Umesh:
You are so very perceptive. I almost missed the
lesson. Thanks for pointing it out. Come to think
of it, there are other reasons to bolster your
observation:
*** Why should micro-credit be blamed? The farmers are not FORCED
to borrow at 20% interest rates. If they
do, it is their own damn fault.
Dilip pointed that out too, even though in not so many words.
*** Nobody promised these dumb farmers a rose-garden along with
the sunshine. Who said life is fair? There will always be winners
and losers in life's lotteries. So a few stupid farmers borrow too
much and end up killing themselves, but a whole lot of money-lenders
laugh all the way to the bank too. And they are the nation-builders,
the building blocks of a resurgent India, aren't they? Aren't these
the people we love to point out to stupid Oxomiyas to emulate?
*** So what a few idiotic farmers go kill themselves after not being
able to pay for their TVs and Motorbikes and refrigerators? India
is far too resilient to be daunted by the loss of a handful of
worthless people. Jut like Mumbai, India won't mope and brood over
the deaths of a few.
If I think hard enough I may be able to find some more reasons to back up your
analysis Umesh. But this is all I have to offer
for now. Perhaps you can add a few more bits of
wise observations yourself.
Take care.
c-da
At 10:32 PM +0100 9/28/06, umesh sharma wrote:
>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
>> >
>> >
>> >
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>
>Umesh Sharma
>5121 Lackawanna ST
>College Park, MD 20740 USA
>
>Current temp. address: 5649 Yalta Place , Vancouver, Canada
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>Ed.M. - International Education Policy
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