Editing Microcredit (section)

===Economic principles===
Microcredit organizations were initially created as alternatives to the "loan sharks" known to take advantage of clients.<ref name="Bateman 2010"/> Indeed, many microlenders began as non-profit organizations and operated with government funds or private [[Subsidy|subsidies]]. By the 1980s, however, the "financial systems approach", influenced by [[neoliberalism]] and propagated by the [[Harvard Institute for International Development]], became the dominant ideology among microcredit organizations. The neoliberal model of microcredit can also be referred to as the institutionist model, which promotes applying market solutions as a viable way to address social problems.<ref>{{Cite journal|last1=Bisen|first1=Arjun|last2=Dalton|first2=Bronwen|last3=Wilson|first3=Rachel|date=November 2012|title=The Social Construction of the Microfinance Industry: a comparison of donor and recipient perspectives|journal=Cosmopolitan Civil Societies|volume=4|issue=2|pages=62–83|doi=10.5130/ccs.v4i2.2715|doi-access=free}}</ref> The commercialization of microcredit officially began in 1984 with the formation of Unit Desa (BRI-UD) within the [[Bank Rakyat Indonesia]]. Unit Desa offered 'kupedes' microloans based on market interest rates.

Yunus has sharply criticized the shift in microcredit organizations from the Grameen Bank model as a non-profit bank to for-profit institutions:<ref>Muhammad Yunus, “Sacrificing Microcredit for Megaprofits” New York Times (15 January 2011) A.23.</ref><blockquote>I never dreamed that one day microcredit would give rise to its own breed of loan sharks... There are always people eager to take advantage of the vulnerable. But credit programs that seek to profit from the suffering of the poor should not be described as "microcredit," and investors who own such programs should not be allowed to benefit from the trust and respect that microcredit banks have rightly earned.</blockquote>Many microcredit organizations now function as independent banks. This has led to their charging higher interest rates on loans and placing more emphasis on savings programs.<ref name="Bateman 2010"/> Notably, Unit Desa has charged in excess of 20 percent on small business loans.<ref name="gdrc.org">{{cite web|url=http://www.gdrc.org/icm/country/unit-desa.html|title=BRI-Unit Desa, Indonesia|access-date=May 16, 2012|archive-date=June 28, 2022|archive-url=https://web.archive.org/web/20220628094006/http://www.gdrc.org/icm/country/unit-desa.html|url-status=dead}}</ref> The application of [[neoliberal economics]] to microcredit has generated much debate among scholars and development practitioners, with some claiming that microcredit bank directors, such as Muhammad Yunus, apply the practices of loan sharks for their personal enrichment.<ref name="Drake 2002"/> Indeed, the academic debate foreshadowed a Wall-street style scandal involving the Mexican microcredit organization [[Compartamos Banco|Compartamos]].<ref name="Bateman 2010"/>

Even so, the numbers indicate that ethical microlending and investor profit can go hand-in-hand. In the 1990s a rural finance minister in Indonesia showed how Unit Desa could lower its rates by about 8% while still bringing attractive returns to investors.<ref name="gdrc.org"/>