Muhammad Yunus in court and the attack on microcredit


by Rumbold
18th January, 2011 at 9:26 am    

Muhammad Yunus, the founder of microcredit bank Grameen (an act for which he won the Nobel prize), has appeared in a Bangladeshi court charged with defaming a local politician. The charges relate to a 2007 interview when Mr. Yunus said:

Politicians in Bangladesh only work for money. There is no ideology here.

Attacking microcredit/microfinance institutions is an increasingly populist pastime in South Asia. The success of microcredit has made it a target for politicians around election time, as there are large numbers of people owing money to such lenders, so politicians bash them and encourage lenders to default. Even amongst economists, microcredit has remained controversial, with high loans rates compared to those in developed countries. Yet the alternative is far worse. Microcredit gives many poor individuals access to credit at far lower rates then they traditionally could afford:

On average, borrowers also owe over four times as much to informal lenders, which charge far higher rates, than they do to MFIs.

Default rates on MFIs (Micro Finance Institutions), remain very low, suggesting the debt is manageable.


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Filed in: Bangladesh,Economics






24 Comments below   |  

Reactions: Twitter, blogs
  1. sunny hundal

    Blogged: : Muhammad Yunus in court and the attack on microcredit http://bit.ly/ekfBkU


  2. Paris Gourtsoyannis

    @cehoc14 RT @sunny_hundal: Blogged: : Muhammad Yunus in court and the attack on microcredit http://bit.ly/ekfBkU


  3. TeresaMary

    RT @sunny_hundal: Blogged: : Muhammad Yunus in court and the attack on microcredit http://bit.ly/ekfBkU


  4. Kyra Choucroun

    RT @sunny_hundal: Blogged: : Muhammad Yunus in court and the attack on microcredit http://bit.ly/ekfBkU #yunus #microfinance #socent


  5. kurdish blogger

    RT @sunny_hundal: Blogged: : Muhammad Yunus in court and the attack on microcredit http://bit.ly/ekfBkU


  6. karen rooks

    RT @sunny_hundal: Muhammad Yunus in court and the attack on microcredit http://bit.ly/ekfBkU


  7. Marthe Neda Gonthier

    RT @sunny_hundal: Blogged: : Muhammad Yunus in court and the attack on microcredit http://bit.ly/ekfBkU


  8. Jenny

    Also, another pov on microcredit:
    http://t.co/lwNjtYtZ




  1. jana — on 18th January, 2011 at 9:47 am  

    Just because default rates are low doesn’t necesarily mean the debt is manageable.

  2. Rumbold — on 18th January, 2011 at 2:49 pm  

    Jana:

    True, but based on the evidence that default rates are far higher for infromal loans, it suggests that, at the very least in comparison, MFI loans are far more mangeable.

    Given the dominant position that informal loans operate, as the Economist article says, we need more MFIs, not less.

  3. douglas clark — on 18th January, 2011 at 3:13 pm  

    Rumbold,

    I think there are issues around microfinancing, see here:

    http://tinyurl.com/4jprkbm

  4. earwicga — on 18th January, 2011 at 3:45 pm  

    Rumbold, isn’t it the case that microfinance loans are for specific purposes i.e. business purposes? It seems disengenious to be comparing them to other informal loans which are taken out for other purposes.

  5. Rashid — on 18th January, 2011 at 3:50 pm  

    There is a wider issue here. Bangladesh’s government has become increasingly authoritarian: from the military caretaker government between 2006-2008 and the current Awami League government who has been settling scores and pursuing opponents with vindictive impunity. Cue the charges against Muhammad Yunus. If microcredit was really under attack, then we also would have heard something about BRAC, which is more pliable to the government.

    The problem is, the Left in this country would be immune to this. And let’s not forget the torture that the previous Labour government supported in Bangladesh, as exposed in today’s Guardian:
    http://www.guardian.co.uk/world/2011/jan/17/uk-link-bangladesh-torture-centre

    This is only the start, in pursuing opponents, the regime in Bangladesh is locking up ‘Islamists’, and the loudest cheerleaders in this country come from the neoconservative left: Spittoon/Harry’s Place

  6. Rumbold — on 18th January, 2011 at 4:11 pm  

    Douglas:

    Yes, the Economist article focused on that too. Politcians, often funded by rival lenders, are using the MFIs as a punchbag.

    Earwiga:

    MFIs tend to focus on business, but there is no reason the rates would be any higher for non-business loans.

  7. Green Richard — on 18th January, 2011 at 5:40 pm  

    Quote from a 2003 paper entitled What DFID can do better for Bangladesh – see page 22 of the report on the Brick Lane circle website “Clearly there is no single answer to the cocktail of concerns about NGOs. Some complaints are undoubtedly legitimate and can in principle be readily rectified (cases of fraud/ criminality/ non transparency.) It is also right that within reason, boundaries for profit making activity and party political campaigning by tax exempt charities are set by government and the courts. A clear concern within the Bangladeshi context however, is that such proposals may be motivated not out of the public interest but more by political vendettas and vested interests.”

    http://www.bricklanecircle.org/research-papers/

  8. douglas clark — on 18th January, 2011 at 6:17 pm  

    Rumbold,

    Politcians, often funded by rival lenders, are using the MFIs as a punchbag.

    You may well be right. This is politics at its worse, playing games with peoples lives.

    I think the idea of microfinance, tied into credit unions is a great idea. I am not so happy when mainstream banks get into it. For they are only after profit, and, given the lack of collateral, are charging usurious rates. Given that there is next to no default, it is money for nothing and your chicks for free..

    It is banks being banks.

    Which is frankly disgusting.

    If I had any money, I would be willing to risk it on lesser terms than these folk do. For the risk reward ratio isn’t what these banks say it is.

    It is prejudice against honest people. People who do repay their debts.

    So we have to be careful about who we are for. It is not, I submit, everyone that hides under the MFI umbrella. Banks are very exploitative, don’t you think?

    We have to break away from the traditional banking sector and work another way.

    Least, that’s what I think.

  9. earwicga — on 18th January, 2011 at 7:29 pm  

    Rumbold – I wasn’t aware that microfinance loans were available for other purposes. I have never seen any evidence of this, which obviously doesn’t mean this is the case obviously. And I wouldn’t assume that interest rates are set at one level either.

    douglas – agreed with all of your last comment.

  10. douglas clark — on 18th January, 2011 at 8:16 pm  

    Earwicga,

    I think that you and I should start a moral MFI. If we put a fiver a month into a pot, and everyone else that read this post did so to, well we’d have a pot of money to distribute.

    Just to be clear, I wouldn’t want to have anything to do with the money!

    Seriously, perhaps Pickled Politics could make a difference through an MFI device. Most folk here are actually quite, well, cough, cough, nice and quite moral and and stuff like that.

    It ought to be up to someone to make us all a force for good rather than just arguing all the time.

    Which we do.

    The likes of a cynic like cjcjc, what do you say?

    You up for it?

    ’cause I don’t think you are enough of a cynic to say no.

  11. earwicga — on 18th January, 2011 at 8:37 pm  

    douglas, I think that is a lovely idea. I already budget how much I can give away though and have it set up, so sorry I cannot join in.

  12. douglas clark — on 18th January, 2011 at 9:20 pm  

    Cool earwicga,

    I would have to find that money also. You are not talking to some sort of rich person here, the fiver a month ought to have been a hint?

    Anyways, you are a good person and I’d accept 10p a month or summat, as long as it exceeded the cost of collection.

    The point is merely to try to make folk that read here, comment here, etc, to put their money where their mouths are in a meaningful way.

    It strikes me that many people that read or comment here do have a fiver, or more, a month to contribute.

    Frankly I’d be the wrong person to run it, but there are better people than me to do it. In fact Sunny, Rumbold and your good self would be fine by me.

    Think about it, please…

  13. persephone — on 18th January, 2011 at 9:57 pm  

    the PP microbank? Is this part of chasing the brown pound?

  14. douglas clark — on 18th January, 2011 at 10:22 pm  

    persephone,

    dunno, is it? I’d have thought it was about getting money to people that need it. But what the heck do I know?

    I can, probably, afford a fiver a month. Can you?

  15. persephone — on 18th January, 2011 at 11:11 pm  

    Douglas

    As to the fiver – sadly for about the next month after which I will be job hunting when it will be a rather thin brown pound

    And after a long stint doing charity work feel I am ‘due’ a break

    persephone

  16. Qazi Nazrul Huque — on 14th February, 2011 at 10:50 am  

    It seems Bangladesh is advancing toward an authoritarian regime and the pluralist ideology is at stake. An ominous tendency to bring politics, bureaucracy, military, business community and civil society under one umbrella is obvious.

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