Muhammad Yunus on Microcredit and Loan Sharks

Here's a follow up to November's microcredit post, written in response to Indian governors attacking microcredit and encouraging loan recipients to default on their payments:

"In the 1970s, when I began working here on what would eventually be called 'microcredit,' one of my goals was to eliminate the presence of loan sharks who grow rich by preying on the poor...At that time, I never imagined that one day microcredit would give rise to its own breed of loan sharks...

"Many lenders started looking for ways to make a profit on the loans by shifting from their status as nonprofit organizations to commercial enterprises...To ensure that the small loans would be profitable for their shareholders, such banks needed to raise interest rates and engage in aggressive marketing and loan collection...

"Credit programs that seek to profit from the suffering of the poor should not be described as 'microcredit,' and investors who own such programs should not be allowed to benefit from the trust and respect that microcredit banks have rightly earned."

-- Muhammad Yunus, founder of Microcredit and 2006 Nobel Peace Prize Recipient, "Sacrificing Microcredit for Megaprofits," (1/14/2011)

Muhammad Yunus on Microcredit and Loan Sharks