Entry # 3
February 6, 2009
Kelsey Walker

Microbanks Are Getting a Cash Infusion
Microfinance banks provide sensible loans that can help developing countries out of financial crisis. Usually only 3 percent of the loans tend to go bad so, the microbank method seems to work. The microbanks have develop investment funds that help mobilize cash for poorer countries. One thing that the microbanks do that other commercial credit banks do not is they provide loans for small businesses. The microbank usually hands out less than $100 in loans to a specific bank; however they successfully help foster private enterprises in poorer countries. The World Bank and Germany’s goal is to provide $600 million out of microcredit to developing countries. The World Bank would provide $150 million along with $130 million from Germany, in hopes to obtain support from other countries and institutions. If they did raise $600 million dollars, that would provide for 150 to 200 microfinance banks in 40 developing countries. The only problem that the World Bank has ran into when devising this plan is the credit crisis. Usually most loans are obtained from Western aid however, before the credit crisis hit many private sources begin to join in. This is a good thing that the World Bank is trying to do however, in the long run many problems will arise. With providing foreign loans they are pushing interest rates through the roof for these developing countries. The plus side, microcredit is not taking money from wholesale financial markets at one rate of interest and lending it out a higher rate. They are providing small, payable loans, which could work if they could get enough support.