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Mf research project Presentation Transcript

  • 1.
    • Microfinance in Crisis in South Asia: An Analysis of Government Intervention in Andhra Pradesh, India & Bangladesh
    Source: By Jeremy Bamberg
  • 2. Agenda
    • Introduction & Thesis
    • MF In India
    • MF In Bangladesh
    • MF Crisis in A.P
    • October Ordinance
    • RBI & Malegam Committee
    • Grameen & Bangladesh Government
    Abbreviations: MF: Microfinance A.P: Andhra Pradesh RBI: Reserve Bank of India
  • 3. Thesis
    • As a result of the MF Crisis in both A.P, India and with the Grameen Bank in Bangladesh several myths have become a part of a discourse demonizing MFIs (particularly NBFCs)
    • These myths need to be analyzed
    • Both the Governments of India and Bangladesh have begun to gradually encroach on MF- Sector. Certainly the Government needs to develop a role in the sector, but they need to be careful not to favor Government MF models to those of NGOs or NBFC- MFIs (Although this is debatable)
    NBFC: Non- Bank Finance Company MFI: Microfinance Institution
  • 4. MF In India Source: Sinha, Frances: State of Microfinance in India
    • Existing SHG models since 1970’s funded by government
    • One of largest MF markets in the world due to high population of poor
    • MFIs are effectively barred by regulation from taking any deposits
  • 5. MF Crisis in A.P Source: Respective Websites Source: Ashta, Arvind: Interest Rate ethics: an aspect of social performance in Microfinance Source: Sinha, Frances: State of Microfinance in India
  • 6. Weeding Out The Myths
    • 1) “Usurious” interest rates
          • Interest rates of MFIs in India ranged from 28% to 32% annually, which are among lowest rates of microfinance globally (Intellecap, Oct. 15th)
          • Many interest rates neglect transaction costs and opportunity costs
    • 2) MF causing farmer suicide rates to rise
          • Link is questionable: “Over 22,000 people have committed suicide in A.P over the past 10 years..” (Intellecap, Oct. 25th)
    Source: Andhra Pradesh
  • 7. October Ordinance: AP Act
    • Ordinance’s 4 Premises
    • MFIs charge ‘usurious’ interest rates;
    • If clients fail to pay on time, MFIs use coercive methods to collect the interest;
    • These practices are frcing the poor to commit suicide;
    • MFIs make huge profits and have no social mission to help poor
    Source: The Hindu: Microfinance credit: AP govt may start NBFC with PSU
  • 8. RBI & Malegam Committee
    • Purpose: “To review the definition and practice of microfinance in India, delineate a regulatory framework, and make related recommendations”
    • Set minimum capital for NBFC- MFIs at 15 Crore ($3.4 mil.) from previous 2 Crore
    • With proposed interest caps it becomes extremely difficult to start and run a commercially viable business as an NBFC- MFI
    Source: Intelelcap White Paper: Malegam Committee Recommendations on MF Sector Source: Ibid
  • 9. Grameen & Bangladesh Government
    • Former Grameen ties with Government
    • Norwegian Funding
    • Attempt to form Political party
    • Leveraging the poor as voters
    • Age
  • 10. Works Cited
    • Killing microfinance will help moneylenders - Economic Times
    • Elisabeth Rhyne: On Microfinance: Who's to Blame for the Crisis in Andhra Pradesh?
    • The Lessons of Andhra Pradesh «
    • Andhra Pradesh: Crisis or Opportunity?
    • Bangladesh's largest NGO admits role in microfinance crisis
    • Stellungnahme responsAbility zum aktuellen Malegam Bericht
    • Media focus on microfinance in Andhra Pradesh, India
    • The Ouster of Muhammad Yunus: Can Politics Destroy Grameen Bank? - Knowledge@Wharton