[Assam] Death by Micro Credit-2 - 06-0930
cmahanta at charter.net
Sat Sep 30 12:01:41 EDT 2006
The following is a response from my friend Murthy
Sudhakar, (who does not usually address me as
c-da:-)), whom I blind copied in on some of these
discussions, because he has spent a number of
years studying these issues in rural South India,
and has been attempting to make a difference with
his InfraSys enterprise, with some small but fine
Thanks for including me in this discourse. Let me
offer you some of my thoughtsshare them as you
see fit. I had read Sudhirender article earlier
and he seems to have highlighted many problems
with this industry in India (and perhaps in other
poorer countries). In making my points let use
cut and paste.
The Moderator wrote: It questions the rationale
of Microcredit which lays a debt trap through
micro-enterprise development as a substitute for
meaningful economic development and fundamental
changes in the economic policies. It does appear
to take one's attention away from finding real
answers to the very real problem of poverty.
The moderator is right except.It is unclear to
me what % of the money lent actually goes to
micro enterprise and what goes to consumer goods,
medical treatment and other squeezes of life of
the poor. I do believe the cover/pretext is micro
enterprise and this is always what is
highlighted. A debt trap it certainly is!
Sudhirendar Sharma writes: Further, there are no
businesses that can generate profit after paying
an interest of 24-36 per cent on capital
This is indeed true even for urban industries.
Only the desperate will borrow at this rate for
an enterprise. Please recognize that most loans
from MFIs are a flat interest rate and not on the
Sudhirendar Sharma writes: 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.
C-da writes; If private profiteers and NGOs are
doing the Govt's job, would you not want to know
what the govt. is there for to begin with
This is significant: As we know the philanthropy
industry/racket is a huge industry. In the name
of charity this industry thrives. Behind ALL
charity is some guilt an embarrassment that
something is deeply wrong; that some amongst us
suffer (structurally) and some of us who do not,
are partly responsible for the state of affairs.
This collective guilt makes us be "charitable"
with our check books.. .and this is the fodder
for the charity industry. Every rupee/dollar
spent on charity reduces the coffers of the
government (tax deduction) and also tends to
absolve the government (which is us) of its(our)
constitutional, ethical, moral or economic
"responsibility towards the poor."
Sudhirendar Sharma writes: MFI pay little
attention to the core concerns of the poor. For
them the critical concern is to sustain services
against emerging odds.
He is right again.. when you loan to the large #s
that the MFIs do, the primary concern will become
the process and not the intent. The process is
the disbursement and the collection of money.
This supersedes the more important purpose of
such loans the intent: improving lives/ micro
Sudhirendar Sharma writes: Far from helping
people generate wealth, easy credit is being used
to encourage primary producers at the farm to
become secondary distributors for consumer
This is probably the most significant point he
makes. Just like the easy access of credit cards
to students and even the poor in the US (with
exorbitant interest rates and annual fees and the
minimum payment required) micro credits for the
rural poor ignores Primary production and its
related linkages. It is only through primary
production by the poor can asset/ wealth building
occur. But this requires a Policy Level Change
and that mean the government ( a reminder- this
is us) The Hindustan Lever's Shakti Amma scheme
to distribute their products in the rural areas
or Amway's MLMs do little for asset building. If
I am allowed to plug - this is where infraSys
differs from Micro Credit/ Finance.
Umesh Sharma writes: It shows that to make
micro-credit effective the illiterate or naive
farmers must become astute and worldly wise. Who
will help them?
It is my humble opinion, based on interaction
with them that the farmers while they maybe
illiterate they are not as naive as we have been
led to believe. They are more aware and
conscious of the structural problems of the
nation's policies and deficiencies that most of
the urban middle class. They see through the
preferential treatment that major industries get
(eminent domain of land for industries, subsidies
for corporations etc).
Umesh Sharma writes: then the same logic can work
for stopping road travel and sea travel etc
--becos people do die in traffic and travel
The comparison (to the ills of micro credit) that
would make the point would be the following: not
stopping road and travel entirelybut the removal
of stop signs speed limits , signals and all
safety measures and regulations for the safety of
Enough for now
>a company investing in rural India...for a change.
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