Adam Smith gets a fresh look

Implications: 1. Stock market takes over microfinance. 2. Microfinance moves from donor to investor.

Analysis: The concept first enlightened by Adam Smith has now taken hold of the microlending.The small and the poor borrowers have now not only to work for themselves to earn a living but also to work for the investors or the multitude owners of the Microfinance Institution (MFI). This will turn them into money making machines.

Instead of living on the charity of the donors micro borrowers will now depend on the investors and soon for reasons of profit the MFI will be dictated by the Stock market and if not making a profit or 'producing' a dividend it will be turned into a basket case. And the very concept and the purpose of a MFI is defeated.

Again, the group of borrowers putting peer pressure on loan repayment will be driven by a set of KPIs, targets, action plans and the like. A noble concept takes an ugly turn.

Is microfinance solely for profit ? then Stock market is a good answer !

But then should the poor be tagged with MNC motives ? Do not the rich have an obligation towards their disadvantaged brethren ? Has charity lost its value ? Why can't Bill Gates, Warren Buffet and the like look at microfinance. Once the poor become rich more computers can be sold and more sales to Microsoft. Is it such a hard thing ? Perhaps, therein lies Adam Smith's invisible hand/motive.

Going to the stock market may not be a bad idea. But then it may not suit every business. One size doesn't fit all.

What now ? Perhaps MNC banks such as Citi and Deutsche Banks could allocate some funds to run a MFI as a group or individually without charging exhorbitant interest (which they already are into), Or a group of wealthy donors could group together to run a MFI. Satisfaction comes when such borrowers are succesful and the donors can feel contented.

From Microsoft to Microfinance not an unthinkable transition.