|
By Dr Sudhirender Sharma NGOs, banks and corporations have benefited from micro-credit at the cost of the poor, says development analyst Dr Sudhirendar Sharma
Development analyst Dr Sudhirendar Sharma worked at the World Bank before embarking on development consultancy and independent research. During the last five years or so, he helped set up hundreds of self-help groups in villages. However, realising that the hidden agenda might be different, he started researching the flip side of micro-credit. At the Ecological Foundation, the Delhi-based think-tank, Dr Sharma and his colleagues critique development through research and advocacy. Is micro-credit the answer to rural poverty in India? Does it create wealth? Scratch the surface and you'll find that this is not the case. Soft loans do remove cash poverty, but only elusively. Unless loans are converted into investments in on-farm productive activities, rural poverty will not go away. Micro-credit improves cash flow but doesn't create wealth. Far from helping people generate wealth, easy credit is being used to encourage primary producers at the farm to become secondary distributors for consumer products. Howsoever lucrative, the transition has severe implications on the livelihood security of poor people. Micro-credit has caught on so much, courtesy the donors, that no one questions its implications now and for the future. Would you call micro-credit exploitative, in terms of rates of interest? Of course! Though the motive was to drive the exploitative moneylender away, in effect exploitation has been legitimised through the neo-institutional mechanism of micro-credit. While interest rates have come down, the banks continue to charge high rates of interest (around 11%) on borrowings by the groups, who in turn levy a higher rate of interest (between 24 to 36%) to make profit. Shockingly, the poor are exploiting the poor by charging high rate of interests. Ironically, the so-called exploitative moneylender has been replaced with an army of moneylenders. With interest rates exceeding the repayment capacity of the poor, a debt-trap has been laid. Does it burden the poor, especially women, with debt? There are some horror stories of women in Bangladesh being jailed for non-repayment. Curiously, the micro-credit sector plays safe allowing only the success stories to get hyped. But exceptions don't prove the rule! As women are the primary targets of the micro-credit campaign, they alone find themselves in the debt-trap. There are any number of agonising stories in rural areas. I'm sure in the months ahead the boom of micro-credit will go bust. Does micro-credit benefit the poorest? It has been designed to create an illusion, much like electoral promises. I've been to some of the first villages covered by the Grameen loans in Bangladesh where there doesn't seem to be any perceptible change in the lifestyle and livelihoods of the rural poor. The oft-repeated stories that micro-credit helps a rural woman buy a buffalo, a poor woman now owns a telephone kiosk cannot be replicated in meaningful numbers. Conversely, at the cost of the poor a large number of NGOs have benefited; banks have found a convenient route to increase lendings; and corporations have got a growing consumer market to target. What is your comment on the allegation that micro-credit promotes market interests, and that MNCs benefit more than poor rural women? It isn't an allegation anymore. Thanks to the success of Hindustan Lever's Project Shakti in Nalgonda district of Andhra Pradesh, this new distribution chain (of utilising women from self-help groups) has been scaled up to cover 63 districts in Andhra Pradesh, Karnataka, Gujarat and Madhya Pradesh. Project Shakti hopes to rope in 11,000 women entrepreneurs (self-help group leaders) who will eventually cover 100,000 villages in the country to market their products. The donor-driven micro-credit movement comes handy for corporations. Given the fact that CitiCorp is co-sponsoring the 2005 UN Micro-credit Summit, it seems the donor sector has been co-opted by corporations to further their interests, albeit discreetly. What is your assessment of Grameen Bank in Bangladesh, and closer home, the ‘success stories’ of Andhra Pradesh, for instance? At the cost of the poor in Bangladesh, Grameen has grown to sky-scraping heights. Is this phenomenal growth not worth investigating? But you will see it depending on who you are and where you stand! Do the negative impacts of micro-credit outweigh the positive? Simple cash flow or easy credit are the much-talked-about short-term gains, but in the long run, we will witness a cumulative debt trap, and the adverse consequences of moving away from primary production activities to supporting market interests. These long-term negative impacts outweigh the short-term positives. But who is interested when the dominant swing is in favour of micro-credit, and when each development worker is singing the micro-credit tune. The micro-credit ‘movement’ has eroded community feelings, systematically blunted peoples' political sharpness, and is side-tracking the critical question of livelihoods security. Put all of these together and one gets a picture of despair, tragically in the name of the poor. Dr Sudhirendar Sharma is a development analyst attached to the Delhi-based the Ecological Foundation. He can be reached at
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
|
