In the present situation, we need a new brand of capitalism (i.e., compassionate capitalism) for integrating more and more people from “bottom of the pyramid” in the mainstream economy.

I am more in agreement with Yunus’s view of social business.

The developing countries like India need to formulate new regulatory frameworks for social businesses. I think
that the existing legal frameworks in India are not appropriate for social businesses.

I think we need to learn from “Community-interest companies (CICs) in the UK and Limited-profit and limited liability companies in USA.

Regards,

KL

One problem is that capitalism reveres profit above all else. If a ten percent profit is Ok, a one-hundred percent profit is ten times as good and a one thousand percent profit is better yet. No amount of profit is excessive. So there, there enter Dr. Yunus’s Social Business.

Chu would argue that, the market will control these prices. Yes, over teme, that is, unless, of course, the providers get together and agree on the price, like in a cartel (but, not so open and obvious) Clearly this is happening in some areas of the world. Effective interest rates in excess of one hundred percent are not defensible under any economic argument possible.

The poorest of the poor are indeed the focus of many strong social mission MFI’s NWTF, The Grameen Bank, etc … but, many Micro Banks do not lend to the poorest … many MFI’s are really lending to the unbanked who, although outside of the formal economy, are not poor by most poverty standards of a dollar a day incomes.

In fact, the MFI as an instrument of abject poverty alleviation would seem fairly effective, but as a tool for community economic development it is, for the most part a total failure. Most MFI borrowers are essentially subsistence borrowers. Example… they buy a case of coke in the morning and sell one can at a time … this subsidizes the family budget, but this is not a business that will ever reach the formal economy, never hire staff, never grow to become a pillar of the community.

Also, in some ways the MFI borowwer is like one of us living off of our credit cards… they pay much more interest than we do AND… a borrower can kite one MFI against another… and they often do. The MFI is incented to keep the borrower in the lending cycle as long as possible… some having been borrowers for fifteen years or more.

Also, although The Grameen Bank is an excellent example of good MFI practice, many are not … most MFI”s do not offer business development services, (BDS) seeing it as too expensive and causing too much impact on “profits.”

I sympathize with Chu and the need for profit but I would be much more convinced if the MFI’s did not lend but invested in their micro enterprises. That would put both investor and borrower on the same side of the fence and the MFI would have a truly vested interest in the success of their “partners.” … not just coming by every week with their hands our for that installment payment.

On the other side… well, another time perhaps…

Tom Humes

Allen Taylor