Farm loan waiver a failure of system, says Nobel laureate Muhammad Yunus

Yunus who is a pioneer in the field of microfinance and microcredit, said farmers should be enabled to repay the loans themselves instead of having to provide loan waivers.

Bangladeshi economist and Nobel laureate Muhammad Yunus, on Monday, termed the loan waivers extended to farmers “a failure of system”. He critiqued the system saying financial institutions provide loans to those “who already have money”.

Nobel laureate Muhammad Yunus at his lecture in University of Mumbai on Monday. (Anshuman Poyrekar/HT Photo)

Yunus, who is a pioneer in the field of microfinance and microcredit, said farmers should be enabled to repay the loans themselves, instead of having to provide loan waivers. “We should build a system where waivers are not necessary,” said the 2006 Nobel laureate, on the sidelines of the Indian Merchants’ Chamber - Pravinchandra V Gandhi Memorial Lecture at University of Mumbai on Monday .

Yunus is the founder of Grameen Bank – which provides small loans to poor people without any collateral — and more than 50 other companies in Bangladesh.

The remarks by Yunus come after CM Devendra Fadnavis announced a ₹34,022-crore farm loan waiver in June last year, initially estimated to help 8.9 million farmers. However, the number of eligible beneficiaries was revised to 5.6 million.

Yunus said the present situation is a result of financial institutions adhering to “old rules” of lending money. He emphasised on the need to provide financial help to the impoverished. For the economies to develop, banks have to become “people worthy” and empower them, he said.