Disintermediating Avarice: A Legal Framework for Commercially Sustainable Microfinance

Authors

Steven L. Schwarcz, Duke Law SchoolFollow

Document Type

Article

Publication Date

2011

Keywords

microfinance, development economics, third world development, capital markets

Abstract

Although microfinance is emerging as a key tool to alleviate poverty, the need for microfinance lending vastly exceeds the amount of funds that can be raised from charitable donors. Commercial bank lending is supplementing donor money, but microfinance loans made by banks are extremely expensive and sometimes even exploitive. This article examines how innovative legal structures can enable microfinance loans to be funded directly from lower-cost, and virtually limitless, capital market sources by removing, or “disintermediating,” the need for a bank intermediary. In that context, the article identifies and attempts to resolve the resulting law-and-business issues of first impression and also examines, more normatively, the extent to which microfinance lending should rely on capital market funding sources.

Citation

Steven L. Schwarcz, Disintermediating Avarice: A Legal Framework for Commercially Sustainable Microfinance, 2011 University of Illinois Law Review 1165-1199