Why are cases against Yunus drawing attention?

Why are cases against Yunus drawing attention?

Subject: Polity

Section: Personality

Context: 

In May this year, the Anti­ Corruption Commission (ACC) filed a case against several members of the board of directors of Grameen Telecom, that included Nobel laureate Dr. Mohammad Yunus, over allegations that the board was involved in misusing funds  from the workers. This was one of the several complaints against Mr. Yunus,  the 2006 winner of the Nobel peace prize, known for his unique venture of microfinancing in Bangladesh.

About Microfinancing:

• MFI is an organization that offers financial services to low income populations.
• These services include microloans, microsavings and microinsurance.
• MFIs are financial companies that provide small loans to people who do not have any access to banking facilities.
• The definition of “small loans” varies between countries. In India, all loans that are below Rs.1 lakh can be considered as microloans.
• In most cases the so-called interest rates are lower than those charged by normal banks, certain rivals of this concept accuse microfinance entities of creating gain by manipulating the poor people’s money.
• Microfinance sector has grown rapidly over the past few decades and currently it is serving around 102 million accounts (including banks and small finance banks) of the poor population of India.
• Different types of financial services providers for poor people have emerged – non-government organizations (NGOs); cooperatives; community-based development institutions like self-help groups and credit unions; commercial and state banks; insurance and credit card companies; telecommunications and wire services; post offices; and other points of sale – offering new possibilities.
• Non Banking Finance Company (NBFC)-MFIs in India are regulated by The Non-Banking Financial Company -Micro Finance Institutions (Reserve Bank) Directions, 2011 of the Reserve Bank of India (RBI).

Major Business Models:

• Joint Liability Group:

This is usually an informal group that consists of 4-10 individuals who seek loans against mutual guarantee.

The loans are usually taken for agricultural purposes or associated activities.

• Self Help Group:

It is a group of individuals with similar socio-economic backgrounds.

These small entrepreneurs come together for a short duration and create a common fund for their business needs. These groups are classified as non-profit organisations.

The National Bank for Agriculture and Rural Development (NABARD) SHG linkage programme is noteworthy in this regard, as several Self Help Groups are able to borrow money from banks if they are able to present a track record of diligent repayments.

• Grameen Model Bank:

It was the brainchild of Nobel Laureate Prof. Muhammad Yunus in Bangladesh in the 1970s.

It has inspired the creation of Regional Rural Banks (RRBs) in India. The primary motive of this system is the end-to-end development of the rural economy.

• Rural Cooperatives:

They were established in India at the time of Indian independence.

However, this system had complex monitoring structures and was beneficial only to the creditworthy borrowers in rural India. Hence, this system did not find the success that it sought initially.