Nobel laureate Muhammad Yunus has labelled profit-driven microfinance firms as ‘loan sharks’ who undermine the small-credit schemes that he pioneered to help tackle poverty.
Yunus, who won the Nobel Peace Prize in 2006 for making loans available to poor entrepreneurs, hit out at the commercial microfinance companies as the concept faces increasing scrutiny.
“When they start looking at profit they become loan-sharks,” Yunus said late Saturday on the sidelines of a conference in Mumbai, the Press Trust of India news agency reported.
“The ultimate objective of microfinanciers is to ensure financial inclusion and not making profit,” he stressed. “If you want to commercialise, please choose a different name. Real microfinanciers are not commercially minded.”
The microfinance sector was until recently hailed as a saviour of the poor in south Asia for providing loans averaging $250 to millions of people, many of them women, unable to get credit from mainstream banks.
But microfinance firms’ surging profits and accusations that some charge extortionate interest rates and deploy heavy-handed debt collectors who have triggered scores of client suicides, have led to mounting controversy.
Last month an Indian central bank panel put forward proposals for nationwide regulation of the microfinance sector, with caps on interest rates and loan amounts.
Courtesy of The Daily Star