Wednesday, October 5, 2011

Are Impact Investors Creating a Real Impact?

According to the World Bank, there are approximately 1.4 billion people living in extreme poverty - making less than $1.25 a day, and approximately 2.6 billion people living in moderate poverty - making less than $2.00 a day. The majority of these individuals live in South Asia, a population density that exceeds Africa's total population.

These groups, like everyone on the planet, need fuel, lightening, affordable heathcare and more; but sadly they do not have the means to do anything about it. With numbers this high, are Impact Investors not doing enough to reduce global poverty? After all, most government agencies are corrupt, with leaders stealing money from their patrons. India, for example, has had approximately 50-70% of welfare stolen by selfish government officials plaguing individuals to receive quality [health]care services that were promised to them. (Upcoming Kumarian Press book, Detecting Corruption, talks about how corruption can be eliminated for the benefit of the citizens. More on that coming soon.)

But, when government officials fail to meet the needs of citizens, who best to turn to but the Impact Investors. So, why aren't they doing enough to hault corruption and help reduce poverty?

The microfinance industry is known by many as a loans savior to those living in extreme poverty, or to those in need. The industry started in ther late 1980s in Bangladesh, India by Microfinance Legend, Mohammad Yunus and his founding of the nonprofit Grameen Bank. But recently, despite many successes, the Microfinance Industry has been under scrutiny, tackling concerns about where the industry's money is going; and who it is most benefiting. Not surprisingly, exploiting the poor is one of the main concerns. In India, credit histories cannot be shared, and "appropriate consumer-protection code and a nationwide regulatory framework are still lacking." (The Microfinance Catalyst, Project Syndicate) Confronting Microfinance talks about the recent concerns in the industry, and discusses the sacking of Yunus from the Grameen Bank, which lead to a huge uproar.

Now, NGOs supporting microfinance loans are under the gun, gearing up for high supervision by government officials."Although impact investors can lay the groundwork for commercial investors, they must also work in unison with government authorities to ensure well-functioning market systems. Only when such systems are firmly established will the poor be able to participate in today’s vast global economy." (The Microfinance Catalyst)

Until this gets more mediated control by the government, what can we do but ask: Whose sustainability really counts?

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