INTERVIEW: Muhammad Yunus discusses the Indian microfinance industry

Wednesday, March 18, 2015

Mumbai: Muhammad Yunus , Nobel laureate and founder of microfinance pioneer Bangladesh’s Grameen Bank, said it is doubtful whether India’s largest microfinance institution (MFI) Bandhan Financial Services Pvt. Ltd will be able to continue its focus on small loans after it becomes a bank. Last year, Bandhan became the first MFI in the country to win a bank licence.

A bank is like a supertanker that cannot fish like a dinghy in shallow water, he said. MFIs in India could be greedy and tapping the capital market or raising loans from private equity funds is a bad idea, Yunus said in an interview. He spoke after a day-long dialogue with the who’s who of India’s conglomerates and intelligentsia, organized by law firm Nishith Desai Associates on 14 March. Edited excerpts:

What is a social business model?

When you talk about business, people immediately think it is got to do with money-making. Business and profit-making are bundled up and hard to disassociate because our theory says so. I was trying to solve the problem of poverty in a village through microcredit, and every time I tried to address a problem, my natural instinct was why not create a business? So I began doing that. The alternative was to bring some charity to them, but I saw the limitation of it, as I would need a fresh round of money to do the same thing. Here business means providing a service or a product for people to buy. Through that you cover your cost, making it sustainable. But I’m not interested in making money. I’m interested in solving problems in a sustainable way. So I defined it as a social business, which will help solve human problems. Investors can take back the investment, but they won’t get any dividends.

Source: Live Mint (link opens in a new window)

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banking, financial inclusion, Grameen Foundation, microfinance