On Nov. 19, Grameen Foundation President, CEO, and founder Alex Counts released an official statement addressing the activities of for-profit microfinance institutions (MFIs) in the Indian state of Andhra Pradesh — a controversy that has ignited worldwide news. With the spotlight already shining bright on the Indian MFI sector after a high-profile public stock offering by SKS Microfinance (largest MFI in India) and the unexpected sacking of its CEO, in October reports of suicides among microfinance clients because of “harassment” by aggressive loan officers began emerging in Andhra Pradesh (home to several leading for-profit MFIs, including SKS). In response, the state government instituted an ordinance requiring all MFIs to get registered in each district of the state where they operate, and imposing fines and jail terms on senior management if an MFI was found guilty of using coercive lending practices. The Indian Finance Ministry also informally instructed public-sector banks – important sources of funds to MFIs – to cease lending to MFIs that charged interest rates of more than 25 percent. These incidents have raised important questions about whether microfinance in India is in fact delivering on its promise to lift the poor out of poverty. However, despite the negative attention toward MFIs in Andhra Pradesh, “Grameen Foundation continues to strongly believe that making financial services available to the poor and poorest is one of the most effective ways of helping them move themselves out of poverty.” We don’t work with any of the MFIs in Andhra Pradesh. Instead, Grameen Foundation – which has worked in the country for more than a decade – focuses on the least-served states north and east of the country. Grameen Foundation is not against MFIs responsibly earning profits, Alex said (the cost of providing financial services to the poor, especially in hard-to-reach areas, can be high), but MFIs also have a responsibility to demonstrate how well they are achieving their poverty-reduction goals. "Grameen Foundation strongly believes that MFIs must measure their social performance as rigorously as they measure financial performance," he said. MFIs can measure this "double bottom line" with tools like the Progress out of Poverty Index™, a country-specific model inspired by the 10 indicators of poverty developed by Grameen Bank. As this controversy continues to garner media attention, the need for microfinance in India remains incredibly high — 600 million people there live on less than $1.25 per day, more than in the continent of Africa. We will continue to provide microfinance and technology solutions that help MFIs operate more efficiently and cost-effectively, so they can reach more poor people at lower cost. Read Alex’s entire statement and learn more about our initiatives, likeGrameen Capital India, that work to get financial services to those in India who need it the most. |
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