Hedge Funds Gamble on Poor in `Simpsons' Farce: William Pesek

Discussion in 'Economy' started by hvactec, Aug 5, 2010.

  1. hvactec

    hvactec VIP Member

    Jan 17, 2010
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    New Jersey
    Betting on the poor has never been this profitable or this tasteless.

    Just ask the good folks at George Soros’s Quantum (M) Ltd., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Nomura Holdings Inc. Funds they control stand to make a bundle on SKS Microfinance Ltd.’s initial public offering.

    Never mind that bankers’ disregard for the poor necessitated the creation of microfinance. Wall Street investment banks and hedge funds alike now see value in the poor of India, where about 120 million households have no access to banking. All’s fair in love, war and finance, right? Wrong.

    This is a sad day for a grass-roots phenomenon that has altered the lives of millions. Be it the widow in Bangalore seeking $100 to buy a cow, the man in Lagos eyeing $75 for a used motorbike or the family in Jakarta looking for $30 for a mobile phone, microfinance is changing the face of development.

    The Nobel Peace Prize committee underlined the point in 2006, when it honored Muhammad Yunus, founder of Bangladesh’s Grameen Bank. Conceived in 1976, Grameen inspired countless copycats to provide credit where it is most needed.

    It’s strangely fitting that Yunus plans to star in an episode of “The Simpsons” later this year. His life’s work risks being turned into a farce in the name of shareholder value. Yunus has been vocal in concerns that micro lending is about to morph into just another money-making business.

    $353 Million

    Yes, I know what the investment set thinks of all this. The IPO by India’s largest microfinance lender could bolster credit in Asia’s third-biggest economy. SKS is seeking to raise as much as $353 million, money that could be deployed widely among India’s 1.2 billion people -- perhaps at lower interest rates.

    Nice theory, but good luck making it real. Over time, you can bet shareholders will wonder why profits and dividends aren’t higher. Oh, they’ll say, why did we make this massive block of less-than-lucrative loans in Goa or Kolkata? Microcredit was supposed to be about alleviating poverty and reducing dependency on an inefficient state.

    full story Hedge Funds Gamble on Poor in `Simpsons' Farce: William Pesek - Bloomberg

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