Discussions
Is Micro-Credit Good or Bad
Posted by Agit8r • 3/14/09 • Subscribe to this Discussion [RSS] • Report This Topic
Topics: clinton, credit crisis, geithner, lahood, micro-credit, microfinance, yunusury
We've all heard of the wonderful new trend in humanitarianism known as microcredit. But with high interest rates and coercive "account management" are they really all that they are cracked up to be?
More about Micro-credit on my latest blog enty.
User Comments
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I get it already, nobody give a $h!t
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You should wait more than 16 minutes
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nah, I'm cranky... read faster. grrr
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Seriously, give it a few hours and then you'll have some comments (besides these ones about your impatience)
IMO - super high interest rates just make things worse...
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Thanks for the feedback. I noticed that at least one of the aid agencies (Oxfam) that was expelled from Sudan under the accusation of "colonialism" was running microcredit in that country.
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Bad.-
you look familiar. Are you on DNC's facebook group?
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I'm still reading up on it.
I see pro's and con's to it, but I'll reserve my judgment until I know more. -
Just about everything I have heard about micro-credit is good. The interest rates should be compared with the alternatives available to these borrowers. I don't know what you mean by coercive "account management". I imagine that the methods used to ensure repayment are gentler than those used by traditional money lenders.-
since there is such a high repayment rate, and there is no preponderance of evidence that the vast majorityof payers are able to recoup the amount lent, it is safe to assume that many (as has been recorded as happening to some) have had to resort to even more usurous lenders in order not to let down their "solidarity group"
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I think you have to be careful when you assume that a high repayment rate = coercive methods.
Just because the borrowers are low income doesn't mean they won't make good on their debts (a common myth.)
Although I have been reading that in certain countries the methods used to encourage repayment are unregulated - opening the borrower up to illegal coercion, force, and abuse. This is a problem that needs to be addressed.
But the idea is OK, so far. -
@Anok
The coercion takes place within the solidarity groups that are charged w/ the task of handling the account. If someone doesn't pay, the whole group loses. due to this delegation of handling, the high interest seems unjustified -
From what I'm reading so far, I was referring to the loan shark-esque techniques used by the person left in charge of specific "areas" or groups (or whatever). Most of the abuse seems to occur in places with very, very high poverty rates and very little legal recourse or regulation of personal contracts/personal safety.
Developed countries who are using it don't seem to have the same problems as impoverished countries.
I think there are some good things about it, and when used properly (legally and/or ethically) it gives people who wouldn't otherwise have a prayer in typical capitalist systems a fighting chance.
But it has some flaws in it, and also seems to be not only abused by some, but also as a means of survival by others. Where social safety nets don't exist, people are taking these loans to pay for basic things - not start businesses or the like of what it's intended to do.
I think parameters and and regulation needs to exist to an extent to prevent these abuses, and, it cannot be used as the be-all-end-all answer to poverty.
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The other option is traditional money lenders and loan sharks with as high as 50-100% interest in most of the places where it occurs. So it is better than nothing. Even 10-20% is better than traditional moneylenders. -
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are you hitting on me?
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I don't think it is "safe to assume" that many have had to resort to more usurous lenders to meet interest and loan repayments.
It seems to me that donations to micro credit providers like Opportunity International are a good way to help people to help themselves achieve better lives. -
Yeah Micro-credit is a good thing.
And it depends on how the user uses it.-
There have been many endeavors by the more developed nations that have been sold to the public as helping the people of undeveloped nations. Even colonialism was among these.
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It seems to be doing wonders in India!!-
Hey.. the article is 2.5 years old.. Check out the latest developments.. I guess the condition is not like that..
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In the allianz post, read carefully..
"Suvarna Gandham, manager of Indian operations for the Oikocredit microfinance fund, says that microfinance is not to blame for the suicides. She says many of those driven to suicide had outstanding debts with commercial banks and moneylenders; not microfinance institutions (MFIs)." -
sure thats the "balance" in the article. They are telling both sides. Needless to say there is a problem in some places. I don't know if India has reformed their laws regarding usury since that time.
I also should note that other sources say that often micro-debtors resort to other lenders in order to satisfy their "solidarity group"
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Micro-credit is the shizzle. Seriously, though, it's a good thing. -
Microcredit, Poverty, and the Merchant of Venice Posted on 18 May 2008
www.sos-arsenic.net/english/development/mcro_credit.html
"I had the opportunity to talk to ‘microcredit’ borrowers. From them, I particularly wanted to know more about microcredit and its effects on their lives. Some of the stories they told, were both enlightening and disturbing. Strangely, these stories reminded me of Shylock, the vicious money lender in Shakespeare’s Merchant of Venice."--H. Weber -
As with any practice, it will be carried out well and poorly. If carried out well, it is a good thing and has a real potential for enriching lives. If carried out poorly, then it has the downsides you mentioned. Just because some people abuse the tool doesn't mean the tool is bad.
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