The Time Magazine honours Muhammad Yunus as People Who Mattered: Muhammad Yunus, Banker to the Poor, while Countercurrents.org writer Omar Tarek Chowdhury finds Yunus in secret collusion with all the ugly capitalists of the world and is all set to sell Bangladesh's poor cheaply to the global finance capital. Take your pick.
Vandana Shiva debates with Susan Davies of Grameen Foundation in Democracy Now! (also available in video) about microcredit and obliquely refers to Yunus at one time wanting to work out a joint venture with Monsanto. Shiva doesn't seem to like microcredit - it is so capitalistic, and worse that it appears to help the poor. That would rob the entire platform of the left.
While at it, you can also look at (or read) Vandana Shiva's take on farmer's suicides in India, Indo-US nuclear deal, foreign investment in retail trading in India and several other of her pet subjects.
At the other end, Jon Entine writes in American Enterprise Institute on Public Policy Research that microfinance at best can take the daily income of people from $2 to $3, whereas massive investment in building factories that can provide thousands of jobs is the way to go - because that is what happened in developed countries once upon a time.
Tuesday, December 19, 2006
Monday, December 11, 2006
Yunus on BBC HardTalk
I couldn't find the video or transcript of this in BBC HardTalk site at this stage. This was telecast in India on Sunday (10th Dec 2006).
Stephen Sackur queried Yunus on some uncomfortable questions. One was about Yunus joining politics. Yunus was categorical in stating that he will not be joining the politics, that he understands the problems faced by his country in the political space but he doesn't know the answers. He said he is better at his current job but could be a total failure if he goes to politics. It was however clear that Yunus felt uncomfortable in dealing with this question.
Yunus found himself weak again dealing with questions on whether credit should be considered a 'human right'. Sackur quoted another economist and former microcredit proponent who now believes that education and training are far more important that microcredit. Yunus did not deal with this question as good as he should have.
I missed the early part of this interview, so need to wait until the transcript comes up in the BBC site.
Stephen Sackur queried Yunus on some uncomfortable questions. One was about Yunus joining politics. Yunus was categorical in stating that he will not be joining the politics, that he understands the problems faced by his country in the political space but he doesn't know the answers. He said he is better at his current job but could be a total failure if he goes to politics. It was however clear that Yunus felt uncomfortable in dealing with this question.
Yunus found himself weak again dealing with questions on whether credit should be considered a 'human right'. Sackur quoted another economist and former microcredit proponent who now believes that education and training are far more important that microcredit. Yunus did not deal with this question as good as he should have.
I missed the early part of this interview, so need to wait until the transcript comes up in the BBC site.
Nobel Acceptance Speech by Yunus
Muhammad Yunus spoke in detail about how to tackle poverty, setting up social businesses, a mild critique of capitalism and globalization during his acceptance speech after receiving the Nobel Peace Prize yesterday.
The complete text of the speech is here.
There is also a video (somewhat funny because half the time the picture is turned upside down, though you would only want to listen to the audio!) at the Nobel site.
Yunus ensured that he mentioned about Telenor of Norway and his intention to convert GrameenPhones to a company owned by the poor people in Bangladesh.
The complete text of the speech is here.
There is also a video (somewhat funny because half the time the picture is turned upside down, though you would only want to listen to the audio!) at the Nobel site.
Yunus ensured that he mentioned about Telenor of Norway and his intention to convert GrameenPhones to a company owned by the poor people in Bangladesh.
Saturday, December 09, 2006
Chirag Terminals of N-logue
N-logue is a rural Internet service provider in India which has been struggling for a long time in establishing a working business model.
N-logue, along with designated Local Service Providers (LSPs) sets up Internet nodes connected by leased lines and fibre. The LSPs provide connectivity to nearby villages through WiLL towers and receivers. In each village there will be a kiosk operator (KO) who has a single computer, a printer and a WiLL connectivity kit. The kiosks are named Chiraag.
N-logue expected local villagers to throng the Chiraag and pay money to send/receive emails, video chat and other services. However the revenue generated was not sufficient for the KOs and LSPs. Several people just closed down their businesses.
However, recently, there has been substantial rethink. The approach now is to convert the KO as outlet for a whole bunch of offline services resulting in footfalls, and possibly some Internet usage as a result of this.
In addition to offline services to the villagers, there is an attempt at creating revenue generating opportunities for the KOs.
One such is data entry/BPO job. I visited couple of such locations yesterday. Standard forms -> data input work was going on in one location. Another project happening was ITC's Mangaldeep Agarbathis. Using an information system organized by ILFS, ITC sends out the raw material required for making the Agarbathis and picks up the finished products.
Recharging of prepaid mobile phones is another interesting activity that is happening at the KOs. However the margins earned in the process is very limited (max of 3.5% of the recharge value).
If it can be demonstrated that rural kiosks can generate profits (after all costs) of about Rs. 5,000+ per month, there will be a resurgence in N-logue's operations. More prospective rural entreprenuers will join in. The investment required will be around Rs. 30,000-40,000 which can be funded partly by Government grants and rest by microcredit with monthly installments.
Internet access alone is not bringing money to the kiosk operator.
N-logue, along with designated Local Service Providers (LSPs) sets up Internet nodes connected by leased lines and fibre. The LSPs provide connectivity to nearby villages through WiLL towers and receivers. In each village there will be a kiosk operator (KO) who has a single computer, a printer and a WiLL connectivity kit. The kiosks are named Chiraag.
N-logue expected local villagers to throng the Chiraag and pay money to send/receive emails, video chat and other services. However the revenue generated was not sufficient for the KOs and LSPs. Several people just closed down their businesses.
However, recently, there has been substantial rethink. The approach now is to convert the KO as outlet for a whole bunch of offline services resulting in footfalls, and possibly some Internet usage as a result of this.
In addition to offline services to the villagers, there is an attempt at creating revenue generating opportunities for the KOs.
One such is data entry/BPO job. I visited couple of such locations yesterday. Standard forms -> data input work was going on in one location. Another project happening was ITC's Mangaldeep Agarbathis. Using an information system organized by ILFS, ITC sends out the raw material required for making the Agarbathis and picks up the finished products.
Recharging of prepaid mobile phones is another interesting activity that is happening at the KOs. However the margins earned in the process is very limited (max of 3.5% of the recharge value).
If it can be demonstrated that rural kiosks can generate profits (after all costs) of about Rs. 5,000+ per month, there will be a resurgence in N-logue's operations. More prospective rural entreprenuers will join in. The investment required will be around Rs. 30,000-40,000 which can be funded partly by Government grants and rest by microcredit with monthly installments.
Internet access alone is not bringing money to the kiosk operator.
Grameen Foundation launches IT system for microcredit providers
Grameen Foundation, the pioneering organisation providing micro-credit facilities in developing countries, has launched Mifos, a new initiative designed to "address the significant technology challenges facing microfinance practitioners worldwide by revolutionising the way they access and use technology to run their operations."
According to Grameen, "With Mifos, a single technology 'backbone' that all microfinance institutions can access and adapt is now available. Its innovative open source model allows microfinance institutions to engage local IT specialists to customise Mifos and to provide ongoing support at local, affordable rates rather than being dependent on one vendor that may sit on the other side of the world." Beta-testing is already underway in India and Tunisia.
According to Grameen, "With Mifos, a single technology 'backbone' that all microfinance institutions can access and adapt is now available. Its innovative open source model allows microfinance institutions to engage local IT specialists to customise Mifos and to provide ongoing support at local, affordable rates rather than being dependent on one vendor that may sit on the other side of the world." Beta-testing is already underway in India and Tunisia.
Thursday, December 07, 2006
Telenor says no quarrel with Yunus
Telenor of Norway and Grameen Bank of Bangladesh are joint venture partners in GrameenPhone, the dominant mobile phone company in Bangladesh. Telenor owns 62% and Grameen 38% in GrameenPhone.
CNNMoney.com | Reuter News
Yunus, Nobel Laureate and founder of Grameen Bank has apparently claimed that Telenor had agreed to transfer majority shares in GrameenPhone to Grameen Bank "within six years". But Telenor claims no such agreement ever took place.
Yunus has also been quoted by Fortune as saying "they're [Telenor] oriented towards profit maximisation. We're oriented towards social objectives."
Telenor has retorted by saying that "this undertaking [GrameenPhone], which was set up as a business project from day one, has probably helped more people than all other development aid programmes together."
CNNMoney.com | Reuter News
Yunus, Nobel Laureate and founder of Grameen Bank has apparently claimed that Telenor had agreed to transfer majority shares in GrameenPhone to Grameen Bank "within six years". But Telenor claims no such agreement ever took place.
Yunus has also been quoted by Fortune as saying "they're [Telenor] oriented towards profit maximisation. We're oriented towards social objectives."
Telenor has retorted by saying that "this undertaking [GrameenPhone], which was set up as a business project from day one, has probably helped more people than all other development aid programmes together."
Thursday, November 23, 2006
Jobs, not microcredit, is the solution
Aneel Karnani, Professor at Ross School of Business, University of Michigan writes in today's Business Standard that rather than hyping microcredit, India should focus on job creation through "labour-intensive, low-skill sectors such as light manufacturing, garments and tourism." Some excerpts from his article:
It is understandable that a lot of people are upset about the extraordinary hype surrounding microcredit. I would agree with Karnani's statement that "The United Nations’ declaration that microentrepreneurs use loans to grow thriving businesses leading to flourishing economies is hype" at the present stage.
It is also regrettable that some Governments now look at abdicating their responsibility in job creation and poverty alleviation by simply encouraging nationalised banks or private bankers to offer microcredits and hoping that somehow microcredits will solve the problem of poverty and grow the economy.
Not all microcredit banks have succeeded yet. It is however an experiment worth continuing, even if it has only partial results, as long as no one becomes worse off than before because of taking microcredit.
Karnani argues that rather than offering microcredit of $200 to 500 people, offer larger loans ($100,000) to an entrepreneur who can create 500 jobs. In a country like India, one does not have to look at "either/or". Those who are capable of setting up $100,000 enterprises continue to do so. But such enterprises cannot be set up in rural areas, because of lack of transportation, quality power and other facilities. The microcredit and SHGs operate predominantly in rural and semi-urban areas. So these two models are mutually exclusive.
In rural India, most people are employed in agriculture as low daily wage earners. They all have jobs but very uncertain jobs paying very little. The Indian Government has just introduced a National Rural Employment Guarantee Act (NREGA), which assures a certain days of manual labour (of mostly unproductive and useless work, in my opinion), for which the workers will be paid minimum wages (of about Rs. 75-100 a day, I think). This money could simply have been given to the rural poor as dole. This will still leave them in poverty and the government has no idea of creating large scale jobs anyway.
I can't see very many entrepreneurs rushing to the rural areas to start enterprises that can give jobs to 500 people - or even 100 people - since the opportunities available in urban centres are more.
In this scenario microcredit in rural areas can at least help in one person micro-enterprises which can help in poverty alleviation. There are plenty of micro-enterprises possible in rural India, just like in rural Bangladesh. However, under extreme stress, a lot of micro-debtors use the money they get for consumption rather than investing that in their enterprise. This is, as Karnani says, a major problem. But this problem cannot be solved by microcredit institutions on their own. While the government works to ensure that there is at least enough money given to the poor people to find their food, the microcredit can then help in lifting them from their poverty.
In Bangladesh, the government is incapable of feeding the poor directly. But in India, if the government has the will, it can certainly provide the poor with food. Microcredit can then take these people to the next level.
Micro-entrepreneurs need not necessary have to have huge skills. Nor is their productivity or profits affected by competition. There is still a huge market for handicrafts (both utilitarian and decorative products), hand woven fancy fabrics, embroidery works and other traditional products. Each micro-entrepreneur learns these skills quickly and easily. Nor are they working towards wiping out the competition. You can see tens of women in most such villages engaged in much the same work (of say weaving a bamboo basket). They are merely looking to earn a little cash that can help in getting better nutrition for the family, the much coveted education for the children, some decent clothes, slightly better housing etc.
Microcredit doesn't need too much hype, but not this kind of onslaught either.
The Economist magazine concluded that while “heart-warming case studies abound, rigorous empirical analyses are rare”. A few studies have even found that micro-credit has a negative impact on poverty; poor households simply become poorer through the additional burden of debt.My comments:
...
The United Nations’ declaration that microentrepreneurs use loans to grow thriving businesses leading to flourishing economies is hype.
...
In an insightful survey on the economic lives of the poor, Abhijit Banerjee writes that the self-employed poor usually have no specialised skills and often practise multiple occupations. Many of these businesses operate at too small a scale. Banerjee points out that the median business operated by the poor has no paid staff; most of these businesses have very few assets as well. With low skills, little capital and no scale economies, these businesses operate in arenas with low entry barriers and too much competition; they have low productivity and lead to meagre earnings that cannot lift their owners out of poverty.
...
Even in developed countries with high levels of education and infrastructure, about 90 per cent of the labour force are employees rather than entrepreneurs.
...
Rather than lending $200 to 500 women so that each can buy a sowing machine and set up a microenterprise manufacturing garments, it is much better to lend $100,000 to an entrepreneur with managerial capabilities and business acumen and help her to set up a garment-manufacturing business employing 500 people.
It is understandable that a lot of people are upset about the extraordinary hype surrounding microcredit. I would agree with Karnani's statement that "The United Nations’ declaration that microentrepreneurs use loans to grow thriving businesses leading to flourishing economies is hype" at the present stage.
It is also regrettable that some Governments now look at abdicating their responsibility in job creation and poverty alleviation by simply encouraging nationalised banks or private bankers to offer microcredits and hoping that somehow microcredits will solve the problem of poverty and grow the economy.
Not all microcredit banks have succeeded yet. It is however an experiment worth continuing, even if it has only partial results, as long as no one becomes worse off than before because of taking microcredit.
Karnani argues that rather than offering microcredit of $200 to 500 people, offer larger loans ($100,000) to an entrepreneur who can create 500 jobs. In a country like India, one does not have to look at "either/or". Those who are capable of setting up $100,000 enterprises continue to do so. But such enterprises cannot be set up in rural areas, because of lack of transportation, quality power and other facilities. The microcredit and SHGs operate predominantly in rural and semi-urban areas. So these two models are mutually exclusive.
In rural India, most people are employed in agriculture as low daily wage earners. They all have jobs but very uncertain jobs paying very little. The Indian Government has just introduced a National Rural Employment Guarantee Act (NREGA), which assures a certain days of manual labour (of mostly unproductive and useless work, in my opinion), for which the workers will be paid minimum wages (of about Rs. 75-100 a day, I think). This money could simply have been given to the rural poor as dole. This will still leave them in poverty and the government has no idea of creating large scale jobs anyway.
I can't see very many entrepreneurs rushing to the rural areas to start enterprises that can give jobs to 500 people - or even 100 people - since the opportunities available in urban centres are more.
In this scenario microcredit in rural areas can at least help in one person micro-enterprises which can help in poverty alleviation. There are plenty of micro-enterprises possible in rural India, just like in rural Bangladesh. However, under extreme stress, a lot of micro-debtors use the money they get for consumption rather than investing that in their enterprise. This is, as Karnani says, a major problem. But this problem cannot be solved by microcredit institutions on their own. While the government works to ensure that there is at least enough money given to the poor people to find their food, the microcredit can then help in lifting them from their poverty.
In Bangladesh, the government is incapable of feeding the poor directly. But in India, if the government has the will, it can certainly provide the poor with food. Microcredit can then take these people to the next level.
Micro-entrepreneurs need not necessary have to have huge skills. Nor is their productivity or profits affected by competition. There is still a huge market for handicrafts (both utilitarian and decorative products), hand woven fancy fabrics, embroidery works and other traditional products. Each micro-entrepreneur learns these skills quickly and easily. Nor are they working towards wiping out the competition. You can see tens of women in most such villages engaged in much the same work (of say weaving a bamboo basket). They are merely looking to earn a little cash that can help in getting better nutrition for the family, the much coveted education for the children, some decent clothes, slightly better housing etc.
Microcredit doesn't need too much hype, but not this kind of onslaught either.
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