Thursday, August 13, 2009

Investors See Profit in Microfinance

Over the past year, microfinance funds have had an annual return rate of 4.47%, compared to an average loss of 22% across the S&P 500.  The micro sized loans can carry interest rates as high as 50% annually, and some funds claim to have only a 2% default rate, allowing for significant profit.  The industry has been expanding its lending at a rate of 40% to 50% per year, leading to fears that there may be too much money chasing too few loans.

The Woes of Group Lending

Microfinance institutions employ a tactic called group lending to ensure use peer pressure to ensure that microloans made without collateral are repaid.  Borrowers must organize into groups of five and promise to honor each other’s loans, which has been causing some social strife.  The groups responsibilities have led to fights between friends and families, and many borrows are worried that others in the group may run away, leaving the group with the burden of their debt.

Kidnappers Free Aid Workers in Somalia

On Tuesday, four aid workers and two pilots were freed after being held captive in Somalia for nine months.  They were working for the French Charity, Action Against Hunger when they were kidnapped last November.  The fate of three Action Against Hunger workers kidnapped in July is still unknown.

Charity to Benefit from NY/NJ Shakedown

Jersey City Mayor Jerramiah Healy has promised to donate $17,600 to charity, roughly the amount of campaign contributions he received from donors connected to the 44 people arrested last month in a federal corruption probe.  Although the Jersey City Council President has been arrested on corruption charges, Mr. Healy has not and appears to be distancing himself from the officials arrested.