For-profit MFIs are loan-sharks, they need regulation: Muhammad Yunus

Muhammad Yunus, the Bangladeshi Nobel laureate who brought revolutionary changes in the micro-credit area in his country, has opined that the best service the profit-oriented MFIs like SKS could do to the sector is to stop calling themselves as micro-financiers as they are nothing but "loan-sharks".

"If you want to commercialise, please choose a different name, and not microfinanciers. Real microfinanciers are not commercially minded. Grameen Bank and all my enterprises are not commercial entities but social businesses," the world famous social economist told PTI on the sidelines of CSR meet organised by Wockhard Foundation here last evening.

Yunus further pointed out that "the ultimate objective of MFIs is to ensure financial inclusion and not making profit. So long as they work towards this objective, they are microfinance companies and when they start looking at profit they become loan-sharks or commercial entities."

When specifically asked for his comments on the controversy that SKS Microfinance brought in, he said "I don't want to name anyone, but what is happening at SKS is far from what is desired."

Yunus wondered how SKS promoter Vikram Akula could change the way he did. He recalled the early years of Akula and said, "He was a nice person when he launched an NGO after visiting many of my social businesses in Bangladesh. He interacted with me many a time in the past. But what happened to him now, I don't understand."

On whether Indian MFIs must be regulated more, Yunus said, "it is not about more or less regulation. What your microfinance sector needs is a separate set of regulations because the area they operate in is different from the area of commercial banks and other lending bodies."

Terming the RBI-appointed Malegam Committee's recommendations on the MFI sector as very healthy and commendable, he said the report can go a long way in correcting the many flaws in the Indian MFI space.

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

"The Malegam report is a very important development in the Indian microfinance sector. By implementing it many of the problems of this industry, which is a must for financial inclusion and socioeconomic re-engineering, can be solved."

The committee was appointed following the credit crisis in the MFI sector following the October 2010 Andhra Pradesh ordinance, which sought to regulate the sector. The panel submitted its report to the central bank last month.

Asked if the Government should interfere in MFIs, the Professor said ad-hoc government intervention and regulations could only harm the much-needed sector.

On some of his recent social businesses, Yunus said he had roped in the global foods and dairy goods major Danon to launch Grameen Danon Company to manufacture and sell yogurt to the malnourished kids in his country.

"The motive is to ultimately eradicate malnutrition in Bangladesh," he added.