Today I read an article in a weekly which carried excerpts from an interview with the legendary vinod khosla, it was on a topic of "Micro Finance" this was probably the second time I am hearing about this topic in the last couple of days, but have found very interesting.
What is Micro Finance?
The micro-finance industry, which began in 1976 with the establishment of Grameen Bank in Bangladesh, is now a world-wide movement comprising thousands of specialist banks, credit unions, co-operatives, village credit societies, NGOs and charities spanning both the richest and the poorest countries. Their common purpose is to extend the outreach of banking services, especially business credit, to those who do not qualify for normal bank loans. Micro-credits are granted at commercial interest rates, though at much lower rates than those charged by informal money lenders. This reflects the status of micro-finance institutions as not-for-profit but able to become fully self-supporting after a number of years.
A few points mentioned by Khosla on microfinance:
Microfinance is simply applying the principles of free markets and capitalism to the poorest people. That is what is interesting. It is more about the economic system of capitalism and how to enable it for people who have been outside of it.
We will see a much bigger economic divide between the rural and the urban unless we do something about accelerating the economic growth of rural India. I believe microfinance is a very, very powerful tool. In fact, it is the only tool with a potential to revolutionise growth in rural India. That's why it is important. It is not only important for the macro numbers of economic growth to be great, but we also must distribute wealth creation.
[Microfinance] is a tool that doesn't interrupt or interfere with any of that, and it can work without that change. In fact, it accelerates that change but is not totally dependent on it. It is an independent axis of economic development. The government can keep doing things to help people from within the political structure, and there will be some good things about it. In the end, what is important is that this tool goes directly to those who are below the poverty line. It enables them, and it helps them sell. And there are thousands, if not millions, of stories in Bangladesh alone.
Another concept that intrigued me was on "Mega Cities" and problems there in, I need to do some reading on this topic before I can write a piece with any sense to it, you will see one on this topic in the days to come, if you have any thoughts on this topic please feel free to send it to me.
What is Micro Finance?
The micro-finance industry, which began in 1976 with the establishment of Grameen Bank in Bangladesh, is now a world-wide movement comprising thousands of specialist banks, credit unions, co-operatives, village credit societies, NGOs and charities spanning both the richest and the poorest countries. Their common purpose is to extend the outreach of banking services, especially business credit, to those who do not qualify for normal bank loans. Micro-credits are granted at commercial interest rates, though at much lower rates than those charged by informal money lenders. This reflects the status of micro-finance institutions as not-for-profit but able to become fully self-supporting after a number of years.
A few points mentioned by Khosla on microfinance:
Microfinance is simply applying the principles of free markets and capitalism to the poorest people. That is what is interesting. It is more about the economic system of capitalism and how to enable it for people who have been outside of it.
We will see a much bigger economic divide between the rural and the urban unless we do something about accelerating the economic growth of rural India. I believe microfinance is a very, very powerful tool. In fact, it is the only tool with a potential to revolutionise growth in rural India. That's why it is important. It is not only important for the macro numbers of economic growth to be great, but we also must distribute wealth creation.
[Microfinance] is a tool that doesn't interrupt or interfere with any of that, and it can work without that change. In fact, it accelerates that change but is not totally dependent on it. It is an independent axis of economic development. The government can keep doing things to help people from within the political structure, and there will be some good things about it. In the end, what is important is that this tool goes directly to those who are below the poverty line. It enables them, and it helps them sell. And there are thousands, if not millions, of stories in Bangladesh alone.
Another concept that intrigued me was on "Mega Cities" and problems there in, I need to do some reading on this topic before I can write a piece with any sense to it, you will see one on this topic in the days to come, if you have any thoughts on this topic please feel free to send it to me.
posted by Prashanth Rai at 10:13 PM
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