Nobel Laureate and founder of the Grameen Bank, Professor Muhammad Yunus called for strengthening the micro-finance movement particularly in developing countries as one of the options to counter the fallout of the recent global financial crisis. He said that appropriate regulations should be put in place to facilitate the growth of this 'social business'.
While in New Delhi, India in March, 2009, for participating in the one-day national micro-finance conference organized by the apex body, Sa-Dhan, Professor Yunus said that micro-finance movement needed to take deeper roots in India. He said: "India should set up an appropriate regulatory authority for micro-finance institutions (MFIs). Regulations for banks and MFIs should be different as MFIs cater to the poor and should be regarded as a social business as distinguished from the purely commercial banking operation."
According to Professor Yunus, MFIs should be self-sustaining and be allowed to attract deposits and provide insurance and pension fund and as well as capacity building. He said that if MFIs are owned by borrowers there should be no payment of license fees. MFIs can source funds from banks. He was, however, not in favor of MFIs sourcing funds from outside the country. Funds should be preferably mobilized locally and distributed locally.
Defining micro-finance movement as 'social business', he said that in case of MFIs there should not be any scope for individual profit. All profits should be ploughed back to the MFIs for meeting the costs of transactions. The interest rates should be preferably lower. MFIs should ultimately be owned and operated by borrowers as is in the case in Bangladesh.
He defended that loans with interests charged by the Grameen Bank was not against the principles of Islam as the bank was owned and operated by borrowers. He said that loans were given to students in Bangladesh, most of who have opted to become entrepreneurs after completion of their study. Interest free loans amounting to 1000 taka were given to 100,000 beggars out of which 15,000 of them have stopped begging and set up small business.
Bangladesh has set up a regulatory authority for the MFIs and another legislation for approval of MFIs as social banking institutions is pending for approval. In India a Bill for regulation of MFIs has been pending in Parliament since 2007. The proposed legislation has been delayed on the issue of lowering of interest rates. The joint secretary in the banking division of the Union finance ministry, Amitabh Verma said, "The government is very keen on MFIs lowering their interest rates. The MFIs should carry out their operations without any subvention of interest rates by the Government."
Professor Yunus squarely held the global banking and financial institutions for the current global economic crisis as they have befooled the investors through mere paper transactions. "Banking regulations should clearly distinguish between gambling and business. There should be proper in-built mechanisms to prevent businesses running into trouble. There should be insurance schemes for protecting deposits. Governments should not bail out these institutions by doling out public money," he said.
Professor Yunus defended the MFIs and said that it was catering to the 'real economy' and livelihoods of millions of poor. The developing countries like India and Bangladesh have been largely insulated from the adverse impact of the current global financial crisis due to the presence of the 'real economy'. In Bangladesh 80% of the poor are covered by micro-finance and the remaining 20% is expected to be covered within the next two years according to Yunus. He said that India which has reached only 20% coverage needs to speed up.
Report by : Ashok B Sharma
http://www.financialexpress.com/news/micro-finance-can-bailout-eco-crisis-yunus/441334/0
|
US President Barak Obama announced a new partnership of the Multilateral Investment Fund (MIF) at the Inter-American Development Bank (IDB), the U.S. Overseas Private Investment Corporation (OPIC), and the Inter-American Investment Corporation (IIC) for the purpose of launching a new US$ 100 million Microfinance Growth Fund for the Western Hemisphere. The fund will provide stable medium and longer-term sources of finance to microfinance institutions and microfinance investment vehicles to help rebuild their capacity to lend during this difficult period and to increase the supply of finance for micro and small businesses as recovery takes hold.
The global credit crisis is having a significant and harmful impact on the availability of finance for micro and small businesses that provide a majority of the jobs in the Western Hemisphere. This is one of the factors jeopardizing recent hard won gains in reducing poverty. While the region has a wealth of microfinance institutions, these lenders are now confronting a serious shortage of private finance from both international and local sources. As the supply of lending is shrinking, the demand for smaller loans is expanding as job losses escalate and the newly unemployed are falling back on micro and small enterprises as their sole source of income. The new Microfinance Growth Fund will aim to address this shortfall in funding for the MFIs in the region.
http://www.whitehouse.gov/the_press_office/New-100-Million-Microfinance-Growth-Fund-for-the-Western-Hemisphere/ |
