Mar 22, 2010

Microfinance continues to kill. The nation remains unmoved.

I always feared this. When I opened an email a few minutes ago, I wasn't prepared to see the funeral pyre of a farmer who had allegedly taken a loan from a micro-finance institution. The email said: "Sir, did you get to see this news. You were always right."

I immediately clicked on the link. The NDTV had carried a Bhubaneshwar dateline story on March 19, 2010: "Orissa: Loan driving farmers to suicides." It made a poignant reading, something that I had always warned. I would have missed seeing this if the alert reader of this blog had not taken the pains to share this disturbing report with us. This report is from Sambalpur in Orissa. I think the picture says it all.

Ironically, the last blog posting on micro-fiance that I had posted, was entitled: "Microfinance also kills". It had carried of a similar report from Andhra Pradesh.

I don't know how many more human lives need to be sacrificed before the Finance Minister Pranab Mukherjee and the Researve Bank of India (RBI) wake up to the grave tragedy. I don't know how much more blood needs to flow before the Nobel Prize Committee apologise for giving an award where it was the least deserving.

The MFIs, which are nothing more than organised money lenders, must be stopped. We cannot allow loan sharks to extract their pound of flesh from innocent and gullible poorest of the poor.

Pasted below is the NDTV news report. You can see the news video also if you scroll down to end of the news report on the NDTV website.

In 2009, 43 farmers in Orissa committed suicide. It was a year that saw a massive farm loan waiver by the UPA government and also a record investment of over Rs 1400 crore in farm credit by the state government. But they were all small farmers who couldn't access institutional loan and had to borrow from microfinance NGOs at an exorbitant rate of interest. Many, even the state government, suspect it's this exploitative loan network that may have driven loan farmers to commit suicide.

A farmer in Sambalpur, didn't get water for his fields, subsidies, or insurance cover. What he got readily was a loan from a local microfinance NGO, at an incredibly high 24 per cent interest. The fear that he would never be able to pay back, drove him to suicide.

As more and more farmers commit suicide in Orissa, crushed under debt, loans have become a scare.

"I fear taking loans. I've never taken it nor will I ever," said Shankar Dhurua, a farmer from Kusumdihi in Sambalpur.

In rural Orissa today, Microfinance NGOs operate through Self Help Groups and local fertiliser and pesticide dealers - people who are most likely to know which farmer needs a loan.

Banks give loans at 5 per cent interest, but unable to provide documents, small farmers end up going to these NGOs where loan disbursal is quick, but the interest charged could be anywhere between 24 per cent and 50 per cent.

"Ninety per cent small farmers fall prey to well-organised loan campaigns by multiple players, without assessing whether it will benefit them or land them in trouble,'' says Durga Bag, a farmer.

A farmer who takes this loan is trapped in a life-long cycle of debt - a burden that has started driving them to suicide.

''The exploitation is visible in cases where farmers had received microfinance from NGOs, and they are exploiting the farmers,'' said Dr Damodar Rout, Orissa Agriculture Minister.   


Prakash Pandey said...

I now understand better why so many religions had outlawed the practice of charging interest on money.....Islam and even Christianity did it... The government needs to be woken up from it's slumber.....

Anonymous said...

Atleast farmers should not be exploited... They don't even have money to eat