[Assam] Death by Micro Credit-2 - 06-0930

[Chan Mahanta]

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 
successes.

Highlighting mine.

cm







Dear C-da:

Thanks for including me in this discourse. Let me 
offer you some of my thoughtsŠshare 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 ŠexceptŠ.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 
investment.

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 
unpaid balance.

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 guiltŠ 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 
enterprise etc.

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 
products.

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 
<http://www.infrasys.biz/>www.infrasys.biz 
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 
accidents.

The comparison (to the ills of micro credit) that 
would make the point would be the following: not 
stopping road and travel entirelyŠbut the removal 
of stop signs speed limits , signals and all 
safety measures and regulations for the safety of 
travel.

EnoughŠ  for now

anbudan




>sudhakar
>infraSys
>a company investing in rural India...for a change.
><http://www.infrasys.biz/>www.infrasys.biz
>
>
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