[p2p-research] Micro-Finance in India Stumbling

Fri Nov 19 16:23:36 CET 2010

Tanks Michel

Yes, possibly a lack of regulation,
and not enough follow up,
leading micro credit to support consumption,
rather then investment in very small scale entrepreneurship.

---

I liked ( the romantic ? ) idea of community self empowerment through micro
credit,
having a caring follow up, with organizations potentially providing
empowering small scale entrepreneurship information,
potentially enabling pools of woman to pay back loans which could then
directly and entirely go back into financing new loans in their community.

I personally believe that such approach should have remained not for profit,
without interest, ideally in alternative currencies ! ( mutual credit ? c3 ?
just to mention some of the more reknown debt based alternative currencies )

----

I would like to remind that the model implemented by Yunus,
although possibly an improvement by attempting to offer credit possibilities
to poor people wanting to set up their business,

has been implemented based on central bank currencies,
while charging interest.

---

Interest contributes, in my understanding of monetary systems,
to artificial scarcity;

If one shares the understanding that all ( or almost all) money created is
created through credit,
and that the creation of interest on this credit principal is not included.

Hence there is not enough money to pay the principal debt / credit + its
interest ( as the interest has not been created ),
unless the total monetary mass increases ( by credit creation through debt,
on which there is again interest ).

The result, in my understanding, is that through time, a greater percentage
of the newly created money / credit, goes into paying off the interest on
the previous debts / monetary creation... a transfer of money , through
interest, from the ones to take credit, to the ones that do not need credit
or control the credit system :

"a power structure."

When such artificial scarcity of currency is experienced by much of the
population,
much of the population starts competing with each other for scarce money,
briigning labor prices down, and enabling people with money to have control
by using their money to have access to labor - with labor potentially
willing to do things it would not do if it would be in a situation of
currency sufficiency...

On Fri, Nov 19, 2010 at 3:45 PM, Michel Bauwens <michelsub2004 at gmail.com>wrote:

> it seems to me that what was probably a genuine innovation in bangladesh
> under yunus, has become fodder for proft maximisation outfits that are using
> the model for other purposes ..
>
> it may be just a case of inadequate regulation,
>
> Michel
>
> On Fri, Nov 19, 2010 at 8:34 PM, Dante-Gabryell Monson <
> dante.monson at gmail.com> 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
>>
>>
>
>
> --
> P2P Foundation: http://p2pfoundation.net  - http://blog.p2pfoundation.net
>
> Connect: http://p2pfoundation.ning.com; Discuss:
> http://listcultures.org/mailman/listinfo/p2presearch_listcultures.org
>
> Updates: http://del.icio.us/mbauwens; http://friendfeed.com/mbauwens;
> http://twitter.com/mbauwens; http://www.facebook.com/mbauwens
>
> Think tank: http://www.asianforesightinstitute.org/index.php/eng/The-AFI
>
>
>
>
>
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://listcultures.org/pipermail/p2presearch_listcultures.org/attachments/20101119/34975539/attachment.html>