[p2p-research] Micro-Finance in India Stumbling

[j.martin.pedersen]

The critiques of microfinancing have long been convincing: it helps
stablise the market economy, it pulls subsistence workers into the cash
nexus through private property title and - at the end of the day - it is
all about debt and it is a billion dollar industry pushing unsustainable
techno gadgets to those who can't afford to buy them, but Nokia must
expand! Stock market poster boys run the show - a neo-philanthropism
feeding on enclosure.

The most amazing thing about this, really, is that some people are
surprised...

I think this touches upon the discussion about whether commons/P2P
communities can/should/would/ought not to - etc. - engage in the
capitalist market economy - this is a very good example of what that
leads to...

-m

PS:

For instance:

http://www.himalmag.com/The-danger-of-Grameenism_nw4752.html

The danger of Grameenism  October 2010
By: Patrick Bond

Far from being a panacea for fighting rural poverty, microcredit can
impose additional burdens on the rural poor, without markedly improving
their socio-economic condition. (Also below, Khorshed Alam on why
microcredit initiatives inspired by Mohammad Yunus’s vision and
implemented by Grameen Bank and other NGOs have not gone nearly as well
in Bangladesh as has been publicised worldwide.)

===================

Why Doesn't Microfinance Work?
by Milford Bateman

published by Zed Books, priced �18.99/$34.95, ISBN 9781848133327. For
more information or to request a review copy please contact Ruvani de
Silva on 020 7837 8466 or ruvani.de_silva at zedbooks.net

Since its emergence in the 1970s, microfinance has risen to become one
of the most high-profile policies to address poverty and
under-development in developing and transition countries. It is beloved
of rock stars, royalty, movie stars, high-profile politicians and
'trouble-shooting' economists. Its most famous pioneer, Muhammad Yunus,
was awarded the Nobel Peace Prize in 2006.

=========================

The New York Times / November 17, 2010

India Microcredit Faces Collapse From Defaults
By LYDIA POLGREEN and VIKAS BAJAJ

MADOOR, India — India’s rapidly growing private microcredit industry
faces imminent collapse as almost all borrowers in one of India’s
largest states have stopped repaying their loans, egged on by
politicians who accuse the industry of earning outsize profits on the
backs of the poor.

The crisis has been building for weeks, but has now reached a critical
stage. Indian banks, which put up about 80 percent of the money that
the companies lent to poor consumers, are increasingly worried that
after surviving the global financial crisis mostly unscathed, they
could now face serious losses. Indian banks have about $4 billion tied
up in the industry, banking officials say.


On 19/11/10 13:34, Dante-Gabryell Monson wrote:
> I just read an article in french from "L'Echo" , updating about the
> stumbling of Micro Credit in India ( which I can send to you in pdf if you
> like ).
> 
> It basically says that Micro Credit is stumbling in India, including through
> political pressures.
> That it is accused of hyper profitable operations with high interest rates,
> leading to suicides, or prostitution to pay off debts.
> 
> The article also says that the Government of Andhra Pradesh, one of the
> Indian States,
> where one third of micro credit loans in India have been made,
> has set controls on micro credit businesses, putting them on hold.
> 
> At a national level, the central bank of India has set up a special
> investigation,
> with the minister of finance of New Delhi, Pranab Mukherjee, declared micro
> credit interest rates exorbitant.
> 
> You can also read this in a english article on the net :
> 
> http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/finance/India-microcredit-sector-faces-collapse-from-defaults/articleshow/6946275.cms
> 
> excerpt :
> 
> *India�s rapidly growing private microcredit industry faces imminent
> collapse as almost all borrowers in one of India�s largest states have
> stopped repaying their loans, egged on by politicians who accuse the
> industry of earning outsize profits on the backs of the poor. *
> 
> I also found the following article in English written *"in 2006"* , which
> gives a very interesting and more in depth overview on potential problematic
> developments in India - including comparisons with Bangladesh :
> 
> http://www.rediff.com/money/2006/nov/10spec.htm
> 
> excerpts :
> 
> *"the funds are often being used not as seed money for a new enterprise,
> such as buying a cow to sell the milk or setting up a fruit stand, but as
> handouts spent on consumption."*
> 
> *"In India rates average 30 per cent a year, though some lenders charge more
> than 45 per cent.*
> 
> *"In their anxiety to expand very fast, they are pushing loans," says Rao,
> the microcredit campaign organiser. "They're not careful in vetting." *
> 
> 
> On the internet, I also found the following recent article
> 
> http://www.isnare.com/?aid=641434&ca=Business
> *
> *
> *The micro-credit loan interest rate is usually 25% -100%*
> 
> This reminds me the following :
> 
> http://en.wikipedia.org/wiki/Loan_shark
> 
> A *loan shark* is a person or body that offers unsecured
> loans<http://en.wikipedia.org/wiki/Unsecured_loan> at
> high interest rates <http://en.wikipedia.org/wiki/Interest_rate> to
> individuals, often enforcing repayment by
> blackmail<http://en.wikipedia.org/wiki/Blackmail> or
> threats of violence <http://en.wikipedia.org/wiki/Violence>.
> 
> 
> ---------- Forwarded message ----------
> From: Franco
> Date: 2010/11/19
> Subject: [gtm] La mirco-finance indienne vacille
> To: "gtmonnaie at gtmonnaie.be" <gtmonnaie at gtmonnaie.be>
> 
> 
>  Bonjour,
> 
> En annexe un article de L�Echo sur le sujet.
> 
> Franco
> 
> 
> 
> 
> _______________________________________________
> p2presearch mailing list
> p2presearch at listcultures.org
> http://listcultures.org/mailman/listinfo/p2presearch_listcultures.org