This refers to Vijay Mahajan’s article “Micro loans, macro results” (October 16). I fail to understand the examples of return on investment by poor people given in the article. Mr Mahajan has simply taken the increase in realisation over the investment as profit and derived the percentage as return on investment. What about the effort and labour provided by the poor labourer to achieve this profit? The author has treated him as an absentee investor. This is an absolutely unacceptable method of calculating the return on investment.
SKS Microfinance has minted money on its investment at the cost of the poor whom it should have helped. Otherwise, how can it sell a Rs 10 share for a price above Rs 900 after only a few years of operation? I hope the government caps the interest chargeable at a maximum of 24 per cent including delivery costs, tax and return on investment. Microfinance institutions should not be allowed to become bloodsuckers of the poor.
R P Garga, on email
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