what-is-holding-back-the-social-entrepreneurFarmers seeking credit to install solar power systems and “even innovators in education, with fairly tried-and-tested models, have had to trudge difficult paths” to obtain credit in India, according to an article today in India’s Economic Times by Naren Karunakaran. 

Why? Because an overwhelmingly disproportionate share of available credit is going to businesses focusing on financial inclusion in general and specifically in microcredit programs. 

In our view, microcredit is one of the least worthy fields in social enterprise. That so much of the scarce resources available to address the challenges of poverty and climate change is squandered on for-profit microfinance ventures is a tragedy. While some microcredit programs — principally those operated as nonprofits — have achieved a lot of good, the rush by the big banks and profit-minded entrepreneurs into the field has proven to be a curse, not a blessing. (See Hugh Sinclair’s Confessions of a Microfinance Heretic for a full exposition of this problem.) As you can see on the table above, Water and sanitation companies received just $7.5 million in financing during 2000 to 2014, and healthcare only $55.7 million, compared to $689.9 million for microcredit.

1

In total, of the $1.6 billion invested in Indian social enterprises in this century to date, 70% is in financial inclusion. And 67% of the rest went into just 15 enterprises. 

 

 

3 Responses to “Where are impact investors putting their money?”

  1. Microfinance Reality Check » Confessions of a Microfinance Heretic | Blog

    […] was by Paul Polak and Mal Warwick, authors of The Business Solution to Poverty. They make an astute observation analysing where social impact investors are directing their […]

    Reply
  2. Smart or Crafty? » Confessions of a Microfinance Heretic | Blog

    […] Paul Polak and Mal Warwick, authors of The Business Solution to Poverty, state: […]

    Reply
  3. Does microfinance really help poor people? | Localized.US

    […] services to the poor particularly loans attracts a cult-like following. Financial inclusion dominates the social investment sector , arguably crowding out other more traditional interventions such as healthcare and […]

    Reply

Leave a Reply