The downside of micro finance
It has got bad publicity all over the world now. Its stock came down sharply in India following suicides of clients in Andhra Pradesh which prompted the state government to seal the offices of some leading micro finance firms. Till then there was a huge laudatory literature and press. Sure, Reserve Bank of India never even mentioned it.
Looking back, it seems ludicrous that its premise of poverty eradication by just offering $ 100 to each poor person was taken seriously by so many people, myself included. I was very impressed by some novel deposit collection schemes of micro finance institutions and Alex Count's books describing in detail the lives of self- help group members in Bangladesh.
But it is now clear that all these institutions have been less than candid and truthful in describing their methodology. All have under reported the interest they charge. Some of them charge more than 100% interest to poor borrowers and their big time funding agencies have ignored this usury.
Confessions of a micro finance heretic by Hugh Sinclair, 2012 gives detailed information about all the malpractices and I find it very absorbing and interesting.
The moral: Do not flow along with the current. Step back, take a critical look and seek answers.
It has got bad publicity all over the world now. Its stock came down sharply in India following suicides of clients in Andhra Pradesh which prompted the state government to seal the offices of some leading micro finance firms. Till then there was a huge laudatory literature and press. Sure, Reserve Bank of India never even mentioned it.
Looking back, it seems ludicrous that its premise of poverty eradication by just offering $ 100 to each poor person was taken seriously by so many people, myself included. I was very impressed by some novel deposit collection schemes of micro finance institutions and Alex Count's books describing in detail the lives of self- help group members in Bangladesh.
But it is now clear that all these institutions have been less than candid and truthful in describing their methodology. All have under reported the interest they charge. Some of them charge more than 100% interest to poor borrowers and their big time funding agencies have ignored this usury.
Confessions of a micro finance heretic by Hugh Sinclair, 2012 gives detailed information about all the malpractices and I find it very absorbing and interesting.
The moral: Do not flow along with the current. Step back, take a critical look and seek answers.
