Image via CrunchBaseNetflix has a market value of $10 billion. The New York Times has a market value of barely one billion dollars. Articles like this one are the reason why. This feels like a hachet job done by a Vinod Khosla enemy. The title of the article itself is so out of the whack. The microfinance industry in India is nowhere close to collapsing. Not even close. The article itself talks about how 1% of those who borrowed the money might no longer be able to pay. That is not a collapse. That is an excellent default rate. The default rates at big New York City banks that rich people and companies borrow from are much higher. And I am talking pre Great Recession numbers.
Image via CrunchBaseJust like the default rate remains low, yes, there are borrowers who have committed suicide because they could not pay back. But the article makes it sound like the microfinance industry in India has given rise to a country wide epidemic of suicides. People are committing suicide left and right by the roadside. That would be like taking the news of one Congresswoman in Arizona getting shot and making it sound like now there was a raging civil war in America.
This is a man bit dog story out of dog bit man material.
New York Times: November 2010: India Microcredit Faces Collapse From DefaultsThe article claims Indian banks have $4 billion tied up in microfinance. And that because of the "collapse" of the microfinance industry, India's financial sector at large could collapse. This claim is so ridiculous. If Indian banks were to lose four billion dollars, that would be a yawn. This writer seems to think of India as a recovering former colony of Britain. The truth is India could buy Britain five times over. Plus or minus four billion dollars, Indian banks are going to do just fine.
First of, it is not like the microfinance sector in India is about to see a 100% default rate. So if the figure is closer to 1% or 2%, that is a loss of
Image via Wikipediamaybe 50 million dollars. To suggest the Indian economy would collapse if Indian banks lost 40 million dollars is, I mean. Who is this guy? Mittal - the richest Indian in the world - flushes 40 million dollars down his toilet every other month. This article absolutely lacks context and perspective. It has done enormous damage to the microfinance industry globally. Or maybe this writer never heard of the Taj Mahal.
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