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Thursday, October 19, 2006

Microcredit, Macro Issues By Walden Bello in The Nation..

Microcredit, Macro Issues

posted by Sandip K. Dasverma at 1:45 PM

1 Comments:

  • From: "Sandip Dasverma"

    Subject:On Microcredit and Muhammad Yunus

    Dear Sukla:

    I think there are the following advantages of Microcredit:
    1. The possibility of release of energy of another individual in attaining the social goal of poverty reduction - his or hers. When millions of such individual energy gets released - it is bound to have impact.
    2. S/he in his/her, life and death fight, against poverty, is going to do his/her best to win if a helping hand is given.
    3. The exploitative usery system of unsecured loans is replaced by a more efficient system. I have seen monthly 10% for a 10 day loan from 22nd of month till next payday for workers and 10% for each hat day (52 per year) in Koraput(Orissa).
    4. The SHG(Self Help Groups) give a strength in numbers and sharing the experience, kind of group. A basis of community action which as we know is the basis of all social changes.
    5. The 30 plus percent interest rate is preposterous at the surface but when you consider the alternative of 120% to 500% you understand it's impact.
    6. The use of technology will make it more efficient and the interest rates can be brought down if World Bank gives low interest or no interest loans to the credit institutions - instead of money to the state Govts. who buy Jeeps and unnecessary equipment and create substandard roads(other infrastructure) to syphon off the money. Additionally, I am very weary of the impact of the consultant system of world bank which tend to corrupt and buy out the independent voices in academia. I think this will be a welcome change if WB lends it's money to self help groups via Grameen or other similar groups.
    Though neo-con Paul Wolfowitz can't be trusted to honestly persue poverty reduction - and I am afraid they will corrupt the activists - the idea I don't dislike at all, if proper checks and balances can be instituted.
    Best wishes,
    Sandip

    Sukla Sen's response:
    Dear Sandip,

    I do entirely agree with you that institutional micro-credit may play some useful role in alleviating poverty.
    It may provide the critical support to a person on the verge of total and imminent collapse to gain some breathing time. More importantly, it can also facilitate entrepreneurship at the grassroots. But then it'd normally require active SHGs to make use of such micro-credits.
    In case of Bangladesh, it has been widely reported that the Grameen Bank has helped women to stand on their own feet, to an extent at least, and thereby earn self-confidence and dignity. In a society engaged in a grim fight against rising mullahcracy, that must be a significant achievement.

    But while Taj Hashmi's criticism of Dr. Yunus appears to be plainly biased and over-hyped, Bello has made a very valid point that micro-credit is no magic bullet; it cannot change the social relations and realities in any radical and thoroughgoing way. That, I believe, is unexceptionable.

    As an aside, the interest rate is strongly related to two factors: servicing expenses and risks involved.
    For very evident reasons, the servicing expenses in case of micro-credit would be higher as compared to bulk loans. And in case of honest operations, the risks would also be higher in this case.
    And, in any case, at the end of the day, the rate of interest will have to be compared with usurious loans - the only other alternative available for such recipients without any collateral guarantees worth the name.

    The charge that women are made to operate as proxies for their male relatives is also very common in case of reservation for women in India in the Panchayat system. But then you can't throw the baby out along with the bathwater. That's no solution. It's something like asking to do away with the PDS as there're huge 'leaks' in the system.

    But the point remains that it's no silver bullet.

    Sukla

    By Blogger Sandip K. Dasverma, at 12:21 PM  

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