These smallscale economic activities are valid business activities to be taken seriously. Interest rates to the poor need to be subsidized. Microfinance rates of interest must reflect operating costs to achieve sustainability. Organizations making large numbers of small loans will have high transaction costs and thus need to charge rates that are higher than commercial rates. However, microfinance rates are still significantly lower than the exorbitant rates charged by money lenders and other sources from whom the poor borrow.
Credit alone is useless.
It must be packaged with training, marketing, technology, and other services. Although programmes which package credit with other services may seem ideal, they require large subsidies and have proven to be largely unsustainable. The minimalist approach used by the Grameen Bank and many others has shown that clients can use credit in small amounts to start or improve the profitability of their microenterprises. Providing marketing and many other areas of services is valid, but best managed separately. The poor cannot be trusted with credit.