MFIs need a separate regulator: Yunus

Mumbai, Feb 19 (PTI) The Nobel laureate and Bangladeshieconomist Muhammad Yunus, who brought about radicalchanges in the micro-credit area in his country by setting upthe Grameen Bank, today called for a separate regulatorymechanism for Indian microfinance sector.

"It is not about more or less regulation. What yourmicrofinance sector needs is a separate set of regulationsbecause the area they operate in is different from thearea of commercial banks and other lending bodies," Yunus toldPTI on the sidelines of a CSR summit organised by the WockhardFoundation here today.

He was answering the question whether the Indian MFIsector needed more regulation.

Demanding that the MFIs like SKS and others of the ilk,who have turned "loan-sharks" overnight by commercialising,should stop calling themselves microfinanciers, he said thatis the best service they can do to the "real micro-lenders".

"If you want to commercialise, please choose a differentname, and not micro-financiers. Real microfinanciers are notcommercially minded. Ours is not a commercial enterprise but asocial business," the professor said.

He further pointed out that "the ultimate objective ofMFIs is to ensure financial inclusion and not making profit.

So long as they work towards this objective, they aremicrofinance companies and when they start looking at profitthey become loan-sharks or commercial entities." (MORE)PTI BENKRK

Stating that he runs over 50 social businesses, which range from micro-credit to manufacturing yogurt, solarpower sets, treated mosquito nets and shoes, he said, he isthe chairman of at least half of these companies but does notown a single share in them.

Terming the Malegam committee recommendations on the MFIsector as very healthy and commendable, he said the report cango a long way in correcting the many flaws in the Indian MFIspace.

He specifically lauded the recommendation for definingthe eligibility criteria for getting microcredit, besides thecall to cap interest rate.

"The Malegam report is a very important development inthe Indian microfinance sector. By implementing hisrecommendations many of the problems of this industry, whichis a must for financial inclusion and socioeconomicre-engineering, can be solved.

"The best part of the report is the definition ofmicrocredit and the need for capping interest rates," ProfYunus pointed out.

Following the credit crisis in the MFI sector in thewake of the October 2010 Andhra Pradesh ordinance, whichsought to regulate the sector, the Reserve Bank had lastNovember set up a committee under the chairmanship of notedchartered accountant and corporate veteran YH Malegam to comeup with recommendations to resolve the crisis. Malegamsubmitted the report to the central bank last month. (MORE)PTI BEN KRK

To a question whether government should interfere in MFIs, the professor said ad-hoc government intervention andregulations can only harm this much-needed sector.

When sought his opinion on SKS Microfinancecontroversy, he wondered how its promoter Vikram Akula couldchange the way he did. Prof Yunus recalled the early years ofAkula and said, "He was a nice person when he launched an NGOafter visiting many of my social businesses in Bangladesh. Heinteracted with me many a time in the past."

On some of his recent social businesses, the professorsaid he had roped in the global foods and dairy goods majorDanon to launch Grameen Danon Company to manufacture and sellyogurt to the malnourished kids in his country.

"The motive is to ultimately eradicate malnutrition inBangladesh," he said, adding that second yogurt plant will beset up by this year and he and Danon want to cover the entirecountry by setting up 50 such plants.

With the premium footwear and sport goods major Adidas,he has set up Grameen Adidas Company to offer shoes to ruralpeople for under one euro.

The professor noted that both these social businessenterprises set up by multinational corporations aredoing brisk business.

And so is his solar power business, which within thefirst few years has sold over 5 lakh home solar sets and hasset a target of selling 1 million units by 2020 and 10 millionby 2050. The company sells one solar set for 32,000 takas(local currency), and extends financing facility too, ProfYunus added.