The New York Times ran an article on microfinance recently titled, Banks Making Big Profits From Tiny Loans.  It’s one of these topics that many people have a strong opinion about, but know little about.  Unhelpfully, I know a lot about it, but don’t have a clear opinion.  Basically, it boils down to these questions, “should you limit the amount you can make when serving the poor?” and “should poor people deserve special protections?”

To me, the answers to both questions are clear, but contradictory, no and yes, respectively.  Limiting how much you can make by providing credit to the poor, a) is hard to measure, and b) will decrease access.  Yet on the other hand, I believe an open society does and should strive for a large middle class, which involves giving extra help to the poor and other disadvantaged people.  How do you saddle the private sector with that obligation without stifling incentives and innovation?  It’s a question we’re facing now in the recent Card Act and the still brewing Consumer Financial Protection Act on the policy side.  On the private sector side, entities like our fund are looking for capitalists with a bigger vision for society.  We want to partner with leaders who are driven to do both.

I don’t believe it’s enough to hope the private sector will do its job unchecked.  I don’t believe that regulatory sticks will do the trick, either.  While regulatory carrots are important, I’m skeptical about their efficacy and sustainability.  So what to do?  From my little desk, all I can do is to use our capital to maximize the leverage of entrepreneurs who are both hungry and driven by a larger purpose.  Any takers?