Tuesday, February 18, 2014

RE: [MFP] Digest Number 3717

 

Thanks Ratnesh! For our non-Indian friends, I am taking the liberty of inserting the figures in US$s (roughly $ 1 = 60 Indian Rupees).

 

Great to see such an affirmative policy creating impact in real numbers. Btw, would you have access to any study on India's priority sector lending policies  on poverty lending?

 

 

Here is another view of how overall formal credit delivery is regionally skewed in Indian banking system.

 

 

Source: http://capitalmind.in/2013/04/30-of-all-bank-deposits-are-in-mumbai-and-delhi/

It provides some very useful insights.

 

the question remains: does an Act like Equal Credit Opportunity (of US) help reduce discrimination for poor/ marginalized at the systemic level? On the other hand, is the banking system justified in their credit policies to remain more cautious against higher risk communities / citizens? In a privatized banking system, where credit policy is legitimately a factor of depositors' safety and shareholders' return; what legitimate means and grounds do we have to argue against?  ECOA seems to provide a middle-ground, ensuring transparency in information (if nothing else).  But maybe not as effective in fighting discrimination as one would like?   

 

Thanks and best regards,

 

Anuj

 

 

 

 

From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com] On Behalf Of Ratnesh
Sent: Tuesday, February 18, 2014 11:37 AM
To: microfinancepractice@yahoogroups.com
Subject: Re: [MFP] Digest Number 3717

 

 

Dear Anuj,

 

You have raised a very pertinent issue regarding barriers that certain communities face related to access to finance. I would like to share the Indian experience on removing / reducing these barriers through concerted action at the highest levels of government.

 

As many of the members may recall that India had constituted a High Level Committee under the Chairmanship of Justice (Retired) Rajinder Sachar to gather data/ information for preparation of a comprehensive report on the social, economic and educational status of the Muslim community of India had made specific recommendations to remove these barriers. I would like to draw the attention of the members to a recent update on the status of compliance to these recommendations by the concerned ministries (http://www.minorityaffairs.gov.in/sites/upload_files/moma/files/Sachar_Committee-Status_of_Follow-up_action_on_decisions.pdf). The section on credit is relevant for the discussion as there is a gradual positive trend in improved access to credit by minorities.



The Union finance minister during his interim budget presentation made on 18 February 2014 madetwo announcements regarding financial access to excluded communities:

 

"Ten years ago, the minorities had 14,15,000 bank accounts in 121 districts of India where there is a concentration of minorities. At the end of March, 2013, they had 43,52,000 accounts and the volume of lending had soared from INR 4,000 crore ($ 665 million) to INR 66,500 crore ($11 Billion). Loans to minority communities in the whole country stood at INR 211,451 crore ($ 35 billion) at the end of December 2013."



He has also proposed to provide an initial capital of INR 200 crore ($33 million) to set up a Venture Capital Fund for Scheduled Castes in order to promote entrepreneurship among the scheduled castes and to provide concessional finance to them.



It would be interesting to further examine the impact of these positive developments on the financial access questions that are being raised in various fora.



Best regards



Ratnesh





3 Messages

Digest #3717

Messages

Mon Feb 17, 2014 8:20 am (PST) . Posted by:

"Anuj Jain" jainanuj



We in the sector have often talked and debated about 'right to capital or a loan', and if that is indeed a right, or is rather a privilege that one must earn by building one's credit worthiness. Some years ago, Prof. Yunus had created quite a debate by saying that it can be considered as a fundamental right.

Regardless of that debate, here is this example, from USA, of this Equal Credit Opportunity Act; which does not give a right to borrow, but at the same time, stops the lending institutions from discriminating against any group of people or individual for accessing credit.

Federal Fair Lending Regulations and Statutes
Equal Credit Opportunity

The Equal Credit Opportunity Act (ECOA) of 1974, which is implemented by the Board's Regulation B, applies to all creditors. The statute requires financial institutions and other firms engaged in the extension of credit to ''make credit equally available to all creditworthy customers without regard to sex or marital status.' ' Moreover, the statute makes it unlawful for ''any creditor to discriminate against any applicant with respect to any aspect of a credit transaction (1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); (2) because all or part of the applicant' s income derives from any public assistance program; or (3) because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.''

Read on for more details...
http://www.federalr eserve.gov/ boarddocs/ supmanual/ cch/fair_ lend_reg_ b.pdf

I wonder if such / similar laws exist in other countries; and what have been practical implications of this Act in USA? Will look forward to hear back.

Best,
anuj

Anuj K. Jain
Sr. Coady Fellow| Microfinance and Development| COADY International Institute
St. Francis Xavier University, Antigonish, Nova Scotia, B2G 2W5| Ph: 902-872-0521
[cid:image001.jpg@ 01CF2BD5. 3B5DDFB0]

Mon Feb 17, 2014 6:22 pm (PST) . Posted by:

"Meyer, Richard"

You probably know that there has been a large debate over the years in the US about redlining, the practice of outlining geographic areas of housing (may be poor, deteriorated, occupied by minorities) and make fewer or no loans within those areas. There have been many attempts to measure the phenomena, and reduce the problem through various means when it is found. I do not know about the current state of the research regarding the issue. It is argued that government policies to stimulate home ownership, including relaxed credit underwriting, is one of the causes behind the financial collapse a few years ago. There are allegations that minorities were charged higher rates and given tougher terms for loans made during this period. Dick

From: MicrofinancePractic e@yahoogroups. com [mailto:MicrofinancePractic e@yahoogroups. com] On Behalf Of Anuj Jain
Sent: Monday, February 17, 2014 10:59 AM
To: MicrofinancePractic e@yahoogroups. com
Subject: [MFP] The Equal Credit Opportunity Act / USA

We in the sector have often talked and debated about 'right to capital or a loan', and if that is indeed a right, or is rather a privilege that one must earn by building one's credit worthiness. Some years ago, Prof. Yunus had created quite a debate by saying that it can be considered as a fundamental right.

Regardless of that debate, here is this example, from USA, of this Equal Credit Opportunity Act; which does not give a right to borrow, but at the same time, stops the lending institutions from discriminating against any group of people or individual for accessing credit.

Federal Fair Lending Regulations and Statutes
Equal Credit Opportunity

The Equal Credit Opportunity Act (ECOA) of 1974, which is implemented by the Board's Regulation B, applies to all creditors. The statute requires financial institutions and other firms engaged in the extension of credit to ''make credit equally available to all creditworthy customers without regard to sex or marital status.' ' Moreover, the statute makes it unlawful for ''any creditor to discriminate against any applicant with respect to any aspect of a credit transaction (1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); (2) because all or part of the applicant' s income derives from any public assistance program; or (3) because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.''

Read on for more details...
http://www.federalr eserve.gov/ boarddocs/ supmanual/ cch/fair_ lend_reg_ b.pdf

I wonder if such / similar laws exist in other countries; and what have been practical implications of this Act in USA? Will look forward to hear back.

Best,
anuj

Anuj K. Jain
Sr. Coady Fellow| Microfinance and Development| COADY International Institute
St. Francis Xavier University, Antigonish, Nova Scotia, B2G 2W5| Ph: 902-872-0521
[cid:image001.jpg@ 01CADFB8. 12862C40]

Tue Feb 18, 2014 4:05 am (PST) . Posted by:

"Anuj Jain" jainanuj

From my living in US during 2001-2005, I had some exposure to this debate, but must admit that I have not kept up on the subject since, except for the crisis in 2008 that was largely blamed on poor housing lending practices. Your brief analysis shows the double edginess of credit as a right. For Banks, damn if you do and damn if you don't. And yet, millions are excluded from capital access because of risk perception or prejudice, or both.

May be the experience of US with 'equal opportunity&# 39; act (and other places where such acts may exist) would be worth studying further; as we encourage policies shift in other countries. Would AFI be a good custodian to look into this?

Please do share if you can, anything else that may be available from US experience.

Regards,

Anuj

p.s. in my brief read of recent reports that showed up on google search; those reports suggest two important points. a. proportion of current risk on high-end real-estate defaults is very substantial in US market (63%!), and b. most of the defaults on housing loans have shifted from sub-prime to prime borrowers (which means, those with high credit rating are higher percentage of defaulters) after 2009 due to rising unemployment. I would search for papers that show, what percentage of defaults came from lower-end housing market in 2006-2008; to know the 'poverty- default&# 39; correlation. This reading is certainly interesting because otherwise, the image that pops-up around sub-prime crisis is those poor black communities or migrant Latino population ; which unfortunately perhaps shows my own prejudice. The reality perhaps was very different and more complex.

http://www.realtytr ac.com/content/ news-and- opinion/high- end-foreclosures -increasing- in-2013-bucking- national- trend-7945

http://economistsvi ew.typepad. com/economistsvi ew/2012/03/ the-changing- face-of-foreclos ures.html

http://t.www. na-businesspress .com/JAF/ GeanF_Web13_ 6_.pdf

From: MicrofinancePractic e@yahoogroups. com [mailto:MicrofinancePractic e@yahoogroups. com] On Behalf Of Meyer, Richard
Sent: Monday, February 17, 2014 10:22 PM
To: MicrofinancePractic e@yahoogroups. com
Subject: [MFP] RE: The Equal Credit Opportunity Act / USA

You probably know that there has been a large debate over the years in the US about redlining, the practice of outlining geographic areas of housing (may be poor, deteriorated, occupied by minorities) and make fewer or no loans within those areas. There have been many attempts to measure the phenomena, and reduce the problem through various means when it is found. I do not know about the current state of the research regarding the issue. It is argued that government policies to stimulate home ownership, including relaxed credit underwriting, is one of the causes behind the financial collapse a few years ago. There are allegations that minorities were charged higher rates and given tougher terms for loans made during this period. Dick

From: MicrofinancePractic e@yahoogroups. com<mailto:MicrofinancePractic e@yahoogroups. com> [mailto:MicrofinancePractic e@yahoogroups. com] On Behalf Of Anuj Jain
Sent: Monday, February 17, 2014 10:59 AM
To: MicrofinancePractic e@yahoogroups. com<mailto:MicrofinancePractic e@yahoogroups. com>
Subject: [MFP] The Equal Credit Opportunity Act / USA

We in the sector have often talked and debated about 'right to capital or a loan', and if that is indeed a right, or is rather a privilege that one must earn by building one's credit worthiness. Some years ago, Prof. Yunus had created quite a debate by saying that it can be considered as a fundamental right.

Regardless of that debate, here is this example, from USA, of this Equal Credit Opportunity Act; which does not give a right to borrow, but at the same time, stops the lending institutions from discriminating against any group of people or individual for accessing credit.

Federal Fair Lending Regulations and Statutes
Equal Credit Opportunity

The Equal Credit Opportunity Act (ECOA) of 1974, which is implemented by the Board's Regulation B, applies to all creditors. The statute requires financial institutions and other firms engaged in the extension of credit to ''make credit equally available to all creditworthy customers without regard to sex or marital status.' ' Moreover, the statute makes it unlawful for ''any creditor to discriminate against any applicant with respect to any aspect of a credit transaction (1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); (2) because all or part of the applicant' s income derives from any public assistance program; or (3) because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.''

Read on for more details...
http://www.federalr eserve.gov/ boarddocs/ supmanual/ cch/fair_ lend_reg_ b.pdf

I wonder if such / similar laws exist in other countries; and what have been practical implications of this Act in USA? Will look forward to hear back.

Best,
anuj

Anuj K. Jain
Sr. Coady Fellow| Microfinance and Development| COADY International Institute
St. Francis Xavier University, Antigonish, Nova Scotia, B2G 2W5| Ph: 902-872-0521
[cid:image001.jpg@ 01CF2C73. F6E41E40]

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