Follow the discussion at Grassroot-in action list ---------- Forwarded message ---------- From: Pradeep Esteves <[EMAIL PROTECTED]> Date: Sep 25, 2006 1:42 PM Subject: [GRASSROOTS-in-action] Re: Microfinance Issues To: [EMAIL PROTECTED], [EMAIL PROTECTED] Cc: [EMAIL PROTECTED]
Dear George, I agree with you that this is indeed becoming a great business model for many of the NGOs. High interest rates of above 24% are being charged by these groups while in the cities the middle class and the corporates can take a loan for less than 7 to 9 % interest - you can get a interest free consumer and vehicle loans too. Now a days you also see the mushrooming of financiers (who are also NGOs) for the microcredit programmes and give credit to the promoting organisation (also an NGO) at a certain rate of interest and in turn the promoting organisation gives these as loans to the SHGs at a higher rate and then the SHG's in turn give loans at a even higher rate of interest to their members. Quiet a chain of money-lending with the interest rate increasing at each level. At this rate my reading is that the Microcredit is indeed already replacing the money-lender!!! If you look at the rules for the repayment of loans, the microfinance groups are more heartless than even the banks. In my observation, the loanee has to repay the installment irrespective of any situation she may have got into including drought, major sickness or even death in the family. Thereby the economics and profits takes precedence and not the well-being or the real development of the members of these groups. Thereby how does the MDG's be addressed? The poorest in the villages cannot keep up with the saving amount prescribed by the groups - which keeps going higher and higher and hence they get left behind from the process as they would not be eligible for taking loans. In my observation we could see only middle - upper middle classes who are benefiting from the micro-credit activity especially in Tamil Nadu with all the World Bank monies pouring in for them. So what MDG and poverty reduction are we talking about? Even in Bangladesh, (which boasts to be the initiaters of this model), what has happened with the initial promoters? They are today competeing as to who has a higher multi-storied building, super-luxury cars etcetera and they have today the vision of profit alone and the social agenda has been totally abandoned. It appears that this will be the way forward also for the microfinance groups in India as well unless we learn from our experiences and adapt these processes to the changing contextual and living conditions of the poor. Pradeep On 9/25/06, Abraham M. George <[EMAIL PROTECTED]> wrote: > > > My observation of over 50 Sanghas (groups) in Tamil Nadu is that less than 5% > of the recipients of micro-credit start their own businesses with the credit, > and only 1% or less remain in the business after 3 years. Moreover, those who > are successful in initiating businesses are not necessarily the bottom 50% of > the "poor." Most so-called entrepreneurs are those in the villages who have > other support mechanisms and power. These observations do not negate the > positive fact that the beneficiaries are able to pay off debt previously > obtained from local money lenders. When combined with grants from government > to those who repay the micro-credit loan, this form of free money (handout > from government) assures repayment of loans. With 24% interest rate and > higher, it is a great business to be in. > > abraham > --~--~---------~--~----~------------~-------~--~----~ greenyouth mailinglist is the activist support mailinglist for kerala run by Global Alternate Information Applications (GAIA) To post to this group, send email to [email protected] -~----------~----~----~----~------~----~------~--~---
