MFIs tapping capital market not a good idea: Yunus

Thursday, June 12, 2014

Indian microfinance institutions (MFIs) tapping the capital markets to raise funds is not a good idea as they have to promise shareholders that they would make profits from the poor, according to Nobel laureate Muhammad Yunus.

“Capital markets are not a source of funds (for the MFIs). They could be given special micro-credit banking licences to accept deposits so that they would come under regulations and the deposits would be strictly used only for micro-lending purposes,” he said.

Speaking to mediapersons on the sidelines of the 12th International Conference on Ageing here on Wednesday, Yunus, known by many as the father of microfinance, said if MFIs were given full banking licences, they might get tempted to move into the other direction … making money for themselves.

Stating that Indian MFI Bandhan being granted a banking licence was a good development, Yunus said such licences often open up lots of opportunities to make money for oneself. He, however, cautioned: “Many banks in the world, including in Germany, started in the same spirit (serving the poor people) but gradually became regular banks. Hence, they were rejected from the banking system.”

Source: Business Standard (link opens in a new window)

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banking, microcredit, microfinance