In April, the New York Times published an article featuring an MFI in Nigeria called LAPO. This was a particularly interesting case. LAPO was accused of lending at rates of 126% per year. This is high by even the most generous standards of what constitutes an “excessive” or “extortionate” rate. Interestingly however, the investors in LAPO included the main microfinance investors, from Grameen Foundation and Citibank to Oxfam Novib, Deutsche Bank and Kiva. The extraordinary profit of LAPO was widely known, and had been published in rating reports for years, but only when the NYT published the article did such investors take action. Kiva severed ties with the institution, as did MicroPlace, part of eBay. Others may have also followed suit. Grameen remains an investor, and defender, of this institution, which challenges the usual belief of their stance against high interest rates. The Schwab Foundation even gave LAPO an award after this case hit the press, further challenging this previous assumption, as Muhammad Yunus of Nobel Peace Prize fame is a board director of Schwab.

The lack of concrete evidence of largescale poverty alleviation is a critical concern, as is the simple fact that client desertion rates at Microfinance Institutions are often alarmingly high. It is certainly not the magical cure many in the sector would like to present, and it is currently undergoing a period of self-scrutiny and criticism. Hopefully this will lead to a strengthened sector with greater poverty reduction abilities in the future. In part this is likely to involve increased scrutiny from regulators, as concerns grow increasingly public.