The massive investments by private equity firms coupled with an initial public offer (IPO) by SKS Microfinance have ignited a debate about the ethics and objectives of microfinance institutions (MFIs) in India.

The SKS Microfinance, the largest MFI in India with substantial investments by private equity firms and hedge funds, is planning to raise Rs.11000 million ($250 million) through an IPO. According to media reports, the original promoters of SKS Microfinance have sold part of their stake to a hedge fund thereby making a 12-fold profit even before an IPO. This shrewd act by promoters and top management not merely raises doubts about their long-term commitments but, more importantly,…

Since 2007, India and European Union (EU) are negotiating a free trade agreement (FTA). The negotiations do not merely cover trade in goods but also include liberalisation of trade and investment in banking services. EU is seeking greater market access and national treatment for European banks through cross-border supply and direct investments.

Unlike other bilateral agreements, the potential implications of India-EU FTA would be far-reaching since nine EU-based banks together controlled 65% of total assets of foreign banks in India in 2008. By asset size, out of the top 10 foreign banks in India, six are European. Since 2000, several European economies have registered a significant growth in their banking services net…

French President Nicholas Sarkozy has proposed that European nations create sovereign wealth funds to protect national companies from foreign “predators.” This column says that idea is protectionist and without merit. Emerging economies establish sovereign wealth funds to invest foreign reserves or commodity revenue – not to bail out domestic firms and stifle global competition.

In a hard-hitting speech to the European Parliament in Strasbourg on October 21, French President Nicolas Sarkozy proposed that European countries create sovereign wealth funds to protect national companies from foreign “predators.” “I’m asking that we think about the possibility of creating, each one of us, sovereign funds and maybe these national sovereign funds could now and again…

Give Priority to Financial Services

Financial Times, July 22, 2008

From Sir Stephen Wright and Mr John Cooke.

Sir, Ministers from some 40 countries are meeting in Geneva to decide the fate of the Doha round of multilateral trade talks. It is vital that they achieve a breakthrough, and lay the foundation for a lasting agreement. The Doha round offers a unique opportunity to address the barriers to global trade that continue to hold back the world economy. This would bring benefits to developed and developing countries alike, and would offer some palliative to the bleak prospects facing the global economy. The focus of the negotiations so far has been on agriculture and the tariff barriers to trade in…

The recent decision by Norway’s Government Pension Fund–Global (GPF) to invest $2 billion in Indian markets has come at a time when most foreign institutional investors are fleeing the markets. This is a very significant development as there are very few institutional investors in the global markets who can provide liquidity when it is most needed. However, the true significance of GPF lies in its role as an ethical and socially responsible investor. The GPF was in the news last year when it sold stake in the UK-listed Vedanta Resources for alleged environmental damage and labour rights violations in its four Indian subsidiaries. The GPF is the second…