Bad at my thesis!

I have to be honest that I have not been paying enough attention to my work for the past few months.

As I mentioned earlier that I was and am still interested in doing my thesis in Microfinance. I just read about how this microfinance bank in Mexico compartusbanco issued an IPO and has over 53% profit and how Prof. Yunus of the Grameen Bank is against another money lender in the disguise of Microfinance is out there exploiting the poor.

Now I read somewhere that it helps in your thesis that you just write down what comes to your mind and then later structure it. The best place to write is my blog! So these are just my views and thoughts and they are likely to be changed, bettered and polish with time but I need to clear of my head and start thinking so here it goes.

I am strictly against interest. be it 1% or 100%. I feel in today's age we just cannot avoid interest. It has become a vicious snake in our lifes. Turn anywhere and there is interest involved. Even in a simple credit or debit card! Either you get or you give.

My views on interest is obviously firstly rooted because of my religious beliefs that interest is not allowed.

Secondly, it is supported by the various examples I have read and seen, personally am afraid in my family and also of family friends who feel they can take a loan and get it repaid irrespective of all the other economic conditions and risks.

We have heard enough stories about how money lenders have exploited the poor with usurous interest rates and our own Indian farmers killing themselves when they fail to repay.

Therefore, I absolutely abhor, hate, loathe and all the similiar synonyms when it comes to interest!

So my idea behind my thesis, it may sound like a fairy tale, it may be rebuked, it may draw critism and many will say 'Oh that's simply impossible' is that I want to build a new model of microfinance based on the concept of profit and loss sharing.

What happens here is that you enter a partnership with the working poor and give them the funds, they put in the efforts and both of you share the expected profits on a preagreed profit and loss sharing ratio.

Example:

I give a microenterpreneur Rs 10000. We agree that he will purchase goods and trade them for a profit margin of say 20%. So he should earn around 2000 as profit.

I as the capitalist will take 30% and as he has put in the effort, he takes 70%.

AND.. very importantly, in case he fails or is unable to make profit, I do not charge him anything. no interest, no name-it-what-you-want fees.

All I want back is my capital. So he has to return only the principal amount.

Now the advantages of such a model would be that we would have more people coming forward, being confident to borrow money. Successful enterprenuers who know they have a good chance to make profit would not hesistate to come front as they are getting 70% of the profits with no interest involved!!

Now as good as this model sounds, I do know the limitation.

Pschologically- anybody can come and take the loan and how truthful can a microenterprenuer (a vegetable seller or a small trader) when it comes to the true amount of profits he has made. Isn't it much simpler to just charge him a fixed interest rate and how he makes his profit is his headache.

Yes, these thoughts are there at the back of my mind, but I rather be an optimistic than a pessimistic.

Surely, there is a way out there. There is a way that we can monitor and control our risks.
I just need to find out what it is.

Secondly, as far as the value of my thesis goes, as my guide tells me, who will be willinging to buy your thesis, the first thing that comes to my mind is anyone and everyone who is against interest!

We can have investors come together and show the world, that this world economy can run smoothly without having interest in it.

If a 100 people join hands and put in Rs 10000, we have Rs 1000 000 to start with!

Like I said, these are my thoughts as and when they come to my mind and I will be posting them so that I can refer back and may be get a few ideas from my readers.