Tuk Tuks and MFIs
-
- Expatriate
- Posts: 769
- Joined: Mon Jun 26, 2017 9:37 am
- Reputation: 72
Re: Tuk Tuks and MFIs
Ok, this is great article i just found by a journalist who was gagged from the newspapers here from reporting on the bad aspects of MFIs. And in 2005! Before the whole industry exploded into a current 3.2 billion dollar debt. Interestingly, the only recent decent report I've read about MFIs here was also a letter to the editor of the Cambodia Daily, which unfortunately is behind a $2 a day paywall now.
Does any of it go towards what i said about the newspapers here having an agenda?
Thanks for that post KS, I'll reply to it tomorrow.
Anyhow, here is the journalist's right to reply.
"Letters to Phnom Penh Newspapers My way of being heard despite what editors think
Microfinance
[The first of these letters was printed in the Phnom Penh Post in September or October 2005. It produced a response from one Tom von Weissenberg, to which the second letter is a rebuttal. I don’t recall whether the second letter was printed.]
‘Role Model’ Bank
Your article about the Acleda Bank (“World Bank-IFC To Honor Acleda as ‘Role Model’”, September 23) quotes In Channy as saying that his bank charges 48 percent annual interest on small loans.
In ordinary English, this suggests that a borrower receives, say, $100, and at the end of one year pays $148 to the bank. That would be 48 percent simple interest.
However, Acleda loans (and most other small loans in Cambodia) are not repaid in this fashion. The borrower is charged a monthly interest rate and makes interest payments monthly. Acleda’s rate of 4% a month means that the borrower of $100 has the use of the full $100 for only one month; he or she returns $4 to the bank at the end of each month and therefore has the use of only $96 for the second month, $92 for the third month and so on.
By the start of the 12th month, the borrower has returned $44 and thus has the use of only $56 for the final month of the loan.
Over the course of the year, the real amount of the loan has been, not $100, but the average of the starting and finishing amounts, namely $100 + $56 divided by two, or $78. The real simple interest rate is therefore $48 divided by $78, or 61.5%. (In the past, Acleda sometimes charged 5% a month, which works out to almost 83% a year in simple interest.)
Freedom from corruption is certainly commendable, but it does not, by itself, produce any income. Usury seems to have far more to do with Acleda’s rise from a simple NGO to a multimillion dollar commercial bank. This casts a rather different light on its “incorruptibility”, which is more than just refusing to give or receive bribes.
Most NGOs enter Cambodian villages with the message, “We are here to help.” Did Acleda, in the interest of transparency, proclaim, “We are here to accumulate profits and become a bank.”?
That, after all, is what happened, and not by accident. The hard-earned riels of poor villagers paying interest of 61.5% or 83% are the source of Acleda’s wealth.
One would like to know exactly how the transfer of those funds to Acleda “benefited” the poor people who lost them. That is not the sort of question that has ever troubled the World Bank. But Cambodians should take note of what the WB considers “model” behavior.
Microcredit and the Philosophers’ Stone
Tom von Weissenberg (letter, October 3) challenges my calculation that a 4 percent monthly interest payment is the equivalent of an annual simple interest rate of 61.5 percent. He says I “forget” that the borrower should use his loan in order to make more money. He forgets that the use made of a loan has nothing to do with calculating the interest rate.
Even stranger is Weissenberg’s apparent belief that he has found the philosophers’ stone, which the alchemists thought would turn other substances into gold.
He assures us that $100 in microcredit provided to a villager will, in the course of a year, allow the family to spend $432 on their consumption ($36 a month for 12 months), and finish the year with a capital of $340. Furthermore, his villager has been able to pay $48 in interest, plus monthly expenses of $15, or $180 over the course of the year.
Add it all up, and it turns out that microfinance has transformed $100 into exactly $1,000. Moreover, Weissenberg assures us that there are 300,000 Cambodian families enjoying this magical expansion of wealth. In total, then, every year microfinance institutions transmute $30 million into $300 million for the benefit of poor Cambodians.
Clearly, we have microfinance to thank for the fact that there is no longer any poverty in Cambodia!
In the real world, things don’t work that way. The vast majority of borrowers in Cambodia have no chance at all of following the business course that Weissenberg recommends.
For example, a 1998 CDRI study, quoted in the 2004 UNDP publication, The Macroeconomics of Poverty Reduction in Cambodia, found that 90 percent of “very poor” borrowers and 78 percent of “poor” borrowers used their loans to buy rice or pay for medical treatment. Indeed, even 20 percent of “well-off” borrowers used their loans for those purposes.
Weissenberg says that the only “alternative” to microcredit is “usurers”. But lenders who charge 4 percent interest a month are engaging in usury, not providing an alternative to it.
Their rates may be lower than those of traditional village moneylenders, but their conditions are usually much harsher, which is why villagers often decide to stick with the devil they know.
And most of the time, the relationship between microfinance bodies and village moneylenders is not competitive but symbiotic. The Womyn’s Agenda for Change has been interviewing rural villagers in five provinces about their daily lives, including questions of debt. Over and over, they have been told of farmers who borrow from a microcredit NGO and then, when they cannot repay the principal, avoid forfeiting their land, if only for a short time, by borrowing from a village moneylender in order to repay the NGO. There are even quite a few instances of multiple borrowings: first from the NGO, then from the moneylender to pay the NGO, then from the same or a different NGO to pay the moneylender, then from the moneylender again—with the borrower usually deeper in debt each time.
WAC even found cases where a village moneylender was borrowing money from a microcredit institution at 4 or 5 percent a month and lending it to villagers at 12 or 15 percent a month. That is a real way to convert $100 of microfinance into $1,000, and it bears no relationship to Weissenberg’s picture.
Finally, I did not say that the World Bank was “foolish” about microfinance usury. I said it was complicit
https://letters2pppapers.wordpress.com/ ... rofinance/
Does any of it go towards what i said about the newspapers here having an agenda?
Thanks for that post KS, I'll reply to it tomorrow.
Anyhow, here is the journalist's right to reply.
"Letters to Phnom Penh Newspapers My way of being heard despite what editors think
Microfinance
[The first of these letters was printed in the Phnom Penh Post in September or October 2005. It produced a response from one Tom von Weissenberg, to which the second letter is a rebuttal. I don’t recall whether the second letter was printed.]
‘Role Model’ Bank
Your article about the Acleda Bank (“World Bank-IFC To Honor Acleda as ‘Role Model’”, September 23) quotes In Channy as saying that his bank charges 48 percent annual interest on small loans.
In ordinary English, this suggests that a borrower receives, say, $100, and at the end of one year pays $148 to the bank. That would be 48 percent simple interest.
However, Acleda loans (and most other small loans in Cambodia) are not repaid in this fashion. The borrower is charged a monthly interest rate and makes interest payments monthly. Acleda’s rate of 4% a month means that the borrower of $100 has the use of the full $100 for only one month; he or she returns $4 to the bank at the end of each month and therefore has the use of only $96 for the second month, $92 for the third month and so on.
By the start of the 12th month, the borrower has returned $44 and thus has the use of only $56 for the final month of the loan.
Over the course of the year, the real amount of the loan has been, not $100, but the average of the starting and finishing amounts, namely $100 + $56 divided by two, or $78. The real simple interest rate is therefore $48 divided by $78, or 61.5%. (In the past, Acleda sometimes charged 5% a month, which works out to almost 83% a year in simple interest.)
Freedom from corruption is certainly commendable, but it does not, by itself, produce any income. Usury seems to have far more to do with Acleda’s rise from a simple NGO to a multimillion dollar commercial bank. This casts a rather different light on its “incorruptibility”, which is more than just refusing to give or receive bribes.
Most NGOs enter Cambodian villages with the message, “We are here to help.” Did Acleda, in the interest of transparency, proclaim, “We are here to accumulate profits and become a bank.”?
That, after all, is what happened, and not by accident. The hard-earned riels of poor villagers paying interest of 61.5% or 83% are the source of Acleda’s wealth.
One would like to know exactly how the transfer of those funds to Acleda “benefited” the poor people who lost them. That is not the sort of question that has ever troubled the World Bank. But Cambodians should take note of what the WB considers “model” behavior.
Microcredit and the Philosophers’ Stone
Tom von Weissenberg (letter, October 3) challenges my calculation that a 4 percent monthly interest payment is the equivalent of an annual simple interest rate of 61.5 percent. He says I “forget” that the borrower should use his loan in order to make more money. He forgets that the use made of a loan has nothing to do with calculating the interest rate.
Even stranger is Weissenberg’s apparent belief that he has found the philosophers’ stone, which the alchemists thought would turn other substances into gold.
He assures us that $100 in microcredit provided to a villager will, in the course of a year, allow the family to spend $432 on their consumption ($36 a month for 12 months), and finish the year with a capital of $340. Furthermore, his villager has been able to pay $48 in interest, plus monthly expenses of $15, or $180 over the course of the year.
Add it all up, and it turns out that microfinance has transformed $100 into exactly $1,000. Moreover, Weissenberg assures us that there are 300,000 Cambodian families enjoying this magical expansion of wealth. In total, then, every year microfinance institutions transmute $30 million into $300 million for the benefit of poor Cambodians.
Clearly, we have microfinance to thank for the fact that there is no longer any poverty in Cambodia!
In the real world, things don’t work that way. The vast majority of borrowers in Cambodia have no chance at all of following the business course that Weissenberg recommends.
For example, a 1998 CDRI study, quoted in the 2004 UNDP publication, The Macroeconomics of Poverty Reduction in Cambodia, found that 90 percent of “very poor” borrowers and 78 percent of “poor” borrowers used their loans to buy rice or pay for medical treatment. Indeed, even 20 percent of “well-off” borrowers used their loans for those purposes.
Weissenberg says that the only “alternative” to microcredit is “usurers”. But lenders who charge 4 percent interest a month are engaging in usury, not providing an alternative to it.
Their rates may be lower than those of traditional village moneylenders, but their conditions are usually much harsher, which is why villagers often decide to stick with the devil they know.
And most of the time, the relationship between microfinance bodies and village moneylenders is not competitive but symbiotic. The Womyn’s Agenda for Change has been interviewing rural villagers in five provinces about their daily lives, including questions of debt. Over and over, they have been told of farmers who borrow from a microcredit NGO and then, when they cannot repay the principal, avoid forfeiting their land, if only for a short time, by borrowing from a village moneylender in order to repay the NGO. There are even quite a few instances of multiple borrowings: first from the NGO, then from the moneylender to pay the NGO, then from the same or a different NGO to pay the moneylender, then from the moneylender again—with the borrower usually deeper in debt each time.
WAC even found cases where a village moneylender was borrowing money from a microcredit institution at 4 or 5 percent a month and lending it to villagers at 12 or 15 percent a month. That is a real way to convert $100 of microfinance into $1,000, and it bears no relationship to Weissenberg’s picture.
Finally, I did not say that the World Bank was “foolish” about microfinance usury. I said it was complicit
https://letters2pppapers.wordpress.com/ ... rofinance/
See crook!!!
-
- Expatriate
- Posts: 13458
- Joined: Wed May 28, 2014 11:37 pm
- Reputation: 3974
Re: Tuk Tuks and MFIs
What to do ? Outlaw monthly interest ? Put a cap on interest lending rates ? Or stop lending to the poor ?
I really don't know anything about this or how it works in other countries - how to enforce ethical money-lending in developing countries where there is little transparency and very little rule of law.
I was shocked when I found out that in Cambodia, interest is paid monthly like this. I did try to explain to friends and family why this is not a good way to borrow money.
But what do you expect people to do when there's no alternative, because this is how it works in Cambodia ?
The Cambodian people I know who borrow money like this are not starving, they are gambling that the land they buy on credit will increase in value, or the restaurant they open will be a huge success. They want to be rich and provide for their families.
What to do ? If one institution won't lend the money, they will go elsewhere. The interest terms seem to be irrelevant.The dream is there and it needs money.
I really don't know anything about this or how it works in other countries - how to enforce ethical money-lending in developing countries where there is little transparency and very little rule of law.
I was shocked when I found out that in Cambodia, interest is paid monthly like this. I did try to explain to friends and family why this is not a good way to borrow money.
But what do you expect people to do when there's no alternative, because this is how it works in Cambodia ?
The Cambodian people I know who borrow money like this are not starving, they are gambling that the land they buy on credit will increase in value, or the restaurant they open will be a huge success. They want to be rich and provide for their families.
What to do ? If one institution won't lend the money, they will go elsewhere. The interest terms seem to be irrelevant.The dream is there and it needs money.
-
- Expatriate
- Posts: 769
- Joined: Mon Jun 26, 2017 9:37 am
- Reputation: 72
Re: Tuk Tuks and MFIs
Let the industry experts who criticize the MFIs and MFOs answer that. Some of their recommendations are in the full report below.Anchor Moy wrote: ↑Wed Jul 12, 2017 1:37 am What to do ? Outlaw monthly interest ? Put a cap on interest lending rates ? Or stop lending to the poor ?
I really don't know anything about this or how it works in other countries - how to enforce ethical money-lending in developing countries where there is little transparency and very little rule of law.
I was shocked when I found out that in Cambodia, interest is paid monthly like this. I did try to explain to friends and family why this is not a good way to borrow money.
But what do you expect people to do when there's no alternative, because this is how it works in Cambodia ?
The Cambodian people I know who borrow money like this are not starving, they are gambling that the land they buy on credit will increase in value, or the restaurant they open will be a huge success. They want to be rich and provide for their families.
What to do ? If one institution won't lend the money, they will go elsewhere. The interest terms seem to be irrelevant.The dream is there and it needs money.
From 2002!
"People don't have the skills to use the money for small business and can't
do calculations," he explains. "This is very serious. NGOs should take
into consideration how they operate because it damages people's lives."
Regional comparisons make interesting reading. AusAID says interest rates vary widely
between different countries: specialized micro-finance providers in Bangla-desh charge
20-30 percent a year, while rates of between 30-70 percent are the norm in the Philippines,
although subsidized government and donor projects often charge less.
Nepal's Nirdhan Utthan Bank charges 20 percent on group-based loans, but best of
the bunch is Vietnam, where the Vietnam Bank for the Poor is the only source of significant
domestic funding for MFIs. It caps the rate micro-credit lenders can loan on its
funds at only 7 percent a year.
The National Bank of Cambodia (NBC) and the Rural Development Bank (RDB) told the
Senate forum that rates here are too high.
"The interest rate is very high," said Kim Vada, NBC's deputy director
of supervision. "The NBC has held seminars to try to explain to MFIs how to
bring down the interest rates, but interest rates cannot be defined [by the government]
because Cambodia is a free market economy."
Well it took 15 years and the PM's private survey to force the NBC to bring the interest rates down. They're still one of the highest rates in Asia. Note how Vietnam funds it's MFI projects. Bloody commies.
Things have increased 10,000 fold in the MFI/MFO loan saturation since 2002.She said the privatization of natural resources, health care and education costs
have increased people's vulnerability so that illness or floods will tip them over
the edge into a cycle of poverty, debt and migration.
Another major criticism is that some defaulters are forced to sell their land or
other assets to repay. In 2000, Oxfam-GB studied 39 families in two districts. It
found that micro-credit loans were a crucial factor contributing to landlessness.
Almost half the respondents said that they would not have sold their land if they
had not received a loan.
Rasmussen believes some NGOs are loaning money to people who don't have the ability
to repay.
"This forces people into debt and often they may lose land, a cow or a moto.
In the worst possible scenario the husband may have to go to Thailand to work and
they may have to sell their daughter to a brothel," she says.
WAC's Barbero concurs, saying that micro-finance can lead to poverty, migration,
bad health, and young women having to seek employment in brothels.
"This makes people very vulnerable; they have no education and have to sell
off land to pay back debts," she says.
And what about those loan sharks? Aren't they worse?
I'm going to post the full article with the hope that at least one person reads it.The idea that MFOs have forced down interest rates due to increased competition is
widespread. However some point out the philosophical difference between private business
people loaning cash, and NGOs which are not-for-profit, donor-funded organizations
with different ideals.
"The claim that these NGOs are better than money-lenders is ludicrous,"
says WAC's Barbero. "To say one form of extortion is less harmful than another
is irrelevant."
And there is no doubt that some people who fall into arrears are forced to borrow
money from the loan sharks to pay back their debt to the MFOs. Elizabeth Abrera,
credit program manager for Catholic Relief Services/TPC, admits that does happen,
but says it is impossible to follow up since her organization has 27,000 clients
Again from 2002. Lots about how NGOs started and ran them and the rise from the beginning of ACLEDA.
http://m.phnompenhpost.com/national/mic ... lping-whom
"
The Phnom Penh Post
Micro-finance: who's helping whom?
25 May, 2002 Caroline Green
PRISON OR PROSPERITY? Critics question whether micro-finance
operators really are helping the poor
The practice of micro-financing was dragged into the spotlight after a recent
Senate hearing criticized micro-finance institutions (MFIs) for their high interest
rates. Senators said that loan rates of up to 60 percent a year cripple the poor,
line the pockets of MFIs and increase rural poverty.
Those rates come in a country that has enjoyed inflation rates in the low single
figures in recent years, a trend the Cambodian Development Resource Institute ascribes
to dollarization of the economy.
Senators also cited widespread lack of education, poor training of borrowers, and
the absence of micro-finance legislation as major factors forcing some rural borrowers
to sell land and possessions to repay loans.
Critics of micro-finance operators (MFOs) are not only found in the Senate. Director
of Oxfam's Womyn's Agenda for Change (WAC), Rosanna Barbero, says micro-finance has
been a failure in terms of its touted goal of alleviating poverty.
"It puts people in a cycle of poverty," she says. "It is a revenue
spinner, a tool of control. It is used by NGOs so they can mobilize the people when
they need to."
Yet credit schemes are run successfully in some developing nations. Predictably,
within Cambodia opinions differ on the best way forward, but proponents insist that
it reaches those who are too poor to borrow from commercial banks and helps tens
of thousands take control of their lives.
In Channy, director at Acleda Bank, the country's biggest MFO, takes that view.
"Micro-finance plays a big role in poverty alleviation in Cambodia," says
Channy. "It can help reduce transaction costs of customers. It helps people
generate income and provides job opportunities."
Critics respond that it can do those things, but question the way the various programs
are run.
Cambodia's banking system was completely destroyed during the Khmer Rouge period.
These days around 90 percent of the population has no access to formal credit.
So in the early 1990s NGOs started providing credit services for the rural poor as
part of their development programs. Acleda was established as an NGO in 1993 by the
International Labor Organization and the UN Development Programme. It registered
as a specialized bank in October 2000. Today it is the country's biggest MFO with
a loan portfolio of nearly $22 million.
There are between 50-70 registered and unregistered small lenders. Two are licensed
MFIs: EMT and Hattha Kaksekar. Around 25 more small loan operators are registered
with the NBC. At least as many operate without accreditation.
The top five players dominate the market: Acleda, EMT, Hattha Kaksekar, PRASAC and
Seilanithih account for 84 percent of all loans. International NGOs (INGOs) operate
credit programs and also fund local NGOs to start their own schemes.
Continue reading
Spoiler:
See crook!!!
- bolueeleh
- Expatriate
- Posts: 4448
- Joined: Fri Jan 29, 2016 12:39 am
- Reputation: 842
- Location: anywhere with cheap bonks
Re: Tuk Tuks and MFIs
paper pushers with no boots on the ground giving thesis on micro financing in KOW, laughable, why post this article that is published in 2002?
Money is not the problem, the problem is no money
-
- Expatriate
- Posts: 769
- Joined: Mon Jun 26, 2017 9:37 am
- Reputation: 72
Re: Tuk Tuks and MFIs
Who exactly are these paper pushers you're talking about? Journalists? Lmfao.
Or groups that work closely with villagers and have done so for years.
There's always one isn't there? Except in Cambodia where there are a few more.
See crook!!!
- bolueeleh
- Expatriate
- Posts: 4448
- Joined: Fri Jan 29, 2016 12:39 am
- Reputation: 842
- Location: anywhere with cheap bonks
Re: Tuk Tuks and MFIs
can i ask what is your interest in MFI to begin with? do you want to start a MFI? or are you already operating one but now faces problems so you airing your grievances online? not trying to be mean or anything but just curious and know where you are coming from. thanksAlonzoPartriz wrote: ↑Fri Jul 14, 2017 10:13 amWho exactly are these paper pushers you're talking about? Journalists? Lmfao.
Or groups that work closely with villagers and have done so for years.
There's always one isn't there? Except in Cambodia where there are a few more.
Money is not the problem, the problem is no money
-
- Expatriate
- Posts: 769
- Joined: Mon Jun 26, 2017 9:37 am
- Reputation: 72
Re: Tuk Tuks and MFIs
My mum said I was dropped on my head as a baby. Oh wait a minute, that was your mum and you.bolueeleh wrote: ↑Fri Jul 14, 2017 10:20 amcan i ask what is your interest in MFI to begin with? do you want to start a MFI? or are you already operating one but now faces problems so you airing your grievances online? not trying to be mean or anything but just curious and know where you are coming from. thanksAlonzoPartriz wrote: ↑Fri Jul 14, 2017 10:13 amWho exactly are these paper pushers you're talking about? Journalists? Lmfao.
Or groups that work closely with villagers and have done so for years.
There's always one isn't there? Except in Cambodia where there are a few more.
Ask a stupid question ...
See crook!!!
- bolueeleh
- Expatriate
- Posts: 4448
- Joined: Fri Jan 29, 2016 12:39 am
- Reputation: 842
- Location: anywhere with cheap bonks
Re: Tuk Tuks and MFIs
My mum said I was dropped on my head as a baby. Oh wait a minute, that was your mum and you.AlonzoPartriz wrote: ↑Fri Jul 14, 2017 10:27 am
can i ask what is your interest in MFI to begin with? do you want to start a MFI? or are you already operating one but now faces problems so you airing your grievances online? not trying to be mean or anything but just curious and know where you are coming from. thanks
Ask a stupid question ...
[/quote]
ok, a well mannered question met with personal sarcastic attack, now we know where you are coming from, goodbye asshole, end of convo
Money is not the problem, the problem is no money
- vladimir
- The Pun-isher
- Posts: 6077
- Joined: Mon May 12, 2014 6:51 pm
- Reputation: 185
- Location: The Kremlin
Re: Tuk Tuks and MFIs
Normally I'd stay out of this, but tbf you did also dismiss the report with your remark about paper-pushers, I think his sarcasm was in response to that, not your later polite question...which, though on the face of it seems polite, could be viewed as kind of snarky, given your 'paper-pusher remark. Why should eh have to explain his interest?
If I say I'm interested in whatever, and post on it', do I have to explain why?
Jesus loves you...Mexico is great, right?
-
- Expatriate
- Posts: 769
- Joined: Mon Jun 26, 2017 9:37 am
- Reputation: 72
Re: Tuk Tuks and MFIs
To be honest, he seemed to be asking the general question of " Why are there socialists in the world mummy?"
There's no real way of answering that if a grown man still hasn't worked it out.
There's no real way of answering that if a grown man still hasn't worked it out.
See crook!!!
-
- Similar Topics
- Replies
- Views
- Last post
-
- 0 Replies
- 1067 Views
-
Last post by rubberbaron
-
- 8 Replies
- 2644 Views
-
Last post by daeum_tnaot
-
- 15 Replies
- 2231 Views
-
Last post by Tootsfriend
Who is online
Users browsing this forum: Ahrefs [Bot], ali baba, J. Visiting, johnny lightning, Malicious123, phuketrichard, steevee and 608 guests