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top 3 ways for microfinance to get its groove back.

April 29, 2011 Leave a comment

microfinance and political interference: is it unavoidable?

March 16, 2011 Leave a comment

The founder of Grameen bank (and now ousted chairman) and 2006 Nobel prize winner is currently being referred to as a blood sucking parasite by the government of Bangladesh. A man who has accomplished such so much in this poverty-stricken nation has moved from being referred to in saint-like terms to this. We are all smart enough to see that this is political interference at its best:  a few years ago, fresh from his Nobel Prize win, Yunus made a veiled threat to set up his own political party in Bangladesh and ever since then the government (namely one Sheikh Hasina) has done everything in their power to attempt to discredit by accusing him of corruption and theft to blaming him for stealing from the poor. (8.9 Billion poor women have benefitted from Grameen’s loans in teh past 10 years!)

The question is: is politics and microfinance  indelibly inter-twined or are they no-go areas for each side? On the one hand, regulation of microfinance institutions is extremely relevant and necessary to ensure that they are operating within their stated missions and not fleecing the unbanked, but on the other hand, independence between the government and microfinance is of extreme importance as it is not suitable for governments to exercise control over credit programs as this must remain the preserve of the Microfinance sector. There are some governments that get involved once they realise how successful the microfinance programs are as they also want ‘a piece of the action’ as has been seen in some parts of Africa. One example of favourable intervention by government was a few months ago in Nigeria where the state close over 200 microfinance institutions due to poor governance practices.

As with everything, a balance is called for: character assassination and elbowing occurs as we have seen in the case of Yunus then that’s the point that one has to say to the government ‘butt out’.  The microfinance community is 100% Yunus and hope that this situation is not repeated elsewhere.

a saint or a sinner? Yunus in the firing line

January 11, 2011 Leave a comment

Recent reports that Nobel Prize winner Yunus’ Grameen Bank could have misused funds granted to it by the Norwegian government have resurfaced within the last couple of weeks. The allegations are that $96Million in funds were diverted from the Grameen legal entity to which they had been granted in the first  place and these funds were not subsequently utilised for the purpose for which they were intended. Grameen has issued a strong statement confirming that the transfers were made but the main reason behind these transfers was the utilisation of a tax loophole. On hearing  the word ‘tax loophole’,  the Bangladeshi government has jumped into the fray and stated categorically that Grameen should be paying its dues and it doesn’t care whether  has a nobel prize or not!!  Some quarters have commented that the Bangladeshi government doesnt like the near Hollywood -like cult figure that  Yunus’ cuts in Bangladesh which Yunus is, he is a  true darling of the Western world and that seems to run teh Bangladeshi’s up the wrong way!

It is not unusual for leaders with an almost saint-like status to go through periods of  sustained personal attacks(eg Jesus  Christ, Mother Teresa, Barrack Obama etc etc) But this particular attack brings to light an interesting aspect from the microfinance perspective and shows just how much Grameen has received in donor funding for its programs. The grant in question was just from one donor and it totalled almost 100million dollars, how much else does Grameen get? Is this clearly reflected in the poor that it serves in Bangladesh? are donors asking for accountability in terms of the impact of their dollars? Is there a clear correlation between dollars spent and the increase in the quality of live in some of the poor countries that Grameen serves? All interesting questions that don’t question the character of the Grameen founder but raise awareness of the need to measure the impact of microfinance in poor communities of the world.

To strangulate or to regulate? Microfinance at a cross roads in India

December 7, 2010 Leave a comment

The recent spate of suicides in the Andhra Pradesh state (45 in total over 2 months) largely attributed to individual borrowers inability to repay their loans has made a whole host of commentators say that the microfinance bubble has burst. My view is that it really ‘hasn’t burst; all that has happened is that industry is at a critical cross road in terms of regulation and introducing some kind of control over the activities of microfinance institutions. Ultimately these institutions are playing a part in terms of creating financial inclusion for hundreds of thousands of India’s poor so lets not throw away the baby with the bath water-lets focus on bringing in sensible regulation that regulates and does not strangulate the industry. For example regulations should cover interest rates and their transparency as well as the possibility of capping them, over indebtedness needs to be considered and MFIs need to be made to act responsibly in this respect. It’s definitely a time for dialogue between India’s Central Bank and the actors in the microfinance industry. Let’s not lets these poor people have dies in vain.

Categories: microfinance india