Kid bankers, microloan sharks?

Springwise has a feature on the kidpreneur movement.  Its focus: a New Delhi bank run by street kids, co-sponsored by HSBC and Comic Relief.

Like any other bank, CDB pays interest on the deposits that New Delhi’s street children make. That interest can be a vital incentive to kids who might otherwise spend their daily earnings on cigarettes, candy or other items—or worse, have their meager profits stolen. Money for the interest comes from the repayment of micro loans made to kids 15 years and older. But interest on income is only part of the picture. While adults stand at the ready to help, CDB is managed by children, helping them gain valuable work skills.

No question this is doing good for the kids running the bank--hooray for them.  But let's take a closer look. 

The bank rewards savings by paying interest, yes.  But the interest comes from microloans, which are increasingly coming under fire for being offered at less than optimal terms:  exorbitant interest over a short period of time, with a principal too small to facilitate a sustainable business. 

While the microloan movement garnered last year's Nobel Peace, it's long-term viability may not be so great.  Witness Natalie Portman's recent plea for microcredit loan forgiveness and the trickle of research papers questioning the loans' low success rate.  

Kid bank co-sponsor HSBC is already under fire over the collapse of its subprime-mortgage loans and high-interest credit-card business.   At what point will microcredit go from being seen as the future of philanthropy to a gateway drug for exploitive lending?