C-da, Good article but if we draw the moral that micro-credit is bad becos it is not effectively implemented and people are dying becos of its faults --so stop it --then the same logic can work for stopping road travel and sea travel etc --becos people do die in traffic and travel accidents.
Umesh > > > >Death by Micro Credit-2 > > > > > >I dont know why writers always give interest > >rate charged as just 20% when in GOI report on > >Vidharba gave the figure to be as high as 5% per > >month to even 1.5% per day. World Bank report of > >2003 (Report No. 25797-IN) also state that > >interest rate charged from farmers and SME is > >36% to 120% per year. > > > >Access to Rural Credit Page 108! of WB- 25797- IN > > > >[3 .8 1 India has a wide network of rural > >finance institutions (RFIs), but a large number > >of the rural poor remain under-served or > >completely left out of the formal financial > >system. There are over 30,000 commercial bank > >branches, over 14,000 regional rural banks > >(RRBs), and over 100,000 rural credit > >cooperatives (RCCs) in addition to several > >non-bank financial institutions. This translates > >to about 4,700 people served by each RFI outlet. > >However, the last available rural household > >survey (Reserve Bank of India 1991) found that > >only about one-sixth of rural households > >borrowed from formal RFIs. Non-institutional > >sources accounted for as high as 52-62% of > >household outstanding debt. The rural non-farm > >sector also faces constraints to accessing > >finance. A recent study covering some 20 million > >small-scale rural enterprises (in the > >unorganized sector) found that commercial banks > >reportedly meet merely 4% of the credit needs of > >this sector, and micro-finance sources provide > >another 3% of their credit needs. > >Various estimates suggest that Indias rural > >poor rely almost entirely on informal sources > >(money lenders, traders, commission agents, > >etc.) to meet their consumption credit needs, at > >annual interest rates ranging from 36% to 120% > >per annum.] > > > >My uncle told me the standard procedure in > >Ludhiana, Punjab is moneylenders give a loan ! > >of say Rs.1,00,000/- on stamp paper. Actual > >money released is 85% or Rs. 85,000/- and the > >loan is payable at Rs.1000 per day or 1% per day > >from day one. > > > >Compounding of 15% alone comes to 66% annually > >but again Rs.1000/- returned per day lend at > >same rate shall also fetch similar return > >therefore actual interest rate may come close to > >100%. > > > >Supply of spurious seeds, pesticides and > >fertilizers, very low MSP and takeover of farm > >produce by moneylenders at harvest time when > >prices are at it lowest compounded with draught > >or unseasonal rain destroying crops, lack of! > >public healthcare all at add up to the financial > >burden. > > > >Farmers are forced to sell their land to pay for > >treatment of their family members or to get them > >admissions to schools and colleges in > >mushrooming private hospitals and educational > >institutions. > > > >Ravinder Singh > >September28, 2006 > ><mailto:[EMAIL PROTECTED]>[EMAIL PROTECTED], > > ><mailto:[EMAIL PROTECTED] > > hoo.com>[EMAIL PROTECTED] > > > >From: sudhirendar > ><<http://us.f349.mail.yahoo.com/ym/[EMAIL PROTECTED]>sudhirendar@ > > >bol.net.in> > >Date: Sep 26, 2006 3:13 PM > >Subject: Micro-Credit > >To: > ><http://us.f349.mail.yahoo.com/ym/[EMAIL PROTECTED]>krishnagreen@ > > >gmail.com > > > >(from The Times of India, Sept 16, 2006) > > > >Death by Micro credit > > > >Sudhirendar Sharma > > > >The tragic suicides by more than 60 self-help > >group members in Andhra Pradesh during April > >this year may have been subsumed under the > >unending spate of farmer suicides in the > >Vidharba region of Maharashtra but the hidden > >dimension of micro-credit revolution in the > >country has only begun to surface. Reports > >indicate that the actual number of suicides may > >exceed 200 in the SHG-saturated districts of > >Krishna, East Godavari, Guntur and Prakasam > >where intimidation of families by the > >Micro-Finance Institutions (MFI) against > >reporting the matter to police had surfaced. > > > >Following protests staged by mourners and > >enraged borrowers, ! the district authorities > >closed down 50 branches of two major microfin > >ance institutions in the state. The erring MFIs > >were charged with exploiting the poor with > >`usurious interest rate' and intimidating the > >borrowers by `forced loan recovery' practices, > >combined effect of which drove debt-ridden poor > >to embrace death. An anguished Chief Minister Y > >S Rajasekhara Reddy had lashed out: `MFIs were > >turning out to be worse than moneylenders by > >charging interest rates in excess of 20 per > >cent.' > > > >As the government began in-depth enquiry into > >suicide deaths and the MFIs launched themselves > >into damage control measures, many affected > >families were left wondering if the government > >had not played ignorant to the modus operandi of > >MFIs. The fact that micro-credit loans earned > >interest in excess of 20 per cent has been no > >secret. Borrower harassment by MFIs hasn't been > >uncommon either. Having been in the business of > >creating self-help groups and promoting > >micro-credit institutions, the government cannot > >absolve itself from being in the thick of the > >fatal crises. > > > >Given the fact that the commercial banking > >system has little regard to the bottom-of-the- > >pyramid group as being creditworthy, the MFIs > >have enjoyed unrestricted political patronage in > >extending credit services to the poor. The > >Reserve Bank of India statistics indicate that > >micro-credit constitute no more than 15 % of all > >commercial bank lending, leaving MFIs to cover a > >clientele of over 200 million families in the > >rural areas. Taking shelter behind these > >numbers, the MFIs have requested the government > >not to pursue the matter further as it was > >detrimental to the interests of the poor! > > > >Are MFIs genuine in catering to the interests of > >the poor? So it may seem as easy credit in rural > >areas has brought about significant turnabout in > >lifestyle, however, at the cost of plunging poor > >households under debt. The latest National > >Sample Survey Organisation (released in Dec > >2005) survey reveals that rural households > >account for 63 per cent of the country's overall > >aggregate outstanding debt of Rs 177,000 crore. > >The incidence of indebtedness was reported to be > >about 27 per cent among rural households, > >predominantly being in the rural areas of Andhra > >Pradesh, Kerala, Rajasthan and Karnataka. > > > >There are number of cases which suggest that a > >large proportion of micro-credit clients are > >worse off after accessing loans. Since higher > >interest rates on micro-credit do not provide > >scope for savings as also for investing in > >insurance, the dominant risk-covering factors > >for the poor, micro-credit seldom propels poor > >out of poverty. Further, there are no businesses > >that can generate profit after paying an > >interest of 24-36 per cent on capital > >investment. Else, why after mobilizing more than > >Rs 5 billion the average saving per member of > >the SHG is a pitiable Rs. 377 in Andhra Pradesh? > > > >MFI pay little attention to the core concerns of > >the poor. For them the critical concern is to > >sustain services against emerging odds. The > >brewing crisis in Andhra Pradesh has not only > >exposed the `unethical' practices by MFIs but > >has raised serious questions on the regulatory > >measures applicable to them. As the murky world > >of MFI operations comes to fore, the government > >is seized of the seriousness of the issue in the > >wake of an assessment report on many cases of > >`unnatural deaths' that has cautioned the state > >against `an imminent danger of more suicides in > >the offing'. > > > >With credit being considered the panacea to > >eradicating rural poverty, it is doubtful if > >political decisions will weigh heavy against > >MFIs. As poverty gets directly co-related to > >reduced cash flow, providing easy credit through > >host of lending institutions creates an illusion > >of `feel good' amongst the rural poor. In many > >ways, micro-credit justifies the ongoing > >processes of decentralization too. As poor take > >control of their destiny through soft loans, it > >becomes convenient for the government and the > >commercial banks to absolve themselves of their > >primary responsibility towards the poor. > > > >Micro-credit has caught on so much, courtesy the > >donors; that its promoters have gained immunity > >under a weak regulatory environment. Marlene > >Dietrich had rightly said: `there is a gigantic > >difference between earning a great deal of money > >and being rich'. Far from helping people > >generate wealth, easy credit is being used to > >encourage primary producers at the farm to > >become secondary distributors for consumer > >products. Howsoever lucrative, the transition > >has severe implications on the livelihoods > >security, and now on lives of poor people. > > > >As micro-credit takes its toll on the lives of > >poor households in Andhra Pradesh, the future of > >the self-help groups and the micro-finance > >institutions has come under scanner. However, > >unless the government jumps in to apply > >stringent regulations on MFI operations > >alongside throwing a safety net around the poor > >and the vulnerable, micro-credit related > >suicides will become more of a norm than > >exception. In a country where farmer suicides > >have been largely accepted, accommodating > >suicides of another kind may not be out of place! > > > >Formerly with the World Bank Dr Sudhirendar > >Sharma is a development analyst attached to the > >Delhi-based the Ecological Foundation. He can be > >reached at > ><http://us.f349.mail.yahoo.com/ym/[EMAIL PROTECTED]>sudhirendar@ > > >vsnl.net > > > > > > > ><http://us.rd.yahoo.com/evt=43257/*http://advision.webevents.yahoo.com/mailbeta>All-new > > >Yahoo! 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