Run on the bank

, by Himal Southasian

The unseemly termination of Muhammad Yunus’s career at Grameen only highlights the deep problems faced by microcredit internationally.

In Bangladesh, banking has turned rancid, and the rot is spreading so fast and far that the entire global microfinance industry is now under threat. The issues range far beyond poisonous local politics, the factor most often stressed by those close to Grameen Bank’s crisis.

[...] This situation is of global importance because it reflects microfinance’s limits as a poverty-fighting strategy, alongside the increasingly desperate desire to rescue neoliberal conceptions of market salvation. It comes on the heels of incredibly high interest rates being charged by lenders in areas throughout Southasia. As The Guardian newspaper reported in early March, 30 million Indian households have borrowed more than USD 3 billion in microcredit since the mid-1990s. ‘In recent months’, the report stated, ‘the industry has been thrown into crisis as it has become clear that a significant number of borrowers – between a tenth and a third, depending on the estimate – cannot afford to repay their loans.’ There are also rural Indian parallels to the 2007-09 ‘sub-primate mortgage bond’ crisis in the US, which hit low-income urban African-Americans especially hard. ‘The past five years have seen the aggressive selling of loans to often illiterate villagers, followed by equally aggressive debt collection,’ states The Guardian.

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