[p2p-research] Micro-Finance in India Stumbling

Fri Nov 19 16:25:27 CET 2010

the material Martin has sent is pretty damning for the whole concept,
including with Yunus himself,

Michel

On Fri, Nov 19, 2010 at 10:23 PM, Dante-Gabryell Monson <
dante.monson at gmail.com> wrote:

> 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
>>>
>>>
>>>
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>>>
>>
>>
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>>
>> Think tank: http://www.asianforesightinstitute.org/index.php/eng/The-AFI
>>
>>
>>
>>
>>
>

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