microcredit and religions : with a focus on hinduism dr. arvind ashta microfinance chair burgundy...
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Microcredit and religions : with a focus on Hinduism
Dr. Arvind ASHTAMicrofinance Chair
Burgundy School of Business CEREN, CERMi
European Microfinance Week, Luxemburg3 -4 nov 2011
My thanks to Banque Populaire de Bourgogne Franche Comté
Religion and Microfinance
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RelIgion Microfinance
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
Note: last two columns are subsets of preceding column)
3 are common, so 17 total
Ashta & De Selva, 2010)
Our possible research QuestionsAshta & De Selva 2010
The spiritual and the material
Very broad questions…. Lybbert (2008)
Backgound information on some religionsAttuel-Mendes, Ashta & Pic, 2011, Ashta 2011
Hinudism Judaism Christianity Islam
Origin 3000 BC or before 3000 BC 0 600 AD
Gods MonotheistPolytheistPantheistDualisticQualified monism
Monotheist Monotheist Monotheist
Scriptures Vedas, Upanishads, ShastrasPuranas
Pentateuch of the Bible (Torah)
Bible and Gospels Koran
Sects Many, examples: Sanatam Dharam, Arya Samaj but also offstreams such as Budhism, Jainism, Sikhism
OrthodoxRoman Catholic, Protestants (many)
SunniShiitesIsmailies (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 IslamManusmriti: up to 60% per annum according to casteArthashastra: 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 interestDampudat (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 profitPrinciple 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 PradeshMay 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 thecustomary village and the Balinese culture of honoring one’s 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-hasanDevelopment 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
MicroEntrepreneur
SKDRDP furnishes raw
material
SKDRDP does the
marketing
SKDRDP furnishes
microfinancing
SKDRDP furnishes technical advice
The temple creates the trust in SKDRDP
Ashta 2011
Figure 2: SKDRDP uses outside processing
SKDRDP
Microentrepreneur
Microentrepreneur
Microentrepreneur
Raw Materials
Finished Goods
Outside processing
Ashta 2011
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
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