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.