In fact, this news report made me sit back and think. A few months back (before this news report) I had read somewhere that some 40-odd SHG members in AP had committed suicide. I checked up with my colleagues in other States where farmer suicides are on an upswing, and to my utter dismay found that many of the farmers who committed suicide also were faced (or let us say shared) with the burden of an abnormally high interest rate that their wives were being made to cough out in the name of micro-finance.
Independent journalist Purusottam Singh Thakur from Bhubaneshwar told me the other day after returning from the suicide-prone areas in Orissa that most of the 32 farmers who committed suicide in the past three weeks or so too had borrowed from micro-finance institutions.
I am not surprised.
Many in the urban centres would commit suicide if the banks start charging us 24 per cent rate of interest. Even at 8.5 per cent rate of interest, those who have drawn housing loans, find it difficult to make monthly EMI payments. Imagine the stress and threat under which the poor in the rural areas are being made to borrow at 24 per cent rate of interest.
The loot doesn't stop here.
The MFI units are now getting ready to extend home loans to the poor. Says a report in The Times of India (Mar 30, 2009): The rural home loan products are structured pretty much the same way as in the cities. The difference being the average loan amount. For MFIs, it ranges between Rs 50,000 and Rs 2 lakh with repayments being in equated monthly instalments (EMIs). Some like Madura Micro Finance also provide a payment holiday of four months for construction.
I am not sure at what rate of interest these loans for the poor are being provided. If you happen to know, please do let our readers know. In any case, you can read the full report MFIs offer home loans at: http://timesofindia.indiatimes.com/biz/india-business/MFIs-offer-home-loans/articleshow/4331728.cms
Whatever be the justification for charging 24 per cent rate of interest, but how can human beings expoit an hungry stomach in the name of a successful business model? How can human beings be so cruel to fellow humans, not even thinking twice before drawing the last ounce of blood from his impoverished body?
The average monthly income of a farm family in India is less than Rs 2400. And I am talking of 60 per cent of the country's population, including their wives who are more often than not members of the SHGs benefitting from micro-finance. How can you charge 24 per cent rate of interest from people who cannot afford two square meals a day?
While you ponder, let me bring to you an interesting post the other day on the FocusOrissa list. Posted by Sikander Kushwaha, a student from Jabalpur, it makes some interesting points that should add to our understanding of the improper and immoral ways the MFIs operate. I reproduce the text here, and I am sure it will provide more food for thought for those who feel outraged at the criminal role of MFIs.
WHEN the Bangladeshi banker and economist Muhammad Yunus
The concept has grown over the past two decades. The United Nations Development Fund
International Micro Credit Summit was held in 1997 at the World Bank
headquarters in Washington DC. The World Bank, United States Agency for
International Development (USAID), United Nations Development Programme
(UNDP) and Citi Bank became its chief patrons and declared an allocation of special fund for it. Over the years, major commercial banks and multinational corporations like Monsanto, Citi Group and others decided to sponsor it.
However, this type of financing has a darker side too. Very few quantitative studies have been made on the subject, which has been able to prove that micro finance
90 per cent of the people who receive micro credit are poor and most of them
succeed in businesses started with these loans.
Apart from this, micro finance
Further, this project has been running in Bangladesh for about 30 years now, via the Grameen bank. However, the country is still counted amongst poor countries and has not had any significant change.
Moreover, the interest rates charged by micro financing institutions
Arnab Mukherji, a researcher at the Indian Institute of Management in Bangalore said,“We’ve seen a major mission drift in micro finance
So, although the option had started with the spirit of poverty alleviation mission, it has now been reduced to a money making tactic of MNCs.