Home » FINANCE » Demonetisation Temporary Solution to End Black Money: Prof. Yunus

Demonetisation Temporary Solution to End Black Money: Prof. Yunus

rp_300px-Professor_Muhammad_Yunus-_Building_Social_Business_Summit_8758300102.jpg

Prof Muhammad Yunus, founder of microfinance system and Nobel Laureate

As experts are cautiously making their views known about the demonetisation move of India, microfinance founder and Nobel laureate Prof. Muhammad Yunus said on Saturday that it was a temporary solution and not long lasting as expected.

Unless sustainable process is put in place, the system will remain locked in for black money as ever, he told ET. “Demonetisation does not solve the problem of the process which created it. The system which created the black money will remain in place unless that becomes our next attention point. We may clean up once, but again it will come back unless the government pays attention to the processes and solves the problem permanently,” he said.

Comparing the current situation with a leaking tap in any house, he said, “I was cleaning up the water on my floor and I was working very hard to get everything cleaned but I did not close the faucet that produces this water. The faucet has to be shut so that it doesn’t flood the floor again.”

He insisted that the process is the most important thing. One door is closed means, people would resort to other means. “Government may not be as successful. We have to root out the process itself,” he said.

Expressing concern about collection holidays given by Indian microfinance institutions (MFIs) to their borrowers in the last 11 days, Yunus said this could become a habit to default payments in the future leading to a major delinquency problem in India in the microfinance sector.

“I hope this is very short lived so that it doesn’t become a habit,” he said. He said the concern among the MFIs is already there with many of them reporting a dramatic fall in their repayments owing to non-availability of small currency. This is the only sector in Indian banking system to have boasted of 99% repayment rates in the last five years and was seen as the real hope to reach the rural segment of the country.

Already, the microfinance sector is reporting a shortfall of Rs 500 crore in recollection of payments from borrowers and the disbursal side is showing a Rs.650 crore shortage sending warning signals to the sector which is very sensitive about its repayments on weekly basis. Microfinance loans are given without collateral and use of force is banned while collecting the repayments.

Prof. Yunus has been focusing on Social Business in recent years to drive home the point that business is still possible with social service as motto. He is in Mumbai to start a co-venture with Tata Trusts to launch the Indian Corporate Action Tank (ICAT), an incubator for corporates to create social business ventures.

Leave a Reply

Your email address will not be published. Required fields are marked *

*