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.

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.

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.

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.

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.