Disintermediating Avarice: A Legal Framework for Commercially Sustainable Microfinance
Steven L. Schwarcz | 2011 U. Ill. L. Rev. 1165
Although microfinance has emerged 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 currently supplements donor money, but microfinance loans made by banks are 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, this 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.