Mega-interest on Microcredit: Are Lenders Exploiting the Poor?
Article first published online: 19 APR 2012
© Society for Applied Philosophy, 2012
Journal of Applied Philosophy
Volume 29, Issue 3, pages 169–185, August 2012
How to Cite
Sandberg, J. (2012), Mega-interest on Microcredit: Are Lenders Exploiting the Poor?. Journal of Applied Philosophy, 29: 169–185. doi: 10.1111/j.1468-5930.2012.00560.x
- Issue published online: 13 AUG 2012
- Article first published online: 19 APR 2012
Microcredit is often hailed as an effective way of alleviating poverty. In recent years, however, microfinance institutions have been the target of much criticism due to their comparatively high interest rates (which may be as high as 70–100% per annum). This paper discusses whether it can be morally justified to charge very high rates of interest when lending money to the poor. Arguments are drawn from contemporary as well as historical debates on usury, exploitation, egalitarianism and consequentialism. It is conceded that it would be preferable if interest rates could be reduced, but it is argued that typical microlenders today do nothing wrong in setting their rates at the current levels. Instead the responsibility rests on governments, commercial banks and overseas investors to facilitate an environment where rates could be reduced.