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Re James Fulford's Post: Microloans May Be Just Another Form Of Welfare
A Reader writes:
To me as a CPA, there is only one issue here. Are the interest rates charged by Grameen Bank high enough to let it make a profit? If so, there is no welfare. Otherwise, it's another IMF-like scam
James Fulford replies: The point of Jeffrey Tucker's article, [Microcredit or Macrowelfare: The Myth of Grameen] is that there's no accountability, and no-one can know for sure if there's more money going in than coming out.
In 2001, the Wall Street Journal's Daniel Pearl and Michael Phillips revealed that the repayment rate of their loans isn't anywhere near what the bank claims, that at least one quarter of its loans were being used for consumption, that the bank delays defaults and hides problem loans, that the bank isn't subject to any kind of serious supervision, public or private. The government owns 6% of its assets, while the rest is only superficially owned by borrowers who cannot sell or trade their stock.
The Wall Street Journal story, [Grameen Bank, Which Pioneered Loans For the Poor, Has Hit a Repayment Snag By Daniel Pearl and Michael M. Phillips, The Wall Street Journal November 27, 2001] has an ominous reminder of why we want people from this region to stay home; one of the two writers is now dead. Daniel Pearl was murdered by jihadis in Karachi in February of 2002.