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