21 June 2008

Micro Mania

An article in Time purports that the rapid growth in micro-finance could be the cause of future financial market turmoil.

Recent history says that when a financial trend gets popular, it gets riskier too. Think subprime mortgages.
Any lending venture involves a degree of risk, but the more I think about it I don't see "micro-finance" causing any "major" problems. The whole idea is to make small loans. Even if default rates skyrocket on these loans at some point in the future, there won't be billions of dollars at stake.

Related Links: Private Sector Development Blog, Marginal Revolution

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