Thursday, October 25, 2007

Changes to Grameen Bank's structure

Thanks to the Military backed Government currently running Bangladesh, Grameen Bank has achieved certain relaxation in the norms governing its functioning. It has to be noted that it was during the time of General Ershad, the military dictator, that Grameen Bank came into being. The current changes are:
  • Grameen Bank allowed to operate branches in urban areas. Earlier they could open branches only in the rural areas.
  • Government stake cut down from 25% to 15%. Note that when the Bank started, Government had a stake of 60%.
  • Number of Government nominated directors brought down to 2 from 3.
  • Chairman of the bank will be appointed by the board instead of Government nomination which existed until now.
This move will strengthen Muhammad Yunus to be at the helm of the bank for quite a while to come. When Yunus decided to run for elections, the political parties got quite antsy. Of course, all legislations can be amended again by newly elected Government, but there could be a lot of resistance form People if such moves are seen as inimical to them.

Microplace - Online microfinance

An Ebay owned company Microplace has launched a site through which online folks can invest any sum over US$100, earn some interest, and hope thew money invested goes to help poor people around the world in the form of microfinance. [Source]

This venture is different from, in that Kiva provides a direct people-to-people microfinance exchange, and you cannot earn any interest.

Now is not the time to discuss which is better. More the merrier.

Monday, October 22, 2007

Grameen Bank goes to USA

Mohammad Yunus has set up Grameen America, based at Queens, New York.
The Grameen office, where the door is always open in the Bangladeshi tradition, is a modest room down a flight of stairs under a doctor's office. Every day, Newaz walks along Jackson Avenue, going into one storefront after another, asking shop owners if they know groups of women who might want to borrow money.
Yunus has already started his operation in Mumbai, India.

Thursday, September 13, 2007

Birla Sun Life to offer micro-insurance

Birla Sun Life has launched two life insurance policies for the rural Indians, named Bima Suraksha Super and Bima Dhan Sanchay.

Bima Suraksha Super is a pure risk policy. A sample calculation shows that for a 30 year old male, for a 10 year policy, for an insurance amount of Rs. 10,000 (US$ 250), annual premium will be Rs. 91.24. The premium can be paid monthly, quarterly, semi-annually or annually. If the premium is paid monthly, it will be roughly Rs. 8 (around 20 cents).

Micro-credit institutions can bundle this product along with their loans, and thereby also cover the defaults on their loan, in case the borrower dies before repayment of the loan.

There is no medical test required, and supposedly minimal paper work. Self attestation on the age is sufficient, and will not require any age proof.

For more details, go here.

The second policy is Bima Dhan Sanchay. Unlike the previous policy, this is an endowment like policy. Upon the maturity period, the policy will pay back the total premia paid (but nothing more). However, the premium is quite low, for a similar risk cover from, say, Life Insurance Corporation of India.

For a 30 year old male, for a 10 year policy, sum insured Rs. 10,000, the yearly premium is Rs. 228.63. Monthly premium would come to around Rs. 20 (50 cents). In the event that the insured person survives over the 10 year period, he will get back Rs. 2263 (the premium amount paid in total). Of course, one could get more returns by investing the money in a bank deposit! But then, this also provides risk cover.

For more details, go here.

On the surface, these two schemes offer a decent risk cover at the lowest possible premium. With more players entering the market, even better products may be offered.

Sex workers bank

The Hindustan Times reports that a co-operative bank has been set up in Kamathipura, the red-light area of Mumbai, by the sex-workers, called Sangini Mahila Seva Cooperative Society.

The co-operative is run by the sex-workers themselves, takes deposits from them, provides them loans, and also procures goods from the wholesale markets and sells them at lower prices.

This is an interesting idea, and I wish them all the success.

Monday, August 27, 2007

Aavishkaar Goodwell gets money

Moneycontrol reports that Aavishkaar Goodwell has received investments from IFC, FMO and Deutsche Bank.

Aavishkaar Goodwell is a for-profit, private equity fund that invests in Microfinance institutions in India.

Sunday, August 26, 2007

Micro credit for Scheduled Tribes and Castes

I learnt yesterday (reading The Hindu) that there is an entity called The National Scheduled Tribes Finance and Development Corporation (NSTFDC) set up specifically to aid in economic development of the Scheduled Tribes.

This entity is planning to "launch a new micro credit scheme to provide financial assistance to people belonging to Scheduled Tribes for undertaking self-employment ventures/activities."

Scheduled Tribes form a very small part of the population across the country (roughly 7%), with high concentration in Madhya Pradesh, Chattisgarh, Jharkhand, Orissa and Maharashtra. Tamil Nadu has tribes existing only in Nilgiris district in reasonable numbers.

It may be more useful if the counterpart for Scheduled Castes - National Scheduled Castes Finance and Development Corporation (NSFDC) embarks on an aggressive micro credit program to help Scheduled Castes come out of poverty.

As part of its operations, the entity claims it is "Providing Micro-Credit Finance to the target group through the SCAs [State Channelising Agencies]." The State Channelising Agency in Tamil Nadu will be TAHDCO - Tamil Nadu Adi Dravidar Housing & Development Corporation - which has multiple functions, and may not focus on micro credit aggressively.

Therefore, rather than just disbursing funds and acting as a grants agency, NSFDC should consider setting up a subsidiary MFI, a focused micro finance company which will provide micro credit only to Scheduled Castes across the country.

Future of 'phone ladies' of Bangladesh

In a detailed article, Richard Shaffer looks at the Grameen Telecom's Village Phones and where the project stands currently.

Grameen Bank is a micro-finance institution set up by Mohammad Yunus.
Grameen Bank (38%) and Telenor of Norway (62%) together own Grameenphone, a mobile phone service provider in Bangladesh. Grameen Telecom is a company owned by Grameen Bank.

Grameen Telecom provided women (dubbed 'phone ladies') in Bangladesh villages with a mobile phone handset and a Grameenphone connection, funded by micro loans from Grameen Bank. In countries like India and Bangladesh landline penetration is low, and non-existent in rural areas. Rented mobile phones provided a great service to people and good income for the phone ladies.

But soon, the mobile revolution caught on and most of the villagers could afford to buy a handset and a connection for themselves. This has impacted the phone ladies. Richard Shaffer finds that though the program helped several people come out of poverty, it is not true anymore, certainly not true in Bangladesh.

Grameen Telecom is however not entirely abandoning the program, and is looking at setting up kiosks - Community Information Centers - which
for fees of 42 cents an hour, will offer such services as online browsing, agricultural and health-care information, digital photography, video telephony via Web cams, and electronic access to government reports and forms.
Whether these centers will be successful or not, one has to wait and see.

In India too, the roadside PCO - Public Call Office - set up by Sam Pitroda under Rajiv Gandhi government, brought telecommunication to everyone, until mobile revolution completely demolished them. Today, PCOs still exist, but they generate a very meagre income for the operators. Rapidly falling telecom rates coupled with low cost mobile handsets have spelt a doom for the PCOs. In India too, there are several attempts at setting up rural information kiosks - both government and private ventures. To this day, every implementation has been a business failure.

N-logue kiosks are floundering. The company is not profitable and it is unclear when and how they will become profitable.

Government of Tamil Nadu initiated the project called RASI (Rural Access to Services through Internet), another utter flop. Villagers were supposed to get Government services delivered through Internet kiosks, set up and operated by women, funded partly by government grant and rest via micro loans. Several women were forced to take loans, but the supposed revenues never came in.

Central Government sponsored ICT kiosk project, currently being implemented by ILFS has a long way to go, and it is unclear how this venture will also succeed and be self-sustaining.

Some of these ideas are noble, but the implementation at the ground level is sadly pathetic.

Thursday, August 23, 2007

A profile of Kotalipara Development Society

Business Standard profiles a West Bengal based micro finance entity Kotalipara Development Society (KDS) in this article. Hear the stories of Najima and Purnima.
Najima [a 25-year-old woman] took a loan of Rs 3,000 to buy a sewing machine from KDS. She had to deposit Rs 300 while taking the loan and had to pay Rs 75 per week till she repaid the entire sum.

“I have borrowed money four times from KDS to expand my business. The last time I borrowed Rs 15,000,” [Najima] said.


[Purnima, a 38-year-old woman] received only primary education and had to discontinue due to financial constraints.

“I make saris. But when I started off I had no money to buy fabrics or sewing machines. I borrowed Rs 5000 from KDS. I paid Rs 125 every week till I repaid the entire amount,” Purnima said.

Keya Sarkar: Hope and despair in micro-finance

Quotes from the article in Business Standard::
These last few months have been marked by deals in the microfinance industry never witnessed before. With $12.5m into Spandana (of which $10m came from JM Financial), $11.5m in SKS Microfinance (majority from Silicon Valley-based Sequoia Capital) and a whopping $27m in Share (of which $25 m came from Dubai based Legatum Capital), suddenly all MFI CEOs seem to be talking about raising capital and doing it quick lest they miss the bus.


Unitus India, which works with MFIs in what it calls a “partnership mode” (helping with grants, capacity building, etc) before investing in equity, has made three investments to date out of the 10 companies it has partnered. Unitus has put in two rounds of equity in SKS Finance (with which its association is over four years) and Bangalore-based Ujjivan Finance.


The disappointment over the last eighteen months, according to both Prasad and Farias, is that despite dealing with a cross-section of companies in the MF space they have not come across much of product innovation. “Attempts at product innovation have at best been half-hearted,” laments Prasad.

The other disappointment has to do with the policymakers. Despite a lot of discussion on the subject and mention of the sector in budget documents, on the ground not much had changed for MFIs or their clients.

Wednesday, August 22, 2007


The Hindu has a review of this book - Indian edition brought out by Penguin Books here. It is pertinent to quote the last paragraph from the review here:
The book, first published in 1998, has just been published here in India. This is nine years too late. Perhaps, if it had come sooner we would not be seeing the Micro-Finance Sector (Development and Regulation) Bill 2007 in its current shape. The Bill seems to be a travesty of the original intentions of the micro-finance movement and takes a top down approach to supplying credit to the poor. Yunus has clearly specified a bottom up approach to make the scheme work “as intended”. The Bill, in the name of increasing the supply of credit to the poor, could actually put the deposits of the poor at risk and open the way for unscrupulous “charities” to manipulate the thrift market for their own ends. What this will do to the existing thousands of crores of deposits that self-help groups have in the commercial banking sector is anyone’s guess. One hopes a better assessment of consequences is made and more caution exercised before gifting the sector to so called micro-finance institutions. Please read the book Mr.Chidambaram.

Friday, August 10, 2007

Business shouldn't be Govt. Business - Yunus

Nepali Times has an interview with Mohammad Yunus here. Here is Yunus on privatised, free market economy...
What relationship do you advise a government to have with the private sector?

First, the only thing any government can do is have the humility to accept that it cannot change people’s lives, and that it can only help people who are changing their own lives. But most governments simply mess up people’s lives, something they are good at. My experience is that business should not be the business of government. Business should be in the hands of the private sector, which produces jobs and services. I define private sector broadly to include both businesses that make profits and do good for society at large such as by building schools, hospitals and the like.
Also interesting is Yunus' views on government run micro-credit program.
In Nepal, government promoted microcredit programs through five regional grameen banks, all of which failed. Is microcredit an area in which a government can play an active role?

I explained to your finance ministers that running microcredit programs through the government would never work. Things get politicised. Loans are given to friends and supporters, who do not pay back. Political supporters are hired as bank officers, and they do no work. I have seen this happen in every country where the government runs micro credit programs. So, the first principle is: no matter what sort of micro credit program you run, do it away from the government. Choosing partners such as NGOs or socially-oriented private businesses comes next. I define a socially-oriented private business as a business that can get its investments back from a socially useful venture but earns no dividend.

Wednesday, May 23, 2007

Out of Focus: KAS Foundation

Business Standard focuses on a non so well known Microfinance institution - Kathir Foundation, KAS Foundation and Jaggannatha Financial Services - all started by Kathiresan, an ex-employee of ICICI Bank. This microfinance institution operates in Tamil Nadu, Pondicherry, Andhra Pradesh, Orissa, Chattisgarh, Maharashtra and West Bengal.

The range of services offered by them is interesting, all through ICICI or subsidiaries. In addition to opening savings bank accounts they have managed to offer medical insurance and micro-mutual fund SIP (systematic investment plan). A monthly investment of just Rs. 50 on mutual fund seems a cool idea. Some of the equity funds are offering excellent returns these days in India. The poor have rarely had access to the capital markets.

Interview with Jayshree Vyas of SEWA

Soumitra Trivedi interviews Jayashree Vyas, Managing Director of SEWA Bank in Business Standard.

SEWA, unlike other micro finance institutions, is a registered bank, regulated by RBI. This is both good and bad - SEWA can tap low cost funds, NBFCs cannot. But the banking norms have to be followed which are stricter.

Vyas feels, total poverty removal is not possible without government intervention and microfinance alone can not make that happen.

Sunday, May 20, 2007

Unitus announces three partnerships in India

Details in the press release here.

The partners are:
Vardan Trust

Solar power through micro credit

Reuters reports that an NGO run by Yunus, Grameen Shakti, is offering solar lighting equipment in rural Bangladesh, with financing through micro credit.

The solar lighting system costs between 25,000 taka ($360) to 65,000 taka ($940). About 70% of Bangladesh households are without electricity.

A similar project, fronted however by United Nations Environment Programme (UNEP), is happening in India. Here, UNEP provides grants that reduces the cost of financing of the equipment to the end users, in cooperation with two leading Indian public sector banks - Canara Bank and Syndicate Bank. More details on the project are available here.

Would Grameen be the target of political parties?

Asif discusses what the political parties - Awami League and BNP - target Yunus' Grmaeen Bank in this blog entry: Yunus’ Foray and the Image of Microcredit.

Thursday, May 10, 2007

Citibank to buy SKS loans

SKS Microfinance is one of the fastest growing microfinance institution in India, which is getting decent funding from venture capitalists. It has just closed a deal with Citibank, where Citibank will buy the SKS portfolio of Rs. 180 crores (roughly USD 44 million), while SKS will service the microloans. Grameen Foundation will provide limited guarantees.


Monday, May 07, 2007

Indian Microfinance Bill not adequate

Indian Minister of State for Commerce Jairam Ramesh has said that the proposed draft of the Microfinance bill is not upto the mark.

In one of my earlier blogs, I had mentioned that there was some opposition to the current version of the bill.

I have not been able to find an online version of the draft bill so far.

Mint, the new Indian Business Daily, has an article that cautions about the clause that allows anyone who can collect upto Rs. 500,000 in total to be a Microfinance Bank.

Yunus abandons political plans

Nobel Peace Prize winner Muhammad Yunus had started a political party couple of months back, called Nagorik Shakti. As the general election was getting closer in Bangladesh, the bickering between the two main political parties - BNP and Awami League - resulted in a political stalemate. Upset with this situation Yunus felt he could convert the groundswell of support he had into a political movement.

However he has now decided to call it off, after finding that he is not getting sufficient support from those who initially welcomed his move.

I wouldn't take the simplest of the explanations, as offered by Yunus. His plans to scrap the party may have something to do with the current military backed interim administration. More truth may come out in the days to come.

Friday, May 04, 2007

Unitus $5 viral web campaign

Unitus is running a web campaign, asking people to donate $5, to help them fund their micro-credit partners around the World. In a blog entry, they explain what $5 can do.
Currently, it takes Unitus less than $5 to help our microfinance partners build the capacity to serve one new micro-entrepreneur with life-changing financial services. (We get this number by dividing our total budget spent per month by the total number of new clients added by our microfinance partners each month.)
So your $5 can help Unitus add one new micro-entrepreneur. To donate, go to Unitus.

Friday, April 27, 2007

Tata Motors to provide Microfinance in Singur

From Financial Express

Tata Motors have acquired land in Singur in West Bengal, India to set up an automobile factory. The land acquisition was politicised and handled poorly by the state Government as well. Tata now have to demonstrate that their intentions are honourable and they will help the local residents move up in their lives.

Tata Motors will be setting up an Industrial Training Institute (ITI), to train the local residents on basic mechanical and electrical techniques. They are also likely to provide microfinance through local Self-Help Groups, "to those driving van-rickshaws (cycle-carts) and upgrade them to motorised vehicles and earn higher income from providing transport services."

Friday, April 06, 2007

Microcredit is a debt trap

Abul Barkat of the University of Dhaka says Grameen's microcredit is a debt trap and 80% of the beneficiaries are caught in it. That is, each of the women is borrowing frome one microlender to pay another and keep getting into an endless trap.
The key reason for the failure, he says, are the high interest rates — 25 to 65 per cent — and high costs of operation of the Grameen Bank model.

Time Magazine article on Microcredit

General article with the usual quotes on Microcredit, what it can do and where critics say it has failed. The example with which the story starts and ends is more interesting.
When Melecio Penafiel wanted to expand his tailoring shop in Guayaquil, Ecuador, last May, he didn't go to the bank or ask his relatives for help. His seed money arrived via the Internet. Using the website a Bay Area software engineer named Nathan Folkert lent Penafiel the $500 he needed to buy two new sewing machines, fabrics and thread for higher-quality suits. Folkert has never met Penafiel but says making the loan "felt like I was giving him a shot at the American Dream."


Penafiel was able to pay back his loan five months later, and had a little left over to cover his six kids' school fees. It isn't quite the American Dream, but it's a start.

Microfinance 2.0

I generally dislike 'Web 2.0' or 'Microfinance 2.0' kind of titles.

An interesting account from Alex Counts of Grameen Foundation. The title talks of "New Tools, New Goals and New Ways to Lift People out of Poverty", and the article says
In fact, Counts, whose non-profit Washington, D.C.-based group supports the Grameen Bank, outlined what could be called Microfinance 2.0 -- a new generation of more accurate tools that can be used to overhaul the loan making system and apply the infrastructure of microfinance to other social woes.
but unfortunately, there is nothing in the report about the "tools" or "goals" or "ways".

Sunday, April 01, 2007

How the poor manage to live...

Slate looks at how the global poor - where entire families spend either $2 or $1 a day - manage to live.

You can get an interesting research report The Economic Lives of the Poor (PDF), which is worth reading, if you want to look at the spending pattern of poor across the world.

Will microfinance wipe out poverty?

Newsweek takes a look at what the critics have said about Microfinance. To quote:
The row over microfinance arises from colliding views on everything from the power of money to human nature. If there is any consensus, it's about the paucity of reliable data. No one knows how many microlenders exist or how solid they are, much less how their millions—or is it hundreds of millions—of clients fare. Some forecasts have projected a future market as (absurdly) large as 3 billion customers, or nearly half the current world population. All sides are arguing in the dark.

Saturday, March 31, 2007

ABN Amro's microcredit exposure in India

ABN Amro, in a press release, says it has become profitable in its microfinance portfolio in India.
In India we apply a different model. Here we provide specialised financial intermediaries with credit who then lend the money to economically disadvantaged borrowers. This approach combines the bank's financial strength with the vast rural network of the intermediaries. In 2006 our Indian microfinance portfolio had grown to EUR 26.2 million through partnerships with 26 intermediaries across six states. Our Indian microfinance business achieved break-even within one year of start-up and continues to operate profitably.

Sequoia Invests $11.5 Million in SKS Microfinance

SKS Microfinance, a leading Microfinance entity in India has received significant venture funding (US$11.5 million - INR 50.6 crores) from Sequoia Capital.

For details of the story, go to CNBC, or company's PR.

Friday, March 30, 2007

The WaterCredit Initiative

Watercredit Initiative is a microfinance organization, that is applying micro-finance principle to helping poor people harness water and build sanitation.

The project is operating in Bangladesh and Tamil Nadu in India.

In Tamil Nadu, the local governments (Panchayat) do not provide clean drinking water to every citizen. (The experience is the same across other Indian states as well.) Even in cities like Chennai, not all citizens have access to drinking water, supplied to their homes. Some of us in 'posh' localities get piped water supply from Metro Water which we collect in sumps and pump to overhead tanks. The water charges and tax are very minimal. For example, in an apartment complex consisting of nine apartments, I pay a little over Rs. 600 for six months. The other residents pay something similar.

Thus, for about Rs. 100 a month (about US$ 2), I get unlimited supply of water.

The water may not qualify as pure, but can be treated with water filters (aqua guard and such), boiled and consumed.

However, poor people within Chennai have Metro Water tankers coming and delivering water. Each family can at best fill a few pots and barrels. Most poor people may not have enough space in their small dwelling places to store the water.

In the suburbs, where Metro Water does not operate, the local municipalities and panchayats to do not provide quality water in decent quantity. In Trichy/Srirangam corporation, where my parents live, again, water is supplied to most homes through pipes, and in reasonable quality and quantity. This, however, is not the case in most of the rural areas.

While it is the job of the local elected Governments to supply water, since they derelict their duty, people have to turn to other means.

Watercredit could be a solution.

I also think it is sensible for the State Government to increase the water fees/tax substantially to 'richer' parts of the state where they are providing piped water supply and use the money to lay pipes to other residents across the state to offer enough water to the people.

Thursday, March 29, 2007

Interest rate charged by Grameen Bank

With Muhammad Yunus entering Bangladesh politics, the politicians have found an easy way of trashing him by talking of the 'exorbitant' interest rate charged by Grameen Bank.

Stung by criticism, the Deputy Managing Director of Grameen Bank Dipal Chandra Barua writes in "The New Nation", the different loans and interest rates charged by his bank.
  • Basic Loan: Income generating loan of Tk. 1,000 for borrowers with a year-end interest of Tk. 100 equivalent to 10% at flat rate. Due to the loan being paid in weekly installments the interest rate stands at 20% on declining balance.
  • Housing Loan: Interest rate on housing loans is 8% (declining basis) with a payback period of five years. This interest rate is halved, when calculated at flat rate. Around seven hundred thousand homes have been built using this loan scheme.
  • Higher Education Loan: Interest is 0% i.e. no interest is charged while students are studying. A 5% is charged as service charge after graduation. This scheme allows children of our members to obtain higher education in various fields like healthcare, engineering enabling them to finish their honours and masters degrees.
  • Struggling Member Programme: This special programme is designated for beggars, charging 0% interest. As of December 2006, about 90,000 beggars have received loans under this programme.
  • Village Centre Construction Loan: Members take this loan for constructing local village centers. No interest is charged i.e., interest rate is zero.
He also states that "Government financed agencies like PKSF and their affiliated NGOs provide loans at a flat interest rate of 12.50% that becomes 25% when calculated on a declining basis."

See also the article in The Daily Star Yunus, politics and interest rates by Safi Khan.

Saturday, March 24, 2007

Indian legislation to regulate microfinance sector

On February 22, 2007, the Union Cabinet (India) gave its approval for enactment of a Legislation on the Micro Financial Sector (Development and Regulation) subject to amendments of drafting or of a consequential nature, if any, in consultation with the Legislative Department. According to the press release issued by the Ministry of Finance,
The Legislation will provide a legal framework for the entities engaged in micro finance and facilitate an environment for development of micro finance services in the country with greater transparency, effective management and better governance. This will facilitate the flow of micro finance services to the un-banked population of the country.
Frontline's March 10-23, 2007 issue discusses the proposed bill and the opposition mounting against the draft being discussed.

Citibank's grant for microfinance

Citigroup said it will give $570,000 to the Foundation for Development Cooperation and the Banking With the Poor Network to expand microcredit services in 10 countries, including India, Indonesia, the Philippines, Sri Lanka and Vietnam.

International Herald Tribune

SEWA vs Grameen

One can hardly imagine a more paternalistic act than acknowledging the need for women's economic equality by making an award to a U.S.-trained, conservative male economist. This marginalizes the achievements of the world's first female-led microcredit organization, the Self-Employed Women's Association of India, known as SEWA.
Susan F. Feiner (director of women's studies and professor of economics at the University of Southern Maine) and Drucilla Barker (professor of economics and women's studies at Hollins University in Roanoke, Varginia) discuss Nobel Prize to Muhammad Yunus and whether micro-finance can completely take women out of poverty. They conclude:
Does the award of the Nobel Peace Prize to the Grameen Bank add credence to the neo-liberal myth of individuals escaping poverty merely through their own hard work? Yes. Do these programs help some women pull themselves up by their bootstraps? Yes. Will micro-enterprises do much to end widespread poverty among the world's poorest women? Not a chance.

Thursday, March 22, 2007

Italian President wants Grameen like operation in his country

Italy's President Giogio Napolitano, wants to replicate Grameen's micro-credit operation in his country, at least in the southern Italy.

The Daily Star News

Pakistan wants Yunus to set up micro-credit operation

Pakistan President Pervez Musharaff has requested Muhammad Yunus to set up a Grameen type operation in Pakistan, and also provide technical advice for poverty alleviation schemes in Pakistan.

The Daily Star News

On his part, Yunus asked Pakistan to do the following:
Prof Yunus suggested the Pakistan prime minister to set up social business enterprise like Gameen-Danone Yogurt company to improve nutrition status of the poor.

He also urged the Pakistani leaders to establish a social stock market in which the social enterprises could be enlisted for trading their shares.

Saturday, February 24, 2007

Academics criticise Yunus

In the aftermath of Mohammad Yunus deciding to start a political party in Bangladesh, several academics and ex-staff of Grameen Bank have crticised some of his views in a meeting organized for launching a book "Grameen Bank and Dr Yunus: In the View of a Witness" written by former Grameen Bank official Sardar Amin.

The criticisms range from
  1. Yunus entering politics shows microcredit alone cannot solve poor people's problems
  2. Yunus can only help capitalists, not poor people
  3. Out and out privatization is not good for Bangladesh
  4. GrameenPhone is only notionally owned by the poor people but in reality it is owend by a Norwegian company
  5. Yunus may misuse his clout with the Grameen Bank to his own advantage in politics

Thursday, February 22, 2007

Caritas India to start micro-credit program

Caritas India, an NGO of Catholic churches of India has indicated that it will start a comprehensive program to save farmers from committing suicide in India.
"An integrated approach to the development of the farmers' region include a sustainable natural resource management, effective micro-credit groups and empowerment of farmers in fighting high suicide rates among marginalized farmers," Fr Varghese Mattamana, Executive Director, Caritas India, said.


"We are planning large-scale intervention against farmers' suicides across the country based on our successful implementation of program in Wynad district, Kerala, where we were able to contain farmers' suicides," Fr Mattamana claimed.

He said more than 2000 poor and marginalized farmers in Wynad who had joined the self-help group development plan of Caritas India did not commit suicide. There are over 250,000 groups established among marginalized communities across India, he said.

Yunus starts a political party

Nobel winner Mohammad Yunus is starting a political party in Bangladesh, named "Nagorik Shakti" (meaning "Citizen Power").

The political system is quite messy in Bangladesh. The two main parties BNP and Awami League are feudal, corrupt and violent in nature. Yunus, I hope, does something better.

However, I am also very skeptical about well meaning individuals jumping into politics in the hope that people would support them simply because they are 'well meaning celebrities'. This happens a lot in India. It takes a lot of organizational work to build a grassroots political party and win elections consistently. If Yunus doesn't build a strong political organization (hopefully in an ethical way), he will lose out to experienced politicians like Sheikh Hasina and Begum Khaleda Zia.

News from Daily Star

Monday, February 05, 2007

Vinod Khosla on his involvement in microlending

Vinod Khosla interviewed in PBS, talks about four of the institutions he has invested in that are involved in microlending. The page contains a video interview. Khosla says he is happy about his friend Yunus getting Nobel, and that microcredit institutions are quite self sufficient.

Three of the entities he has invested in are in India and one in Africa, says Khosla. I know only of SKS Microfinance in which he has invested.

Create legislation for setting up micro-credit banks - Yunus

Yunus has asked India to set up legislation allowing creation of micro-credit banks.

As of now, micro-credit institutions come under NBFC (Non-banking finance corporations) and as such are severely restricted in their operations including their ability to collect deposits and access low-cost funds. Reported in Financial Express:
Although India is booming, it cannot neglect those who are left without credit availability. He made an obvious reference to the Tata-Corus deal and said, "One side of India is looking up and the other not catching up. Grameen Bank, which lent to 7 million poorest of the poor in Bangladesh, has set the target of reaching out to every household by 2010. On these lines, India should try to reach out to the poorest of the poor," he opined. Yunus praised the self-help group model for providing credit linkage but asserted that it does not cover all poor but other segments also.
SHG model in India is quite restricted and it is important for India to come up with legislation for micro-credit banks. However, I have a feeling that there is no lobby pushing for this and as such no one is going to look at this space for a long time to come.

Also reported in Economic Times is that RBI's CS Murthy that RBI is not for creating banking regulations for micro credit institutions since the regulations are stringent and micro credit institutions may not be able to handle that. This argument sounds dodgy. One can always come up with reasonably relaxed norms specifically for micro credit banks, if one wants it.

Yunus has also suggested that micro credit institutions be regulated with an upper limit for the rate of interest on lending. However the formula he is proposing may have to be looked at carefully. A regulator like TRAI who constantly looks at the prevailing situation and modifies the limit on rate of interest could be useful rather than strict legislation for the upper limit.

Wednesday, January 31, 2007

Danone, Grameen and Yogurt in Bangladesh

A lot is being made out of the Grameen, Danone joint venture in Bangladesh which will produce fortified yogurt for the malnourished children in Bangladesh.

A detailed article from Fortune appears in Saving the world with a cup of yogurt

The modus operandi is as follows:

Danone will invest $500,000 in the venture. Grameen will supply the rest. Three years down the line, Danone will take back the initial investment and keep ploughing the rest of the profits back into the venture. (I think Telenor also said the same!)

Grameen borrowers will supply milk to the venture. Danone will make yogurt and sell them in cups priced $0.07 (approximately Rs. 3, or Taka 5). Grameen members will buy these cups and will sell them across their villages. The plant manufacturing yogurt will also employ women.

What is surprising is that such a venture actually requires french technology and investment. In India, plenty of local milk cooperatives make milk, yogurt and derivative products. The largest player in India is Gujarat Co-operative Milk Marketing Federation, which owns the brand name Amul. The multinationals Nestle or Danone or nowhere in the game. Yunus could have easily obtained technology at near zero cost or free from Amul, and could have run the plant with his own money.

The story of Danone's involvement is over-romanticised in the Fortune article. The $500,000 investment is probably just a fraction of what the CEO of Danone spends on his travel around the world.

We hope the malnourished children of Bangladesh get their nutrition quickly.

Give microcredit to 160 million in India - Yunus

Muhammad Yunus was in India in connection with the Satyagraha centenary celebrations. (For those who do not know, Mohandas Gandhi launched the Satyagraha movement - a novel way of non-violent mass protest - in South Africa to get more rights for Indian immigrants in White-ruled South Africa, 100 years back. Later on, he came back to India to lead the country to freedom from the British rule. The function has been organized by India's Congress Party, the leading partner in the ruling coalition.)

Yunus addressed the gathering and has also been talking to press otherwise. He has talked about financial apartheid - of financial institutions not providing credit to poor. He says 16 million people in Bangladesh have been provided with micro-credit. If the same percentage is extended in India, then at least 160 million people should be given micro-credit in India.

Financial Express Article

Tuesday, January 23, 2007

Microfinance and the broader agenda

Two part article in The Financial Express on Microfinance by Amrit Patel and Gopal Kalkoti (who are 'professionals with decades of field experience in microfinance planning').

1. Microfinance and the broader agenda
2. Microfinance: outreach and self-sufficiency

Yunus upsets Bangladeshi politicians

This had to happen.

Muhammad Yunus has now succeeded in uniting the two warring political parties in Bangladesh - for one cause. To criticise Yunus.

Yunus, with his global fame after the Nobel Peace Prize, told AFP that politicians in Bangladesh as a class are dishonest and they are in politics only for money. (Which, I think is entirely true, not only in Bangladesh, but also in India and Pakistan and most other countries.) However, certain truths should not be told publicly, and bluntly.

BNP and Awami League - the two main political parties, aggressively fighting each other (I mean, not just ideologically but also with knives and stones!) to win the next general elections, have both criticised Yunus for being unfair and "jingoistic".

For more details: One | Two | Three

Yunus was recently offered the post of the caretaker chief of the country (a tradition in Bangladesh when one Government leaves and the elections have to be held for choosing the next Government), but declined.

The work Yunus is doing in Bangladesh still requires some support from those in power. If not anything, the Government has the ability to harm the good work microcredit can do, by simply bringing in more and needless regulation.

Yunus should be wiser in deciding what to say aloud and what not.

A defamation suit has also been filed against Yunus. Gulf News says, "Advocate Nazrul Islam Chunnu, joint general secretary of Jatiya Samajtantrik Dal (JSD) in Mymensingh in northern Bangladesh, filed a defamation suit against Younus, the New Age newspaper reported."

Bush is a terrible leader - Yunus

Nobel laureate Muhammad Yunus has told a newspaper that George Bush, the President of USA is a terrible leader who "has led the world on a dangerous path and it will take a lot of time to take it back on the right one."

Reported in The Australian.

Microfranchising: the next big thing

Microfranchise is the next great idea after microfinance, writes Swaminathan Anklesaria Aiyar, in The Economic Times.

There is only one serious example quoted - GrameenPhones of Bangladesh. Aiyar cleverly bats for Telenor. ("Without the financial and technical clout of Telenor, GrameenPhones could not have gone far.")

The other examples - Scojo (Spectacles) and HP (Marriage photos and video) have a fair way to go. ITC is not in the same franchise model; it outsources Agarbathi production and few other similar activities.

Aiyar wants Anil Ambani of Reliance Infocomm to unleash a revolution like what Yunus did in Bangladesh through the 'Phone Women', rather than looking at taking over Hutch.

Microfranchise ideas look a bit farfetched at this stage.