Microcredit and religions : with a focus on Hinduism

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Microcredit and religions with a focus on
Hinduism

• Dr. Arvind ASHTA
• Microfinance Chair
• Burgundy School of Business
• CEREN, CERMi

My thanks to Banque Populaire de Bourgogne
Franche Comté
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Religion and Microfinance
RelIgion
Microfinance
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Yet not much research done on theseAbstracts in
EBSCO on Dec 21, 2009
Default terms Alone (Religion or religious) AND (Religion or religious) AND (entrepreneur OR entrepreneurial Or entrepreneurship) AND (Religion or religious) AND (finance Or Financial) AND
Religion OR religious 49031 xxx xxx xxx
entrepreneur OR entrepreneurial OR entrepreneurship OR business OR enterprise 2051476 4426 xxx 614
Finance or financial 1499043 2447 614 xxx
Microfinance OR microcredit 1699 16 6 2
Microentrepreneur OR microenterprise 412 4 1 3
3 are common, so 17 total
Note last two columns are subsets of preceding
column)
Ashta De Selva, 2010)
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Our possible research QuestionsAshta De Selva
2010
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The spiritual and the material

• Very broad questions.

• Lybbert (2008)

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Backgound information on some religionsAttuel-Men
des, Ashta Pic, 2011, Ashta 2011
Hinudism Judaism Christianity Islam
Origin 3000 BC or before 3000 BC 0 600 AD
Gods Monotheist Polytheist Pantheist Dualistic Qualified monism Monotheist Monotheist Monotheist
Scriptures Vedas, Upanishads, Shastras Puranas Pentateuch of the Bible (Torah) Bible and Gospels Koran
Sects Many, examples Sanatam Dharam, Arya Samaj but also offstreams such as Budhism, Jainism, Sikhism Orthodox Roman Catholic, Protestants (many) Sunni Shiites Ismailies (Aga Khan)
Symbols
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How is money viewed in these relgions
Hinudism Judaism Christianity Islam
Duty, Money, Pleasure and Salvation are the four principles virtues / aims Divergent interpretations on the texts of Genesis Roman Catholics don't talk about money Trade and Allah mentioned by the prophet
Central role given to Lakshmi, the Goddess of fortune Protestants consider it as a reward for hard work Distinct field of islamic finance
The Goddess is fickle and the Gods and the Rakshasas fight over her Questions the possibility of making money with money Money by itself is unproductive
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Interest rates and religion
Hinduism/ India Judaism Christianity Islam
Manusmriti up to 60 per annum according to caste Arthashastra up to 240 per year for sea voyages (high risk) Prohibition of Tarbes (practical interest) Initially between Jews, Prohibition in Antiquity and Middle Ages "Money does not use" Riba is one of three major prohibitions
Pious obligation with real estate, three generations have to pay with interest Dampudat (with no inheritance) sons still need to pay with interest but next two generations without interest (Sharma 2011) Can charge interest for non-Jews Thomas Aquinas (thirteenth century) relaxation of the ban No prohibition of money lent for remuneration or profit Principle of sharing profits and losses
The role of Karma Cannot leave a loan unpaid in this life because may be indebted in future ones (Seibel Nurcahya 2009) Today Legitimacy of lending at interest In many countries, both islamic finance and normal finance
Ordinance in October 2010 to 100 capping the interest rate in Andhra Pradesh May 2011 RBI caps at 26 if MFI wants to benefit from priority sector status Ceilings in some developed countries and not in others Ceilings of 27 in B'Desh and W. Africa
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MFIs and religion
Hinduism/ India Judaism Christianity Islam
The power of customary governance in financial institutions of the customary village and the Balinese culture of honoring ones obligations have played a role. (Seibel Nurcahya 2009) The customary system is comprised of customary villages (desa adat, desa pakraman) and constituent customary communities (banjar) United Jewish Social Fund Catholic Committee against Hunger and for Development (CCFD) Study in Indonesia (Seibel, 2008)
SKDRDP Rural development program started from a Hindu Temple run by a Jain priest. (Harper et al , 2008) Not exclusively reserved to the Jewish community Oikocredit coopertive (protestant) but loans to all Rural banks, including Islamic rural banks, have not done well in Indonesia. Unsupervised cooperatives, including Islamic, are dangerous to savers (Seibel 2008)
Interest rates of 12.5 to 13.5 (compared to 24 to 30 by for-profit top ten MFIs) Interest Rate 0 Interest rate varies with the country Mudarabah (investing) Murabahah (purchase and sale) Charitable Loans Qard al-hasan Development of a microfinance based mainly on Islamic Murabahaj (purchase and resale)
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Figure 1 The development perspective places the
microentrepreneur at the centre
SKDRDP furnishes microfinancing
The temple creates the trust in SKDRDP
Micro Entrepreneur
SKDRDP furnishes raw material
SKDRDP does the marketing
SKDRDP furnishes technical advice
Ashta 2011
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Figure 2 SKDRDP uses outside processing
SKDRDP
Raw Materials
Finished Goods
Outside processing
Microentrepreneur
Microentrepreneur
Microentrepreneur
Ashta 2011
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References

• Harper, Rao and Sahu (2008),  Development,
  Divinity and Dharma The role of religion in
  development and microfinance institutions,
  Practical Action Publishing, Rugby, UK
• Lybbert, T.J. (2008). Exploring the Role of
  Spiritual Capital in Poverty Traps and
  Microfinance. Faith and Economics(51), 57-79
• Seibel, H.D. (2008) Islamic Microfinance in
  Indonesia The Challenge of Institutional
  Diversity, Regulation, and Supervision, Joumal of
  Social Issues in Southeast Asia Vol. 23, No. 1,
  pp. 86 -103
• Seibel Nurcahya (2009) Growth and Resilience
  of Savings-based Microfinance Institutions in the
  Face of Adversity The Case of the Lembaga
  Perkreditan Desa in Bali
• Ashta De Selva (2010) Religious Practice and
  Microcredit Literature Review and Research
  Directions
• Attuel-Mendes, Ashta Pic (2011) Microcrédit et
  religions regards croisés, présentation à
  Strasbourg
• Ashta (2011) Hinduism and Microfinance
• Sharma, A. (2011) Principles of Finance in
  Hinduism, Agefi, Luxemburg