Opinion Sur
Microfinance increasingly is being met with political hostility in nations such as Bangladesh, India, and NicaraguaMicrocredit under Increasing Political Scrutiny [[Bajaj, Vikas. “[Microlenders, Honored With Nobel, Are Struggling->http://nyti.ms/h3ENJf]”, New York Times 1/06/11. ]]
Once extolled as a powerful weapon in the battle against poverty, microfinance increasingly is being met with political hostility in nations such as Bangladesh, India, and Nicaragua, the New York Times reports.
By the end of 2009, microloans totaling $70 million had been issued, while microcredit in some form or another had been extended to 91 million customers, most of them women. But the
goodwill engendered by the industry over many years is rapidly being undermined as politicians accuse microcredit companies of profiteering at the expense of borrowers. Indeed, Bangladeshi
prime-minister Sheikh Hasina Wazed, herself a former champion of microcredit, has called for an investigation of microfinance pioneer Grameen Bank, whose founder, Muhammad Yunus, was awarded the Nobel Peace Prize in 2006 for his innovations in the field. Meanwhile, strict new laws in India designed to restrict micro-lending have slowed what were until recently the world’s fastest-growing microcredit businesses, while an increasing number of activists and politicians in Nicaragua, Pakistan, and Bolivia are urging borrowers not to repay their loans.
Some industry officials argue that loan-only lenders need to diversify into microsavings accounts, which many experts assert are more effective than loans in alleviating poverty. Many experts
also argue that microcredit organizations need to measure success not just by profits but by how fast their customers are able to climb out of poverty.
“These crises happen when the microfinance sector gets saturated, when it grows too fast, and the mechanisms for controlling over-indebtedness are not very well developed,” said Elisabeth Rhyne,
a senior official at Accion International. “On the political side, politicians or political actors take advantage of an opportunity. When they see grievances, they go, ‘Wow, we can make some hay
with this.'”
