELOPMENT: BATTLING POVERTY THROUGH SELF-EMPLOYMENT (1998).
Abstract: Addresses microenterprise and seeks to offer guidance to lawyers who volunteer to represent microentrepreneurs and microenterprise development organizations that facilitate the development of these small businesses. The aspects covered in this manual include: how lawyers can get involved in microenterprise; guidelines on legal formation issues and business issues for microbusinesses; setting up microenterprise programs; information on organizations that support microenterprise and assistance provided by federal agencies.
Articles
Todd Arena, Social Corporate Governance and the Problem of Mission Drift in Socially-Oriented Microfinance Institutions, 41 Colum. J.L. & Soc. Probs. 269 (2008).
Abstract (from author):
Microfinance has become increasingly popular as a development and anti-poverty tool due to its promise of providing sustainable social and economic development to the world's poor without the need for ongoing subsidies to sustain such programs. The efforts to achieve this promise have led microfinance providers to focus on what has become an industry-wide push for financial self-sustainability (FSS). However, the efforts to achieve FSS have highlighted a tension between the dual missions of microfinance and created a tendency for the microfinance provider's mission to drift away from an integrated development program towards financial service provision alone. This Article offers a response to mission drift that moves past the traditional stance, which assumes that either FSS or social mission must be prioritized to the expense of the other. By examining the corporate governance aspects of two microfinance providers, particularly through the use of case studies and field research, this Article presents a growing body of experience with governance structures based on a novel conception of corporate governance. Unlike traditional corporate governance mechanisms, social corporate governance is designed to vindicate the organization's social and development goals. This Article argues that social corporate governance mechanisms, when properly balanced against traditional corporate governance structures, alleviate the tension between financial and social development goals and provide a solution to mission drift in microfinance. This Article aims to further the debate within the microfinance community by elaborating the concept of social corporate governance.
Rebecca Farrer, Exploring the Human Rights Implications of Microfinance Initiatives, 36 Int'l J. Legal Info. 447 (2008).
Abstract: Microfinance and microcredit (“MFI”) programs have been advanced as a way to make the world a better place. These programs involve making small loans to people who would otherwise be unable to borrow money to facilitate them starting their own businesses: frequently, the programs focus on women borrowers in developing countries. Muhammad Yunus of the Grameen Bank says microfinance and microcredit programs can literally end world poverty.
This article explores MFI from several perspectives, with particular emphasis on human rights issues. The emphasis of MFI programs on women in developing countries makes it important to consider these programs in terms of both women’s and indigenous rights, while MFI as an approach to poverty merits a discussion of economic rights. The Article first explores the concept and scope of MFI programs, identifying key components that the programs share. Particular attention is paid to the Grameen Bank and its much-lauded and prototypical approach. The Article then explores the human rights implications of MFI programs in detail, within the context of economic, indigenous and women’s rights. One particular aspect of Grameen’s program, namely the use of Sixteen Decisions, is also critiqued, applying organizational behavior theory. The Article also examines MFI in respect to other approaches to poverty alleviation in the developing world, including property rights’ initiatives, women’s cooperatives, and social enterprise approaches.
B. Seth McNew, Regulation and Supervision of Microfinance Institutions: A Proposal for a Balanced Approach, 15 L. & Bus. Rev. Am. 287 (2009).
Abstract (from author):
Today, microfinance institutions (MFIs) are providing financial services to millions of the world's most impoverished citizens, who were once deemed “unbankable” by traditional banks due to their lack of credit history and collateral. Although MFIs experienced limited success upon their creation, it is currently estimated that between 1,000 and 2,500 MFIs provide access to financial services for around sixty-eight million clients in over 100 different countries. While great strides have been made in reaching those people who were traditionally ignored by the banking industry, some estimate that MFIs are still reaching fewer than 5 percent of the potential microfinance clients, due, at least in part, to a lack of a formal regulatory framework.
Molly Richardson, Increasing Microlending Potential in the United States through a Strategic Approach to Regulatory Reform, 34 J. Corp. L. 923 (2008).
Abstract (from author):
This Article explains microlending in general, and then examines its implementation in the United States. It then analyzes why U.S. MFIs have not reached self-sufficiency at the same levels as international MFIs. Next, this Article examines the various proposals different scholars and practitioners have offered to address the limitations of microcredit in the United States. This Article next recommends the most promising solutions, which center on regulatory reform. The proposed regulatory reforms aim to strengthen the sustainability of microlending in the United States. The Article then offers a practical political strategy to implement these reforms--something largely missing from academic literature on microlending in the United States.
Michelle Scholastica Paul, Bridging the Gap to the Microfinance Promise: A Proposal for a Tax-Exempt Microfinance Hybrid Entity, 42 N.Y.U. J. Int'l L. & Pol. 1383 (2010).
Abstract (from author):
Prior to the emergence of Microfinance Institutions (MFIs), poor borrowers seeking credit without collateral were limited to local moneylenders, who typically charged high interest rates in excess of 100 percent. MFIs now compete with moneylenders, but unfortunately many MFIs also charge very high interest rates. It remains unclear how best to aid MFIs in lowering their rates. MFIs charge higher interest rates than commercial banks because they face higher operating costs. MFI operating costs are comparatively higher than commercial banks because the provision of numerous small loans exposes lenders to greater risk due to lack of information about borrowers, lack of collateral to secure loans, and defaults. Further, MFI operating costs are also pushed upwards due to high administrative costs and the high costs of obtaining capital. Most MFIs are limited in their ability to attract sufficient capital because they are formed as nonprofit entities, which generally are statutorily barred from access to equity capital due to the non-distribution constraint.
R. H. Tipton III, Note, Microenterprise Through Microfinance and Microlending: the Missing Piece in the Overall Tribal Economic Development Puzzle, 29 Am. Indian L. Rev. 173 (2004).
Abstract (from the introduction): This comment discusses microfinance and microlending in general, providing both foreign and domestic examples of successful MFIs and explaining the different models of microlending. Part III proposes a hybrid model of microlending which is tailored to tribal institutions and is feasible, relatively simple and extremely practical. The final section discusses the positive effect a hybrid model could have on economic development on reservation land.
Megan Whittaker, South Africa's National Credit Act: A Possible Model for the Proper Role of Interest Rate Ceilings for Microfinance, 28 Nw. J. Int'l L. & Bus. 561 (2008).
Abstract (from author):
The concept of microcredit, in which poor people are given access to small loans as an alternative to charity, began as an economic and social experiment in the developing world. Microlending was pioneered by Bangladeshi Professor Muhammad Yunus in 1976, when he launched an action research project in his native country to "examine the possibility of designing a credit delivery system to provide banking services targeted at the rural poor." As of December 2007, the product that resulted from Yunus' research project, the Grameen Bank, has 7.41 million borrowers, ninety-seven percent of whom are women. The Bank has 2259 branches serving 72,833 villages, covering more than ninety-six percent of the total villages in Bangladesh. The success of the Grameen Bank has been duplicated in various other countries by various other microfinance institutions ("MFIs"). Indeed, loans to the poor have existed for thousands of years, albeit in less formalized models. The movement has advanced from the collective insights of numerous "extraordinary individuals," and today there are thousands of financial institutions around the world providing the very poor with access to financial services. Since the idea's inception in the 1970s, the Grameen Bank and other microfinance institutions have "reversed conventional banking practice by removing the need for collateral and created a banking system based on mutual trust, accountability, participation and creativity."
Online Resources
Accion Home Page
www.accion.org
FINCA, Microfinance Programs.
http://www.finca.org/site/c.erKPI2PCIoE/b.2589481/k.5ABD/Microfinance_Programs.htm
Jeffrey Gangemi, Making Microfinance Easier, Bus.Week (Aug. 16, 2006).
http://www.businessweek.com/smallbiz/content/aug2006/sb20060815_733434.htm
Grameen Bank, A Short History of Grameen Bank
http://www.grameen.com/index.php?option=com_content&task=view&id=19&Itemid=114
Kiva Home Page
http://www.kiva.org
MicroPlace Home Page
https://www.microplace.com/
Prosper Home Page
http://www.prosper.com
Jamie M. Zimmerman & Ray Boshara, Global Savings, Assets, & Financial Inclusion: Lessons, Challenges, & Directions: Report From a Global Symposium, June 2007, Singapore (2007).
http://www.newamerica.net/files/Singapore%20report_0.pdf
Other Materials
Bad Dog Pip
http://baddogpip.blogspot.com/2006/12/mifex-neighborhoods-tres-trinitaria.html (Dec. 19, 2006, 17:44 EST)
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