Have micro credits reached the end of the line?
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JEREMY HOBSON: Next week, the Supreme Court in Bangladesh will decide whether to let a Nobel peace prize winner keep his job. Muhammad Yunus is known as the godfather of ‘microfinance’ — for giving small loans to the poor. His idea has helped millions of people work their way out of poverty. But Yunus himself was fired from his position last month because he’s past the country’s mandatory retirement age. And it’s put a big question mark over the future of the micro-credit model he created.
The BBC’s Anbarasan Ethirajan has more from the capital Dhaka.
ANBARASAN ETHIRAJAN: Professor Yunus has taken his fight to the High Court in Bangladesh, claiming the government is trying to take control of his Grameen bank. Debapriya Bhattacharya is an economist at the Centre for Policy Dialogue in Dhaka and he says the sudden departure of Yunus from the bank could impact its stability.
DEBAPRIYA BHATTACHARYA: So it is going to affect the overall efficiency, efficacy of poverty alleviation efforts.
Meanwhile, the microcredit industry itself is under scrutiny. A number of “for profit” microfinance institutions have mushroomed in the last few years, charging very high interest rates and using coercive debt collection methods. The companies claim competition will eventually drive interest rates down. But analysts warn the negative perceptions could ruin the sector.
In Dhaka, I’m the BBC’s Anbarasan Ethirajan for Marketplace.
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