Microfinance

Grameen Leaks ?

Phil Mader of Governance Across Borders blogs about the recent release of secret documents of Grameen Bank.

And now this: Grameen Leaks ??

By Phil Mader

In the past few weeks, I’ve been silent here about the microfinance crisis events in India. But why not let others do the talking ? This blog published (what I think was) the first analysis of the A.P. events right after the crackdown ordinance; following up with a two-piece search for the underlying causes (12). Most of the causes I speculated about at the time are pretty much turning out to be true:

  • interest rates were far too high and have been rushed down
  • the sector was under-, or practically un-, regulated (especially, if Kaushik Basu says so)
  • the borrowers were/are overindebted (far more than the MFIs were aware of, I assume)
  • and the profit motive created perverse incentives for MFIs.

One prediction I won’t make, though, is whether microfinance in India will pull through. That depends on politics in Delhi (bailout or not?) as much as it does on the adaptiveness (not the resilience, which means “no change”) of the sector. But I wouldn’t bet my money on an MFI in India at the moment, given the pessimisim of Vijay Mahajan (“If this situation continues, there will be no microfinance sector in 2011.”) or the SKS’ shareholders(shares down by 52 percent).

Read the rest on the Governance Across Borders Blog

grameen bank wikileaks

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