Trouble at Grameen Bank?

Repayment rates are falling at the world’s most famous microfinance institution, Grameen Bank. David Roodman is worried:

  • I do not know whether Bangaldesh’s microcreditors are in major trouble. But if they are, the beginning of the end would manifest much as in the graphs above.
  • It is tempting to link the degradation in the Bank’s portfolio to the mysterious dismissal of Deputy Managing Director Dipal Barua in December. I have no evidence for a link. However, when a financial institution forces out its head of operations while key indicators are going south, it raises questions. Shareholders—in this case, mainly the Bank’s members—as well as other stakeholders deserve an explanation.
  • A crisis in Bangladesh, akin to recent ones in Bosnia and Herzegovina, Morocco, Pakistan, and parts of India, would tarnish the image of microcredit worldwide, perhaps permanently.
  • Other microcreditors should quickly match Grameen’s standards of financial disclosure so that we can get a better read on the extent of lending trouble.

Hopefully David’s fears will come to nothing, but he has established himself as a sharp-eyed and constructive critic of microfinance.

Here’s an earlier feature I wrote about the big trends in microfinance.

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Tim, also known as the Undercover Economist, writes about the economics of everyday life.