Hinduism and Microcredit

Abstract

Our purpose is to show that the microfinance industry practices can benefit from the culture and spiritual traditions of a country.

We use the Bhagavad Gita and the codes of Manu and Kautilya to describe the background of Hindu teaching and practical wisdom. We use a case study of a Hindu microfinance institution.

We find that Indian spirituality is a case-based application of learning through experience.

The case used in this study is one of a religious organization led microfinance institution. It would be interesting to have follow up case studies of for-profit organizations and study their philosophy and links to spiritual traditions. We find that business in general, and microfinance institutions in particular, should adopt risk-based pricing. The specificities of each product, its delivery and price should be based on continuous learning from experience of helping customers. . Thus a case-based approach to product development and pricing is required.

This paper is a response to the current criticism of microfinance and argues for more tolerance on the part of society and more sensitivity on the part of microfinance institutions. The case study shows that with the right attitude, it is possible to balance societal interests, customer needs and the institution’s growth.

This is the first paper on microfinance which looks at outsourcing from a spiritual viewpoint and launches a debate on whether “playing God” is useful.

Keywords: Religion, Microcredit, Loan, Interest Rate, Loan Recovery

JEL Classification: B15, G2