- Microfinance struggles to restore its reputation, By Erika Kinetz (AP), March 7, 2011, Boston Globe: “Long heralded as a way to lift the downtrodden out of poverty, microfinance is under a cloud. The stories of lives being changed by a $27 microloan and picture perfect scenes of smiling women with colorful handlooms, empowered by affordable credit, have been replaced by headlines about borrowers driven to suicide. At best, microfinance seems to be failing to achieve its most noble goal: poverty alleviation. At worst, some lenders are contributing to a cycle of indebtedness and abuse, just like the loan sharks they sought to replace. Critics say the industry has grown too quickly for its own good, with too much rapaciousness and too little regulation. That has fostered a breakdown in lending discipline, with multiple loans to overextended borrowers, and allowed some unscrupulous players to thrive…”
- India’s poor need help to help themselves, By Sarika Bansal, March 7, 2011, The Guardian: “Until recently, microfinance has been the golden child of international development. Microfinance companies would lend small amounts of money to poor women who would, in the ideal scenario, use them to start small businesses. Their interest rates were typically lower than loan sharks’ but still high enough to make a profit. Around the world, development experts believed microfinance was an ideal way to alleviate poverty, a smart way to ‘do good’ while also ‘doing well’. How times have changed. In the last few months, many people have become newly critical. In November, politicians in the southern Indian state of Andhra Pradesh started making bold claims about how microfinance’s crushing interest rates and strongman tactics were, among other things, leading to suicide among over-indebted borrowers…”
Tag: Microfinance
Microlending in Developing Nations
Microlenders, honored with Nobel, are struggling, By Vikas Bajaj, January 5, 2011, New York Times: “Microcredit is losing its halo in many developing countries. Microcredit was once extolled by world leaders like Bill Clinton and Tony Blair as a powerful tool that could help eliminate poverty, through loans as small as $50 to cowherds, basket weavers and other poor people for starting or expanding businesses. But now microloans have met with political hostility in Bangladesh, India, Nicaragua and other developing countries. In December, the prime minister of Bangladesh, Sheik Hasina Wazed – who had championed microloans alongside Mr. Clinton at talks in Washington in 1997, while Mr. Clinton was president – turned her back on them. She said microlenders were ‘sucking blood from the poor in the name of poverty alleviation,’ and she ordered an investigation into Grameen Bank, which had pioneered microcredit and which, along with its founder, was awarded the Nobel Peace Prize in 2006. In India, until recently home to the world’s fastest-growing microcredit businesses, lending has slowed sharply since the state with the most microloans adopted a strict law restricting lending. In Nicaragua, Pakistan and Bolivia, activists and politicians have urged borrowers not to repay their loans…”
Microlending – India
In India, greed creeps into microlending, critics say, By Rama Lakshmi, October 30, 2010, Washington Post: “The microcredit revolution has been celebrated for helping poor women in developing countries start small businesses. By borrowing money for purchases such as a buffalo or sewing machine, the women were able to help lift their families out of poverty. But critics say the microcredit model has been perverted by commercial greed in India, with reports of abusive collection methods and sky-high interest rates…”