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BW Businessworld

Hope Of Resurrection

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A decade ago, MFIs (microfinance institutions) were the panacea to the third world's poor. They have since come under scrutiny because of unsustainable business models. In disbursing $2.7 billion in loans at an interest rate of 24 per cent, the microfinance industry has churned out huge non-performing assets. The government has mooted the idea of bringing the industry under the central government, rather than leave regulation to the states. This will bring stability to the industry, which will enjoy the same status as insurance and financial markets. But for an industry suffering from basic systemic problems such as getting their clientele to repay loans, even a central council will be hard put to save it.

Nevertheless, the Microfinance Bill has been introduced in Parliament. It is a step up. Much better than allowing the state governments to let populism destroy business models of lending institutions.

Strictly Business
Germany has struck down a proposal for euro zone bonds backed by France, Italy and Belgium, arguing that such a move would prevent structural reforms in the southern economies (Italy, Greece, Portugal and Spain).

(This story was published in Businessworld Issue Dated 04-06-2012)