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Profiting from the Poor in Mexico

Our look at how a popular poverty-fighting tool has become a lucrative business model in Mexico ("The Ugly Side of Micro-Lending," In Depth, Dec. 24) ignited reaction from development agencies, nonprofits, Mexican banks, and individuals. Some readers chided borrowers for abdicating responsibility as they plunged into debt. Others were outraged over lending rates that top 100%. And a few readers wondered if high-interest lending in Mexico fuels desperation and more illegal immigration to the U.S. On that subject—undocumented workers—see some of the many letters we received about Arizona's tough new immigration law, covered in the same issue.

How sad that something so hopeful inevitably turns extortionate. Microcredit was seen as a way to help poor women and other disadvantaged groups become entrepreneurs. This is an area where government should be involved.

Screen name: Sue

An anecdotal story of unfortunate payment problems could be set in any bank, but your article focused on Banco Azteca. We take pride in the effectiveness of Banco Azteca's collection system and do not consider it "ugly." Microlending is one way to infuse capital into the bottom of the pyramid in developing markets. Is it expensive? Yes. But interest-rate caps would only lead to scarcity of capital and a step backward, to loan sharks and pawn shops.

Daniel McCosh

Director, Financial & International Information

Grupo Salinas

MEXICO CITY

I am disgusted that Wal-Mart (WMT) would join the [lending] fray in Mexico. With its Christian base, it has a moral responsibility to run its banking arm in a way that could help the poor. I have spent $24,809.25 at Wal-Mart in the last three years. It has seen my last dime.

Screen name: Jayne P.

I wish the piece could have been titled "The ugly and only side of unchecked usury." We at the Microcredit Summit Campaign found that 133 million families had a microloan in 2006, 93 million of whom were among the very poor when they started. Some 90% of these poorest clients are in Asia, where they are paying four to five times less in interest than the 80% to 100% being charged by the lenders you profiled in Mexico. Let's call a loan shark a loan shark.

Sam Daley-Harris

WASHINGTON

We were deeply disappointed by the portrayal of our affiliate, Banco Compartamos. The article focused on two unhappy clients of a bank with high retention and extraordinarily low delinquency rates—a bank whose client base has grown from 64,000 in 2000 to more than 765,000 today.

You failed to place Compartamos' interest rates in the context of the Mexican market, where capital and labor are expensive compared with other developing markets. Compartamos' rates are lower than those charged, on average, by other Mexican microfinancing institutions. The bank is more profitable than others because it is more efficient. Microfinance, which cannot fulfill its potential without for-profit investment, is not for everyone. Nor is it a panacea for global poverty.

Success requires discipline and entrepreneurial skills from the client—and from the lender, a scrupulous assessment of the client's ability to pay. But microfinance improves the lives of poor, working clients in the vast majority of cases.

María Otero

President & CEO ACCION International

WASHINGTON

The real issue here is not whether microfinance helps the poor. It's the immorality of the outrageous interest rates charged—rates that would give old-fashioned Mafiosi pause. As for Wal-Mart, apparently it is not enough to exploit its American employees with poor wages and benefits, as it is now joining the loan jackals fighting over the carcasses of the Third World's poor.

Screen name: George P.

Done correctly, microloans do help people achieve their dreams. They are an important part of the solution to the immigration problem between the U.S. and Mexico. Experts agree that to halt the influx of undocumented workers, more jobs need to be created in Mexico. A large percentage of Mexicans are self-employed in the informal economy and do not have access to traditional financing to make their small businesses grow.

Lionel Sosa

Executive Director

Mexicans & Americans

Thinking Together

SAN ANTONIO

How can you blame hard-working, poor Mexican citizens for sneaking across the U.S. border? The only way to fix America's illegal immigration problem is to fix Mexico.

Screen name: Robert

"It's easy to feel sorry for the people whose possessions get repossessed after business fails, but it's hard to be sympathetic toward the Wal-Mart shoppers buy[ing] the plasma screen TV!"

Zuckin, on Kiva.org

Microfinance may make borrowing more convenient, rather than affecting the traditional "impact" measures—income, consumption, health, and education. Ultimately, as with any service, the best measure of microfinancing's value is whether the customer continues to use it.

Brett Coleman

Private & Financial Sector Dept.,

Europe & Central Asia Region

World Bank

WASHINGTON

Is Arizona's Immigration Law a Help or a Hindrance?

Arizona's law punishing employers who hire illegals sounds like it might work ("Hire an Illegal Worker, Lose Your Business," What's Next, Dec. 24). If Washington would enact a temporary-worker program to pair with it, the illegal-alien problem would disappear with no harm to the businesses.

Tom Keller

HENDERSON, NEV.

The Arizona economy needs immigrant labor. Congress needs to stop pandering to its various minority constituencies, get over its inertia, and pass a viable guest-worker program. However, no guest-worker program should be a guaranteed path to citizenship.

William Clarke

RICHLAND, WASH.

Enforcing these laws will do nothing to help Arizona. If anything, it will hurt the state as crop producers [and other businesses] consider moving out. That is a net loss.

Screen name: Francisco

Nays and Yeas for Google

Regarding "Google's Next Big Dream" (Cover Story, Dec. 24): Is it just me or is this all starting to sound like a bad sci-fi story? The computer does the work, and thousands of Google (GOOG) engineers service the machines.

Screen name: stone age man

Cloud computing goes back almost 50 years. Others in the community contributed important technology and standards. It's a huge community effort.

Google's real merit is a powerful business model built on one of our basic needs: curiosity. So, still a great achievement!

Screen name: wgentzsch

Innovation and a fresh approach to old ideas is not bad. I'm glad Google is around—and that they encourage people to think out of the box. Only good will come from Google's venture into the clouds.

Screen name: eddie mayfield


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