Microfinance caught the imagination of the world and even a Nobel price; but is it really a game changer and life saver as it is made out?
Microfinance was originally conceived as a non-profit, society’s-own, self-sustaining, self-correcting mechanism to deliver much needed and often denied monetary loan to the helpless and most downtrodden of the society, mostly the self-employed.
The man who originally conceived it in 1970s, Muhammad Yunus in Bangladesh even won a Nobel prize for his ‘Grameen Bank’ in 2006. An Indian effort was started in 1997. Everything went well for about 10 years.
In 2005, the Indian organisation, SKS reinvented itself from a non-profit setup into a for-profit, regular money-lending, finance institution. It went public in 2010.
For several years now there have been regular reports of farmer suicides in Maharashtra and Andhra Pradesh in India. Reports which have been equally regularly repudiated by the respective state governments.
However, the AP government was forced to enact some laws restricting recovery operations of lenders after it was revealed that farmers in debt are forced to commit suicide when pressed or threatened by the debt collectors.
Now it seems even an internal investigation by microfinance institutions themselves reveal links between their tough, merciless collection policies and farmer suicides [http://ibnlive.in.com/news/probe-links-sks-microfinance-to-suicides/233399-3.html].
Just reading the report makes me feel sick. But then when the microfinance sector as a whole has grown into a behemoth with no regulation as to who can own, run, or without any oversight, these situations are bound to develop. By some reports, the microfinance industry worldwide is as big as $50 billion dollars of outstanding loans with almost equal amount of deposits.
Can you imagine such a huge industry operating under the garb of good Samaritans, without any sort of oversight? If ‘when the cat is away, the mice will play,’ what will happen when there is no cat at all? And I am sure that some fat political pig would also have its dirty snout in it somewhere!
:-/
My Naughty half natters, ‘Wasn’t the Nobel winner Yunus accused of diverting funds? Perhaps I should junk writing blogs and start loan sharking!’
:-D
Microfinance was originally conceived as a non-profit, society’s-own, self-sustaining, self-correcting mechanism to deliver much needed and often denied monetary loan to the helpless and most downtrodden of the society, mostly the self-employed.
The man who originally conceived it in 1970s, Muhammad Yunus in Bangladesh even won a Nobel prize for his ‘Grameen Bank’ in 2006. An Indian effort was started in 1997. Everything went well for about 10 years.
In 2005, the Indian organisation, SKS reinvented itself from a non-profit setup into a for-profit, regular money-lending, finance institution. It went public in 2010.
For several years now there have been regular reports of farmer suicides in Maharashtra and Andhra Pradesh in India. Reports which have been equally regularly repudiated by the respective state governments.
However, the AP government was forced to enact some laws restricting recovery operations of lenders after it was revealed that farmers in debt are forced to commit suicide when pressed or threatened by the debt collectors.
Now it seems even an internal investigation by microfinance institutions themselves reveal links between their tough, merciless collection policies and farmer suicides [http://ibnlive.in.com/news/probe-links-sks-microfinance-to-suicides/233399-3.html].
Just reading the report makes me feel sick. But then when the microfinance sector as a whole has grown into a behemoth with no regulation as to who can own, run, or without any oversight, these situations are bound to develop. By some reports, the microfinance industry worldwide is as big as $50 billion dollars of outstanding loans with almost equal amount of deposits.
Can you imagine such a huge industry operating under the garb of good Samaritans, without any sort of oversight? If ‘when the cat is away, the mice will play,’ what will happen when there is no cat at all? And I am sure that some fat political pig would also have its dirty snout in it somewhere!
:-/
My Naughty half natters, ‘Wasn’t the Nobel winner Yunus accused of diverting funds? Perhaps I should junk writing blogs and start loan sharking!’
:-D
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