Mf research project


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Mf research project

  1. 1. <ul><li>Microfinance in Crisis in South Asia: An Analysis of Government Intervention in Andhra Pradesh, India & Bangladesh </li></ul>Source: By Jeremy Bamberg
  2. 2. Agenda <ul><li>Introduction & Thesis </li></ul><ul><li>MF In India </li></ul><ul><li>MF In Bangladesh </li></ul><ul><li>MF Crisis in A.P </li></ul><ul><li>October Ordinance </li></ul><ul><li>RBI & Malegam Committee </li></ul><ul><li>Grameen & Bangladesh Government </li></ul>Abbreviations: MF: Microfinance A.P: Andhra Pradesh RBI: Reserve Bank of India
  3. 3. Thesis <ul><li>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) </li></ul><ul><li>These myths need to be analyzed </li></ul><ul><li>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) </li></ul>NBFC: Non- Bank Finance Company MFI: Microfinance Institution
  4. 4. MF In India Source: Sinha, Frances: State of Microfinance in India <ul><li>Existing SHG models since 1970’s funded by government </li></ul><ul><li>One of largest MF markets in the world due to high population of poor </li></ul><ul><li>MFIs are effectively barred by regulation from taking any deposits </li></ul>
  5. 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. 6. Weeding Out The Myths <ul><li>1) “Usurious” interest rates </li></ul><ul><ul><ul><ul><li>Interest rates of MFIs in India ranged from 28% to 32% annually, which are among lowest rates of microfinance globally (Intellecap, Oct. 15th) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Many interest rates neglect transaction costs and opportunity costs </li></ul></ul></ul></ul><ul><li>2) MF causing farmer suicide rates to rise </li></ul><ul><ul><ul><ul><li>Link is questionable: “Over 22,000 people have committed suicide in A.P over the past 10 years..” (Intellecap, Oct. 25th) </li></ul></ul></ul></ul>Source: Andhra Pradesh
  7. 7. October Ordinance: AP Act <ul><li>Ordinance’s 4 Premises </li></ul><ul><li>MFIs charge ‘usurious’ interest rates; </li></ul><ul><li>If clients fail to pay on time, MFIs use coercive methods to collect the interest; </li></ul><ul><li>These practices are frcing the poor to commit suicide; </li></ul><ul><li>MFIs make huge profits and have no social mission to help poor </li></ul>Source: The Hindu: Microfinance credit: AP govt may start NBFC with PSU
  8. 8. RBI & Malegam Committee <ul><li>Purpose: “To review the definition and practice of microfinance in India, delineate a regulatory framework, and make related recommendations” </li></ul><ul><li>Set minimum capital for NBFC- MFIs at 15 Crore ($3.4 mil.) from previous 2 Crore </li></ul><ul><li>With proposed interest caps it becomes extremely difficult to start and run a commercially viable business as an NBFC- MFI </li></ul>Source: Intelelcap White Paper: Malegam Committee Recommendations on MF Sector Source: Ibid
  9. 9. Grameen & Bangladesh Government <ul><li>Former Grameen ties with Government </li></ul><ul><li>Norwegian Funding </li></ul><ul><li>Attempt to form Political party </li></ul><ul><li>Leveraging the poor as voters </li></ul><ul><li>Age </li></ul>Source:
  10. 10. Works Cited <ul><li> </li></ul><ul><li>Killing microfinance will help moneylenders - Economic Times </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li>Elisabeth Rhyne: On Microfinance: Who's to Blame for the Crisis in Andhra Pradesh? </li></ul><ul><li>The Lessons of Andhra Pradesh « </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li>Andhra Pradesh: Crisis or Opportunity? </li></ul><ul><li>Bangladesh's largest NGO admits role in microfinance crisis </li></ul><ul><li>Stellungnahme responsAbility zum aktuellen Malegam Bericht </li></ul><ul><li>Media focus on microfinance in Andhra Pradesh, India </li></ul><ul><li> </li></ul><ul><li>The Ouster of Muhammad Yunus: Can Politics Destroy Grameen Bank? - Knowledge@Wharton </li></ul>