Criticism
Analysts have suggested that microcredit can bring communities into debt from which they cannot escape, citing situations where microloans from the Grameen Bank were linked to exploitation and pressures on poor families to sell their belongings, leading in extreme cases to humiliation and ultimately suicides.
The Mises Institute's Jeffrey Tucker suggests that microcredit banks depend on subsidies in order to operate, thus essentially becoming another example of welfare, whereas Yunus believes that he is working against the subsidized economy, giving borrowers the opportunity to create businesses. Some of Tucker's criticism is based on interpretations of the Grameen's 16 decisions, seen as indoctrination, without further analysing what they mean in the context of poor, illiterate peasants.
Maulana Ibrahim, a reactionary imam in Bangladesh, spoke out against the Grameen Bank in 1993 for fostering "un-Islamic ways", alleging (referring to the lenders' pledge) that women were taking a vow not to obey their husbands and not to live in poverty anymore.
Grameen bank has been accused of tax evasion in a Norwegian documentary, Caught in Micro debt. These accusations have recently been repeated in a Spanish documentary, Microcredit. The accusation is based on the unauthorised transfer of approximately US$100 million donated by The Norwegian Agency for Development Cooperation (NORAD) from one Grameen entity to another "Grameen Kalyan" in 1996, before the expiry of the Grameen bank's tax exemption. Muhammad Yunus denies that this is tax evasion: "There is no question of tax evasion here. The Government has provided organizations with opportunities; we have made use of these opportunities with aim of benefitting our shareholders who are the rural poor women of Bangladesh."
David Roodman and Jonathan Morduch question the statistical validity of studies of microcredit's effects on poverty, pointing to the complexity of the situations involved.
Yoolim Lee and Ruth David discuss how microfinance and the Grameen model in South India have in recent years been distorted by venture capitalism and profit-makers, leading poor rural families into debt spirals, harassment by microfinance debt collectors, and in some cases suicide.
In India, as nonbanking financial companies cannot accept deposits, microlenders must borrow capital from local banks, which charge substantial interest rates, or rely on government grants. These sources of capital are usually unstable, insufficient, or too expensive, as it relies heavily on the goodwill of the government or the corporate credit cycle.
Read more about this topic: Grameen Bank
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