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Poverty

Making Money Off the Poor? Microfinance Institutions Going Public Creates Controversy

Shweta Banerjee's picture

Microfinance originated in South Asia in the 1970s when pioneers such as Mohammed Yunus of Grameen, introduced the idea that providing small loans to the poor, especially women, can help generate income. In the last thirty years, after many experiments from around the world, the term microfinance now not only includes credit but also savings, insurance and cash transfer services for low income families.

An explosive growth of microfinance institutions (MFIs) has been seen within the last decade, both in India and globally. In fact, following the recent financial crisis, both Grameen Bank and Kiva have started lending in the United States.

The largest MFI in India, SKS made its first public offering on July 28, 2010. Backed by powerful funders like George Soros and Narayan Murthy, this is only the second “pure” MFI in the world to go public. The first one was the Mexican MFI, Compartamos, in 2007.

The Microfinance Gateway is the most comprehensive online resource for the global microfinance community and recently features an article based on eleven interviews with diverse experts on what they think the IPO could mean for the poor. Here’s a sneak-peek:

Financing Living Wage in Bangladesh’s Garment Industry

Zahid Hussain's picture

The Wage Board on garments in Bangladesh nearly doubled minimum wages on July 29, 2010. The minimum wage at the entry level will be raised to Tk 3,000 a month (or about $43) from Tk 1,662.50 ($24). The new pay structure, proposed to be effective from November 1, maintains the existing seven grades with the highest pay fixed at Tk 9,300 ($140) per month. About 3.5 million Bangladeshis work in the garment industry, which accounts for 80 percent of the country’s exports. International companies like Wal-Mart, JC Penney, H&M, Zara, Tesco, Carrefour, Gap, Metro, Marks & Spencer, Kohl's, Levi Strauss and Tommy Hilfiger all import in bulk from Bangladesh.

Garment workers apparently are unhappy over their wages, even after the proposed increase. They protested by smashing vehicles and blocking traffic in various garment sites in Dhaka following the announcement of the wage increase. Why has the frequency of violence increased?

Bangladesh sets a world record – 5 million CFLs in a day, one bulb at a time!

Ashok Sarkar's picture

CFL bulbIf you were in Bangladesh in June, you would have found teachers in schools, preachers in mosques, and ads in newspapers, television, loudspeakers and pamphlets, encouraging people to bring in their incandescent bulbs to exchange with new Compact Fluorescent Lamps (CFLs) – and encouraged they were! On Saturday, June 19th 2010, at over 1,400 rural and urban distribution centers spread across 27 districts, manned by teachers, utility workers and other volunteers, Bangladeshis collectively took home about five million high quality CFL bulbs, in the first round of distribution.

 

They broke a record set by the British in January of 2008, for the most number of CFL bulbs distributed in a single day―some 4.5 million. In June, the Government and people of Bangladesh were inspired to do even better … and they did!

 

Let Good Sense Prevail in Bangladesh’s Garment Industry

Zahid Hussain's picture

The garment industry in Bangladesh has been subject to several tests of resilience in recent years—global recession, energy shortage, input price increases, and labor unrest. Of late, the labor unrest has escalated apparently triggered by disagreement over re-fixation of minimum wage. The workers, for quite some time now, have been pressing for adjustment in minimum wage that was last increased in 2006, after 12 years, from Tk. 930* (about $60 in PPP) per month to Tk. 1,662 (about $108 in PPP) per month. The government in April 2010 committed that a new pay-scale for the RMG workers will be announced before Ramadan, and formed a Wage Board for making the wage recommendations. For reasons not yet fully understood, the labor unrest was reignited recently without waiting to hear what the Wage Board’s recommendations are. However, it is abundantly clear that dissatisfaction with the nominal level of the minimum wage is at the center of the discord between garment owners and workers.

Bangladeshi Communities Build "New Lives"

Meena Munshi's picture

In 2008, I sat with a focus group of about 15 women in a rural village of Bagerhat district in southern Bangladesh. I and some colleagues had visited their village the day before and saw their desperate living conditions and the family conflicts that erupted because of it. This village, and many others, had been hit by cyclone Sidr four months earlier.

We asked the women about their aspirations; they responded with blank stares. But after just two hours of discussion, these women had absorbed and understood the importance of savings, of credit, of good governance, and how they could rebuild (and improve) their lives and livelihoods. At the end of the meeting, one woman told us, “We came here because we thought you would give us food, but we’re not hungry anymore. We have hope.”

The women in Bagerhat and 7 other districts are part of the Social Investment Program Project (SIPP), which has been working in Bangladesh since 2004, when it started as a US$18 million pilot, to introduce community driven development to the country’s rural communities.

A revolution in connectivity for education coming your way

Michael Foley's picture
Photo Courtesy of Dante

When Jim Wolfensohn, then President of the World Bank, sent me to Kabul in early 2002, just after the fall of the Taliban, in order to set up the first GDLN center in Afghanistan, the main challenge was to find decent Internet connectivity. In the end we had to set up our own satellite connection back to the World Bank in Washington DC. The same happened in Sri Lanka. How things have changed in South Asia.

For a long time, universities in the region had to rely on high cost, low speed, satellite based services to bring Internet access to its faculty and students, but that situation is changing rapidly. Led by the Higher Education Commission (HEC) in Pakistan and more recently by the National Knowledge Commission in India, and by a host of other programs in other countries, educational institutions across the region are building or rebuilding their networks, connecting to each other and to global networks with high speed fiber optic links that are set to revolutionize how we share knowledge and collaborate in research.

South Asian Youth Showcase Economic Ideas with the World

Joe Qian's picture

I had the opportunity to be a part of the launch of "Economic Challenges to Make South Asia Free from Poverty and Deprivation" in Washington and was truly inspired by the talent and knowledge of the students and the ideas and enthusiasm generated by the event across the region.

The event, coordinated across the region through video conference was moderated by Economic Adviser Shekhar Shah, who authored the foreward, and was exceptionally encouraging of the students and the issues discussed in the volume and organized by Hema Balasubramanian who heads the Public Information Center in New Delhi.

The unique student initiative that created the book, South Asia Economics Students’ Meet (SAESM), edited by Meeta Kumar and Mihir Pandey promotes budding economists to foster intellectual discourse with other students from the region. The annual conference, since 2004, has provided an opportunity for exceptional economic students to write, present, and share their academic papers on economic issues critical to the region.

Yes, how many deaths will it take till we know…

Maitreyi Bordia Das's picture

…that too many children have died?

I adapt this from Dylan’s famous 1962 lyrics, but it is nowhere more true than for Adivasis or tribal peoples (called Scheduled Tribes) in India.

Come monsoon, the Indian media is rife with stories of child deaths in tribal areas, frequently reported as “malnutrition deaths”. Kalahandi district in Orissa for instance, had been a metaphor for starvation due to press reports dating back to the 1980s. Melghat area in Maharashtra has similarly surfaced in the press especially during the monsoon when migrant Adivasis return to their villages and to empty food stocks in the home. This is followed by public outrage, sometimes by public interest litigation and often a haggling over numbers.

We recently published a working paper that looks at child mortality among India’s adivasis – the starkest manifestation of their deprivation. We find that an average Indian child has a 25 percent lower likelihood of dying under the age of five compared to an adivasi child. In rural areas, where the majority of adivasi children live, they made up about 11 percent of all births but 23 percent of all deaths in the five years preceding the National Family Heath Survey 2005. While there has been progress in child survival over the years, and much greater vigilance, which often leads to these stories surfacing in the media at all, the fact remains that children in tribal areas are at much greater risk of dying than those in other areas.

Fiscal Story of Bangladesh: Not There Yet, But Can Get There?

Abul Basher's picture

The current budget (FY10) expects a significant increase in revenue collection, a perennial problem in the country. The target revenue was set at 610.00 billion taka ($8.8 billion) with 261.10 billion collected in the first half and the remaining 348.90 billion in the second. The realization of this target requires a year on-y growth of 16.15%, which, being a notable departure from the trend growth rates was received with sheer skepticism from the economic observers of the country. However, about 33.67% more revenue has to be collected in the second half of the fiscal year as compared to the first half which seems realistic in the light of the fiscal performances of the last 5 fiscal years.

India’s Vision for Technology and Financial Inclusion: Interview with Bindu Ananth of IFMR Trust

Jim Rosenberg's picture

Bindu Ananth is the President of IFMR Trust, which has a mission of ensuring that every individual and every enterprise in India has access to complete financial services. In pursuit of this, IFMR has made four key investments – IFMR Rural Finance (full service financial institutions for remote rural India), IFMR Capital (guarantee company for high-quality MFIs), IFMR Mezzanine (subordinated debt provider for emerging MFIs) and IFMR Ventures (debt access for rural enterprises).  Through these investments as well as other initiatives , IFMR Trust is advocating for an inclusive financial system in India. Recently I interviewed Bindu about how the financial system in India might be configured to deliver complete financial service access.

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