Академический Документы
Профессиональный Документы
Культура Документы
spur entrepreneurship. These individuals lack collateral, steady employment and a verifiable
credit history and therefore cannot meet even the most minimal qualifications to gain access to
traditional credit. Microcredit is a part of microfinance, which is the provision of a wider range
of financial services to the very poor.
Microcredit is a financial innovation that is generally considered to have originated with the
Grameen Bank in Bangladesh.[1] In that country, it has successfully enabled extremely
impoverished people to engage in self-employment projects that allow them to generate an
income and, in many cases, begin to build wealth and exit poverty.[citation needed] Due to the success
of microcredit, many in the traditional banking industry have begun to realize that these
microcredit borrowers should more correctly be categorized as pre-bankable; thus, microcredit is
increasingly gaining credibility[citation needed] in the mainstream finance industry, and many
traditional large finance organizations are contemplating microcredit projects as a source of
future growth, even though almost everyone in larger development organizations discounted the
likelihood of success of microcredit when it was begun. The United Nations declared 2005 the
International Year of Microcredit.
Contents
[hide]
• 1 History
• 2 Principles
• 3 Strengths
• 4 Microcredit and the Web
• 5 In the developed world
• 6 Criticism
• 7 Role of developing countries—a recent Forbes ranking
• 8 See also
• 9 References
• 10 Bibliography
• 11 External links
History
Ideas relating to microcredit can be found at various times in modern history.
Jonathan Swift inspired the Irish Loan Funds of the 18th and 19th centuries.[2] In the mid-1800s,
Individualist anarchist Lysander Spooner wrote about the benefits of numerous small loans for
entrepreneurial activities to the poor as a way to alleviate poverty.[3] Ideas relating to microcredit
were mentioned in portions of the Marshall Plan at the end of World War II.[citation needed]
The origins of microcredit in its current practical incarnation, with attention paid by economists
and politicians worldwide, can be linked to several organizations founded in Bangladesh,
especially the Grameen Bank in the 1970s and onward, for which its founder Muhammad Yunus
was awarded the Nobel Peace Prize in 2006.[4]
Principles
Microcredit is based on a separate set of principles, which are distinguished from general
financing or credit.[5]
Microcredit emphasizes building capacity of a micro-entrepreneur,[6] employment generation,
[citation needed]
trust building,[7] and help to the micro-entrepreneur on initiation and during difficult
[citation needed]
times.
Microcredit is a tool for socioeconomic development.[8][9]
Strengths
In the past few years, savings-led microfinance has gained recognition as an effective way to
bring very poor families low-cost financial services. For example, in India, the National Bank for
Agriculture and Rural Development (NABARD) finances more than 500 banks that on-lend
funds to self-help groups (SHGs). SHGs comprise twenty or fewer members, of whom the
majority are women from the poorest castes and tribes. Members save small amounts of money,
as little as a few rupees a month in a group fund. Members may borrow from the group fund for
a variety of purposes ranging from household emergencies to school fees. As SHGs prove
capable of managing their funds well, they may borrow from a local bank to invest in small
business or farm activities. Banks typically lend up to four rupees for every rupee in the group
fund. Groups generally pay interest rates that range from 30% to 70% APR[10], or 12% to 24% a
year, based on the flat calculation method. Nearly 1.4 million SHGs comprising approximately
20 million women now borrow from banks, which makes the Indian SHG-Bank Linkage model
the largest microfinance program in the world. Similar programs are evolving in Africa and
Southeast Asia with the assistance of organizations like Opportunity International, Catholic
Relief Services, CARE, APMAS and Oxfam. Microfinancing also helps in the development of
an economy by giving everyday people the chance to establish a sustainable means of income.
Eventual increases in disposable income will lead to economic development and growth.
Jason Cons and Kasia Paprocki of the Goldin Institute, while quite critical of some unintended
side-effects of microcredit, nonetheless acknowledge its "enormous potential as a tool for
poverty alleviation."[1]
Microcredit and the Web
The principles of microcredit have also been applied in attempting to address several non-
poverty-related issues. Among these, multiple Internet-based organizations have developed
platforms that facilitate a modified form of peer-to-peer lending where a loan is not made in the
form of a single, direct loan, but as the aggregation of a number of smaller loans—often at a
negligible interest rate. There are several ways by which the general public can participate in
alleviating poverty using Web platforms.
New platforms that connect lenders to micro-entrepreneurs are emerging on the Web, for
example Kiva, Lend for Peace and the Microloan Foundation. Another WWW-based
microlender United Prosperity uses a variation on the usual microlending model; with United
Prosperity the micro-lender provides a guarantee to a local bank which then lends back double
that amount to the micro-entrpreneur. United Prosperity claims this provides both greater
leverage and allows the micro-entrepreneur to develop a credit history with their local bank for
future loans.
In the developed world
Microcredit is not only provided in poor countries, but also in one of the world's richest
countries, the USA, where 37 million people (12.6%) live below the poverty line.[11] Among
other organizations that provide microloans in the United States,[12][13] Grameen Bank started
their operation in New York in April 2008. According to economist Jonathan Morduch of New
York University, microloans have less appeal in the US, because people think it too difficult to
escape poverty through private enterprise.[citation needed]
Other developed countries in which the micro-loan model is in fact gaining impetus include
Israel,[14] Russia, the Ukraine and more, where micro-loans given to small business entrepreneurs
are also used to overcome cultural barriers in the mainstream business society. The Israel Free
Loan Association (IFLA) has lent out over $100 million in the past two decades to Israeli
citizens of all backgrounds.[citation needed]
Even so, efforts to replicate Grameen-style solidarity lending in developed countries have
generally not succeeded. For example, the Calmeadow Foundation tested an analogous peer-
lending model in three locations in Canada, rural Nova Scotia and urban Toronto and Vancouver,
during the 1990s. It concluded that a variety of factors—including difficulties in reaching the
target market, the high risk profile of clients, their general distaste for the joint liability
requirement, and high overhead costs—made solidarity lending unviable without subsidies.[15]
However, debates have continued about whether the required subsidies may be justified as an
alternative to other subsidies targeted to the entrepreneurial poor, and VanCity Credit Union,
which took over Calmeadow's Vancouver operations, continues to use peer lending.[citation needed]
Some organizations, however, have been able to find success bringing the microfinance model to
the United States. ACCION USA, which is the US subsidiary of the more well-known ACCION
International, has been able to provide US$117 million in microloans since 1991, with an over
90% repayment rate.[citation needed]
Criticism
See also: Microfinance#Other criticisms
Gina Neff[16] of the Left Business Observer has described the microcredit movement as a
privatization of public safety-net programs.[17] Enthusiasm for microcredit among government
officials as an anti-poverty program can motivate cuts in public health, welfare, and education
spending.[citation needed] Neff maintains that the success of the microcredit model has been judged
disproportionately from a lender's perspective (repayment rates, financial viability) and not from
that of the borrowers. For example, the Grameen Bank's high repayment rate does not reflect the
number of women who are repeat borrowers that have become dependent on loans for household
expenditures rather than capital investments.[citation needed] Studies of microcredit programs have
found that women often act merely as collection agents for their husbands and sons, such that the
men spend the money themselves while women are saddled with the credit risk.[1][18] As a result,
borrowers are kept out of waged work and pushed into the informal economy.[citation needed]
Many studies in recent years have shown that risks like sickness, natural disaster and
overindebtedness are a critical dimension of poverty and that very poor people rely heavily on
informal savings to manage these risks (see, for example, The Microfinance Revolution:
Sustainable Finance for the Poor by Marguerite Robinson). It might be expected that
microfinance institutions would provide safe, flexible savings services to this population, but—
with notable exceptions like Grameen II—they have been very slow to do so. Some experts
argue that most microcredit institutions are overly dependent on external capital. A study of
microcredit institutions in Bolivia in 2003, for example, found that they were very slow to
deliver quality microsavings services because of easy access to cheaper forms of external capital.
[19]
Global data tables from The Microbanking Bulletin show that savings represent a small source
of funds for microcredit institutions in most developing nations.[citation needed]
Because field officers are in a position of power locally and are judged on repayment rates as the
primary metric of their success, they sometimes use coercive and even violent tactics to collect
installments on the microcredit loans. Some loan recipients sink into a cycle of debt, using a
microcredit loan from one organization to meet interest obligations from another.[1] Also, counter
to the original intention of the microcredit system to empower women, one of the effects of an
infusion of cash into local economies has been to increase dowries, with women forced at times
to take microcredit loans as the only means to pay these increased dowries for their daughters.[1]
Bangladesh's former Finance and Planning Minister M. Saifur Rahman charges that some
microfinance institutions use excessive interest rates.[20] In recent years, there has been increasing
attention paid to the problem of interest rate disclosure, as many suppliers of microcredit quote
their rates to clients using the flat calculation method, which significantly understates the true
Annual Percentage Rate.[citation needed]
The BBC Business Weekly program reported that much of the supposed benefits associated with
microfinance, are perhaps not as compelling as once thought. In a radio interview with Professor
Dean Karlan of Yale University, a point was raised concerning a comparison between two
groups: one African, financed through microcredit and one control group in the Philippines. The
results of this study suggest that many of the benefits from microcredit are in fact loaned to
people with existing business, and not to those seeking to establish new businesses. Many of
those receiving microcredit also used the loans to supplement the family income. The income
that went up in business was true only for men, and not for women. This is striking because one
of the supposed major beneficiaries of microfinance is supposed to be targeted at women.
Professor Karlan's conclusion was that whilst microcredit is not necessarily bad and can generate
some positive benefits, despite some lenders charging interest rates between 40-60%, it isn't the
panacea that is purported to be. He advocates rather than focusing strictly on microcredit, also
giving citizens in poor countries access to rudimentary and cheap savings accounts.[21]
Role of developing countries—a recent Forbes ranking
The US business magazine Forbes ranked the world's top 50 microfinance institutions. Forbes
made the ranking of MRIs by using data available from the Microfinance Information Exchange
and the analysis from rating firms Micro-Credit Ratings International Limited and MicroRate.
The ranking was based on six key variables: gross loan portfolio, operating expense, operating
expense divided by the average number of active borrowers as a proportion of gross national
income per capita, outstanding balance of loans overdue by more than 30 days as a proportion of
gross loan portfolio, return on assets, and return on equity. "Each microfinance institution earned
scores in four equally weighted categories—scale, efficiency, portfolio risk and profitability.
Rankings were then based on the combined average score of those four categories."[22]
India and Bangladesh together are home to the most MFIs. Seven of the 50 were little-known
institutions from India. Those in other countries included five from Bosnia and Herzegovina,
four each from Morocco and Peru, three from Colombia, two each from Ecuador, Ethiopia and
Serbia, and one each from 15 other countries, including Russia, Pakistan, Mexico and Brazil.
Forbes magazine said that "microfinance has become a buzzword of the decade, raising the
provocative notion that even philanthropy aimed at alleviating poverty can be profitable to
institutional and individual investors."
"Billionaires, global leaders and Nobel Prize recipients are hailing these direct loans to
uncollateralised would-be entrepreneurs as a way to lift them out of poverty while creating self-
sustaining businesses," it stated.
See also
• Cooperative banking
• Flat rate (finance)
• Microgrant
• Solidarity lending
References
1. ^ a b c d e Jason Cons and Kasia Paprocki of the Goldin Institute, "The Limits of Microcredit—A
Bangladeshi Case", Food First Backgrounder (Institute for Food and Development Policy),
Winter 2008, volume 14, number 4.
2. ^ University of Calgary
3. ^ Lysanderspooner.org
4. ^ Nobleprize.org
5. ^ SSRN.com
6. ^ SSRN.com
7. ^ SSRN.com
8. ^ SSRN-Micro Finance: The Pillars of a Tool to Socio-Economic Development by Vrajlal
Sapovadia
9. ^ Sapovadia, Vrajlal K., "Micro Finance: The Pillars of a Tool to Socio-Economic Development"
. Development Gateway, 2006
10.^ [1]
11.^ CIA.gov
12.^ Findarticles.com
13.^ University of Michigan
14.^ Svivatomehet.org.il (Hebrew)
15.^ Cheryl Frankiewicz. "Calmeadow Metrofund: A Canadian Experiment in Sustainable
Microfinance", Calmeadow Foundation, April 2001.
16.^ Blogspot.com
17.^ Microcredit, microresults The Left Business Observer #74, October 1996
18.^ Goetz, A.M. and R. Sen Gupta. "Who takes the Credit? Gender, power and control over loan
use in rural credit programmes in Bangladesh." World Development Vol. 24, January 1995.
19.^ Hillary Miller. The paradox of savings mobilization in microfinance: why microfinance
institutions in Bolivia have virtually ignored savings. Development Alternatives Inc. and USAID,
Washington, 2003.
20.^ Saifur takes swipe at micro-credit
21.^ BBC.co.uk
22.^ Forbes.com
Bibliography
Following is a selected bibliography about microcredit.
• Adams, Dale, Doug Graham and J.D. Von Pischke (eds.). Undermining Rural
Development with Cheap Credit. Westview Press, Boulder, Colorado, 1984.
• Drake, Deborah, and Elizabeth Rhyne (eds.). The Commercialization of Microfinance:
Balancing Business and Development. Kumarian Press, 2002.
• Rhyne, Elizabeth. Mainstreaming Microfinance: How Lending to the Poor Began, Grew
and Came of Age in Bolivia. Kumarian Press, 2001.
• Fuglesang, Andreas and Dale Chandler. Participation as Process – Process as Growth –
What We can Learn from the Grameen Bank. Grameen Trust, Dhaka, 1993.
• Gibbons, David. The Grameen Reader. Grameen Bank, Dhaka, 1992.
• Harper, Malcolm and Shailendra Vyakarnam. Rural Enterprise: Case Studies from
Developing Countries. ITDG Publishing, 1988.
• Hulme, David and Paul Mosley. Finance Against Poverty. Routledge, London, 1996.
• Johnson, Susan and Ben Rogaly. Microfinance and Poverty Reduction. Oxfam, Oxford
UK, 1997.
• Kadaras, James & Elizabeth Rhyne. Characteristics of equity investment in microfinance.
Accion International, 2004.
• Khandker, Shahidur R. Fighting Poverty with Microcredit. Bangladesh edition, The
University Press Ltd, Dhaka, 1999.
• Ledgerwood, Joanna. Microfinance Handbook. Washington, D.C., World Bank, 1998.
• Rutherford, Stuart. ASA: The Biography of an NGO, Empowerment and Credit in Rural
Bangladesh. ASA, Dhaka, 1995.
• Small Enterprise Development. Intermediate Technology Publications, London.
• Todd, Helen Women at the Center: Grameen Borrowers After One Decade. University
Press Ltd, Dhaka, 1996.
• Wood, Geoff D. & I. Sharif (eds.). Who Needs Credit? Poverty and Finance in
Bangladesh. University Press Ltd., Dhaka, 1997.
• Yunus, Muhammad. Banker to the Poor: Micro-Lending and the Battle Against World
Poverty. Public Affairs, 2003.
• Padmanabahn, K.P., Rural Credit, Intermediate Tech. Publ. Ltd., London 1988.
• Germidis D. et al.,Financial Systems and Development: what role for the formal and
informal financial sectors?, OECD, Paris 1991.
• Robinson, Marguerite S., The microfinance revolution, The World Bank, Washington
D.C., 2001.
• Mauri, Arnaldo, A new approach to institutional lending and loan administration in rural
areas of LDCs, International Review of Economics, Vol. XLV, no. 4 (1995).
External links
• Building a Microfinance Institution from Scratch Institution's objective is to offer
financial services on a self-sustaining yet efficient basis to microentrepreneurs.
• Journal of Microfinance, a forum for practitioners in microfinance and microenterprise
development to exchange information and ideas
• Omidyar-Tufts Microfinance Fund, a partnership between Pierre Omidyar and Tufts
University.
• "Microfinance in the U.S." Helping ensure egalitarian access to needed financial services.
• The Promise of Microfinance for Poverty Relief in the Developing World
• Microcredit Regulatory Authority, MRA The central body to monitor and supervise
microfinance operation of NGOs of Bangladesh
• Alleviation and poverty and enpowerment of the poor, BRAC Bangladesh
• The European Union Project "Credit Cooperatives - Russian Federation" official web site
• Small Fortunes: Microcredit and the Future of Poverty web site for a PBS documentary
Retrieved from "http://en.wikipedia.org/wiki/Microcredit"
Categories: Credit | Development | Microfinance | United Nations Secretariat
Hidden categories: Articles needing cleanup from August 2008 | All pages needing cleanup | All
articles with unsourced statements | Articles with unsourced statements from October 2009 |
Articles with unsourced statements from September 2009 | Articles with unsourced statements
from July 2008
Views
• Article
• Discussion
• View source
• History
Personal tools
• Try Beta
• Log in / create account
Navigation
• Main page
• Contents
• Featured content
• Current events
• Random article
Search
Top of Form
Special:Search Go Search
Bottom of Form
Interaction
• About Wikipedia
• Community portal
• Recent changes
• Contact Wikipedia
• Donate to Wikipedia
• Help
Toolbox
• What links here
• Related changes
• Upload file
• Special pages
• Permanent link
• Cite this page
Print/export
• Create a book
• Download as PDF
• Printable version
Languages
• বাংলা
• Català
• Česky
• Deutsch
• Español
• Français
• 한국어
• Italiano
• עברית
• ქართული
• Lietuvių
• Nederlands
• 日本語
• Norsk (bokmål)
• Norsk (nynorsk)
• Polski
• Português
• Русский
• Suomi
• Svenska
• தமிழ்
• 中文
http://www.google.co.in/search?
hl=en&source=hp&q=report+on+micro+credit+in+india&aq=o&aqi=&aSearch
Top of Form
Bottom of Form
• Home
• Company
○ http://www.m-cril.com/
○ http://www.myrada.org/Mission and Philosophy
○ History
http://india-financing.com/Micro%20Credit%20in%20India%20-%20Overview%20of
Micro Credit in India:
%20the%20Regulatory%20Scenario.pdf
• Team
○ Management
○ Board
○ Advisory Board
○ Investors
• Careers
○ Working at Madura
○ Opportunities
• Contact Us
Education is delivered in small modules or ‘micro’ portions to make it as accessible to the audience as possible. In
addition, members discover new opportunities and hear of success stories through our seidhi malar member
newsletter, monthly video malar and through freely distributed copies of our classifieds newspaper.
Some of our education components are designed to not only to educate but also to invite new aspirations. Video clips
of our members, employees and management speaking on everything from their successes and failures to their
involvement in their local community are utilized to move our member audiences. Coming soon is our inspirational
feature film entitled “Shakti Pirakkudhu,” a film based on extensive research into the lives and struggles of our SHG
women that provides solutions and inspires expanded aspirations as well as a 5 part digital mini MBA certificate
program that takes business principles to the rural context.
Approach
• Self Help Groups
• Microfinance
• Microeducation
• Micromarkets
Expand
nextprevious
Close
Previous
0/0
Next
ql=&oq=&gs_rfai=Search
Home Company Mission and Philosophy History Approach Self Help Groups
Microfinance Microeducation Micromarkets Team Management Board Advisory
Board Investors Careers Working at Madura Opportunities Contact Us Investors
Elevar Equity
Save to
My Page
Ask
Users
Write a
Comment
In the K R Puram slum in Bangalore, India, a group of 15 women gather in a small, muggy living room. The electricity
comes and goes, turning the fan and the single bare lightbulb on and off. Flies buzz around the room, and children
run in and out.
The women have borrowed $330 and meet weekly to make repayments. The loans were meant to serve as capital for
them to start small businesses and, eventually, lift themselves out of poverty. But the women say the loans haven't
turned into new income.
Sitting in a circle on the floor, some sound sad and others angry. One woman has started selling firewood, but others
haven't started businesses at all. Instead, they say, the money helped them pay for urgent expenses, such as their
children's school fees.
It's a scene that's repeated inside dark living rooms and on parched rooftops across India. Boosted by a government
mandate to keep the startup funds flowing, lenders making these small, or microcredit, loans are dutifully throwing
cash at shantytown borrowers.
Slideshows:
Most luxurious credit cards
Top ten hottest jobs in India
And the funds-- $1.3 billion was lent during the year ended Mar 31, up from $4 million in 1996--are often being used
not as seed money for a new enterprise, such as buying a cow to sell the milk or setting up a fruit stand, but as
handouts spent on consumption.
D S K Rao, the Asia organizer for the Microcredit Summit Campaign, estimates that only one-fifth of Indian
microcredit borrowers start a business. Mathew Titus, executive director of New Delhi-headquartered Sa-Dhan, an
association of microcredit lenders, says it's one-third, counting women who barter instead of selling goods.
Alas, there has never been a rigorous study in India or elsewhere of how successful the businesses become, whether
any of the borrowers eventually graduate to the middle class or how many of the loans get repaid on time. "I don't
know of any great studies--they haven't been done," says New York University professor Jonathan Morduch, who
focuses on microcredit and economic development.
For much of its 35-year history microcredit has enjoyed glowing reviews, culminating last month when Muhammad
Yunus--founder of Bangladesh's microlending Grameen Bank--won the Nobel Peace Prize. The tiny loans appeal to
both idealistic aid workers and gimlet-eyed bankers.
They seem to help the poor in developing countries earn a livelihood without making them dependent on handouts.
And they use market mechanisms, allowing banks to charge interest rates high enough to cover the risks of lending
to people with no collateral and little credit history. In India rates average 30 per cent a year, though some lenders
charge more than 45 per cent.
In the last decade microcredit has taken off. The 1997 Microcredit Summit in Washington, DC--sponsors included the
World Bank, MasterCard and JPMorgan--vaulted microlending onto the world stage.
Participants pledged to lend to 100 million families worldwide within a decade. Pushing to maintain the momentum,
the United Nations named 2005 the International Year of Microcredit. Today organisations from the US Agency for
International Development to Citigroup trumpet the idea.
Slideshows:
Top ten richest Indians
Emerging global cities
Much of that attention is focused on India, which is home to a quarter of the world's poor but also one of the hottest
economies. The country has seen an explosion of microfinance institutions, which are usually set up by
nongovernmental organizations. Ten years ago 400 institutions boasted 200,000 customers.
Today there are 1,000 that, together with 300 commercial banks, lend to 17.5 million people, according to Sanjay
Sinha, managing director of Micro-Credit Ratings International in India. Much of the lending is based on Yunus'
original idea--making loans to groups of women and relying on peer pressure from the members to ensure
repayment.
"India was very small in this field ten years ago," says Sam R Daley-Harris, director of the Microcredit Summit
Campaign. "Now they're going like gangbusters, expanding ferociously."
The money to fund all these lenders comes mostly from India's biggest commercial banks, such as ICICI [ Get
Quote ], State Bank of India [ Get Quote ] and Canara Bank [ Get Quote ]. But some is put up by foreign investors and
banks making social-responsibility bets, and by overseas donors.
Technology entrepreneurs are particularly intrigued. The foundations of Bill and Melinda Gates and Michael and
Susan Dell have each given $4 million or more to microcredit organisations. Vinod Khosla, a Sun Microsystems
founder and venture capital star, has put at least $1 million into Indian microfinance institutions, as donations and
investments.
"In their anxiety to expand very fast, they are pushing loans," says Rao, the microcredit campaign organiser. "They're
not careful in vetting." At least, some groups of borrowers are first required to save money that they can put down as
collateral; others must outline their business ideas to lenders.
The rapid growth also means that lenders are less likely to keep tabs on a borrower after a loan is made. In India,
says Daley-Harris, borrowers sometimes "are on their own after a couple of years, whereas in Bangladesh there's a
bank worker who often visits every week for a lifetime." In Bangladesh there is one microfinance staffer for 131
borrowers and in Afghanistan one for 54, but in India the ratio is one to 439, according to the Microfinance
Information Exchange in Washington.
The women in India could probably use more guidance, because it's so difficult to run a business there: The country
ranks 134th out of 175 that the World Bank studied this year for ease of doing business.
Slideshows:
The pros and cons of outsourcing in India
The world's largest companies
The result is that lenders often hand over money without taking the time to educate the borrowers, making sure they
understand that they're supposed to start businesses and that there are penalties for not paying the money back,
says Gowramma, secretary of the Bangalore branch of the All India Democratic Women's Association, who works
with women in the slums. "The people receiving these loans do not know what this microcredit system is all about,"
she says.
This means that microcredit's other goal--to empower women in highly patriarchal societies--isn't always achieved,
either. In Tumkur, a city outside Bangalore, a group of women received $155 loans. They stood in a circle, placed
their hands on the money and pledged to use their loans to launch businesses. But afterward, each handed the
money to her husband, and the men started the businesses. Because the women are responsible for repaying the
loan, they suffer the consequences if their husbands squander the money.
Microcredit advocates often claim impressively high repayment rates, averaging 95 per cent, as proof that borrowers
do use their loans to generate income. Otherwise they wouldn't be able to pay them back, they argue. "Can
[microcredit] be done badly? Absolutely," Daley-Harris says. "Can it make a massive difference in people's lives when
it's done well? Absolutely."
But in some cases women borrow from other sources to repay the loans. That often means resorting to
moneylenders--or loans from friends and family--to pay back the microloan and vice versa, trapping them in a cycle of
debt. The lucky ones have family members who have migrated to cities or abroad to work and send back remittances.
In Bangladesh, for example, 40 per cent of microcredit borrowers also borrow informally, says Thomas Dichter, who
has evaluated microcredit programs in 20 countries, including India. "You're getting a large number of people
borrowing from Peter to pay Paul," says Dichter, who wrote the 2003 book Despite Good Intentions: Why
Development Assistance to the Third World Has Failed.
More important, Dichter and others who study microfinance doubt the repayment rates. There are no reliable figures
on the percentage of loans delinquent for more than, say, six months. But it's telling that the vast majority of the
microlenders are not "sustainable," meaning that so few loans are repaid on time and costs are so high that lenders
need to keep tapping the easily available funds from banks, donors and the government to stay in business.
More than anything, the microcredit bubble is being inflated by government rules that all but force lenders to keep
pumping out microloans. New Delhi [ Images ] requires banks to devote 40 per cent of the money they lend to a
category of borrowers that includes small enterprises, with about half of that going to rural outfits. Banks have long
struggled to meet this obligation, and lending to microcredit institutions that then lend to the groups of women offers
an easy way to do it.
Sometimes microcredit does live up to its billing. Manjula, a 40-year-old seamstress who lives in Bagalur, a village 90
minutes away from downtown Bangalore, struggled to support her two children without help from her alcoholic
husband. She depended on moneylenders, who charge up to 1,000 per cent a year.
Two $220 microcredit loans over two years enabled her to open a shop selling saris, which she had been peddling
from her home. Since then she has increased her monthly income from $45 to $110, including the earnings from side
jobs tailoring and teaching sewing classes. That's enough to pay off her loan and save $30 a month. "My dream is to
convert this place into a big shop," she says proudly.
It was success stories like this that drew Khosla, an affiliated partner in Silicon Valley venture capital firm Kleiner,
Perkins, Caufield & Byers, to microcredit in his native India. Three microfinance lenders that he funds--SKS
Microfinance, Share Microfin and Activists for Social Alternatives--are on a top-ten list compiled by Micro-Credit
Ratings International, and he becomes so passionate about microcredit that his eyes tear up when he talks about it.
"This is the single most important tool for addressing poverty I have ever seen."
Might a careful study turn that article of faith into a provable proposition? "I don't need that study," Khosla says. "I
won't spend a penny on it because I've talked to 200 women who are recipients of these microloans myself. I've seen
it in the field."
Even Manjula's success story needs some cautionary footnotes. She started out with distinct advantages. Unlike
most of India's poor, she is educated, speaks some English and started her business before receiving the loan. And
Manjula hasn't been able to completely stop borrowing from moneylenders.
"The research is skimpy, but the research we do have shows increasingly that the main hope for microcredit--that it
will generate millions of tiny businesses and these businesses will grow and pull their owners over the poverty line--is
false," says Dichter, the author.
By the Numbers
Microcredit is quickly spreading in India, but the loans don't always lead to businesses; in some cases they are even
used to pay off previous debts.
Ask
Users
Write a
Comment
Samasta Microfinance
I have joined the Board of Directors for a small start up microfinance company operating in
Tamil Nadu and Karnataka, called Samasta Microfinance.
It is amazing to know how many people are desperately looking forward to getting money to
kickstart their lives. It is also unfortunate to know that larger banks are not yet willing to lend
money to microfinance institutions. As a result, the credit demand in India remains unfulfilled.
With respect to Samasta, I would like to suggest to the company interesting ways in which the
borrowers can improve their lives, particularly through intervention in education, healthcare,
better solutions for safe drinking water, renewable electricity solutions and so on.
I have looked at some simple, low cost water purifiers which, if deployed, can cut down the
healthcare costs. The quality of water is notoriously bad in urban and suburban Chennai, and is
one of the major causes of diseases. Several low income households can benefit substantially
from solar lighting solutions. Power cuts have increased in the last 5 years in Tamil Nadu, not
just in rural TN but also in the urban areas. The most affected are school children, near their
exam times.
More technology providers will have to look at the lower end of the population to come up with
affordable solutions.
I am greatly interested in education and reading books in general, being a book publisher
myself. We gave away several free books to microcredit borrowers of Samasta (all women) and
talked to them about the need to get their children to read books (as opposed to watching TV
mindlessly). All the women accepted the idea and agreed to persuade their children to get into
reading books.
LABELS: MICROCREDIT
2 COMMENTS:
5 / 2 8 / 20 0 9 9 : 4 0 A M
http://blog.investraction.com/2009/09/microfinance-in-spot-of-trouble.html
9/25/2009 9:12 AM
Post a Comment
Create a Link
Older Post Home
• Grameen Koota
• Samasta Microfinance
• SEWA Bank
• SKS Microfinance
• Spandana
Links
• Aavishkaar Goodwell - Private Equity
• Grameen Bank
• Microcapital
• Microcredit - Wikipedia
• MicroPlace
• Unitus
Blog Archive
• ▼ 2009 (1)
○ ▼ May (1)
Samasta Microfinance
• ► 2008 (25)
○ ► October (2)
○ ► July (4)
○ ► June (9)
Kiva vs Microplace
Micro-investment: Fabindia
Microcredit in Meghalaya
○ ► May (2)
○ ► April (2)
○ ► March (3)
○ ► February (3)
• ► 2007 (49)
○ ► October (3)
○ ► September (2)
○ ► August (7)
Aavishkaar Goodwell gets money
○ ► May (9)
○ ► April (8)
○ ► March (9)
○ ► February (5)
○ ► January (6)
• ► 2006 (48)
○ ► December (6)
○ ► November (4)
○ ► October (19)
○ ► September (7)
○ ► August (12)
About Me
BADRI SESHADRI
VIEW MY COMPLETE PROFILE
Top of Form
/w EPDw UKMjAzM
/w EWAw L3zvmu
helping organisations create and sustain competitive advantage in line with their mission
Company Profile
Our History
Board of Directors
Our Team
Clients
Financial Rating
Social Rating
Systems/Portfolio Audit
New Initiatives
M-CRIL IntelliGence
CRILEX India Growth Index
M-Cril14, March 2002=100
The CRILEX India Growth Index is a composite index of growth of microfinance institutions in India
and uses information on numbers of borrowers and size of loan portfolio at 14 MFIs.
About Us
M-CRIL is a global leader in the financial rating of microfinance institutions and in sectoral advisory
services. We aim to have a stimulated sector growth and depth of outreach and impact of initiatives
for financial inclusion on a worldwide basis. more...
Publications
Micro-insurance Regulation in the Indian Financial Landscape
M-CRIL Review of Rural Banking in India: Working Paper 1
Annual Report 2007-08
M-CRIL review of Indian Microfinance
more >>
Bottom of Form