From Grameen Bank to the Kiva community, microlending is taking the world by storm. In Part 5 of our Diablogue on the topic of corporate responsibility, Jill Damatac investigates the fine line between the ethical heart of the Grameen philosophy - poverty eradication and human development - and the profit-making aspirations of financial institutions. Can social gain be reward enough for microlenders?
Image courtesy of Bloomberg Businessweek
SKS Microfinance, India’s largest microlender, went public this past July, reaping over $350 million in its IPO. This groundbreaking move has generated both record profits and a heated pro/con debate. With recent turbulence at its helm—CEO Suresh Gurumani departed earlier this fall after apparent incompatibilities with founder Vikram Akula and SKS’s board—followed by accompanying turbulence in the Bombay Stock Exchange (due to investors nervous about the CEO’s firing), SKS’s IPO glow is fast fading, replaced by tough questions and, most prominently, the ever-nagging conflict presented by the opposing goals of an MFI (altruism) and its stockholders (profits).
Before SKS went public, Grameen Bank founder (and Nobel Peace Prize winner) Muhammad Yunus openly criticised the much-anticipated IPO, emphasizing the main objective of microlending, which is to help eradicate poverty, versus the main objective of stockholders, which is to make profits. Though this contrast is indisputably true, proponents of the IPO fairly underscored the difficulties faced by MFIs when it comes to fundraising.
>> Read on at The Owl’s Post
Tags: Business, CSR, Diablogue, Economics, International Development
Chandra Babu Naidu ex- Chief Minister who toured the Ranga Reddy district, addressed several micro finance victims and advised them to just pay the principal and not the interest thereupon. He also told them not to make any payments until the government agreed to extend Pavala Vaddi scheme to the Micro Finance. Telling them to tie those who came to their houses for collection of micro debts and throw them in a room, the former chief minister said that his party would then take care of them.
Join the Campaign and ban MFIs. If they want to profit from the blood of the poor, lets give them a taste of their own medicine. Let the poor make money out of them. Let’s bankrupt some of financial vultures invested in the Company. Who knows whether some will commit suicide Vikram Akula of SKS Microfinance is our mascot
What’s wrong with Micro-finance Institutions? Practically everything as the case of SKS illustrates.
http://devconsultgroup.blogspot.com/2010/10/whats-wrong-with-micro-finance.html
Thanks for your comment, Rajan. Great to see the other side of the argument put forward!
As you say, there is a capitalist side to microfinance, as there is to any financial institution. But Yunus’ founding principles of sustainability, opportunity and human development are difficult to deny. There’s a really fine line between the “corporate vulture” and the chance to stimulate sustainable livelihoods.