I get asked a lot about whether I think micro-credit can help save the Global South. The article I most often send people to is Walden Bello’s fine summary in The Nation, written in 2006 on the occasion of Mohammed Yunus’ receipt of the Nobel Peace Prize. In short: micro-credit is a great way to survive poverty, but a poor way to beat its structural causes, or to address the relations of power the produce it in the first place. People in the Global North are generally surprised to learn the interest rates on micro-credit loans – between 20-70% from the more reputable lenders – and a new article in Outlook India is a reminder that it’s not the interest rate that kills, it’s the people who break down the door demanding repayment.
Though the avowed intention of MFIS and banks providing microcredit is to help small borrowers, there is increasing evidence to show its cumbersome processes are forcing landless farmers and traders to seek out the traditional moneylender. On the flip side, loan beneficiaries often face undue pressures. Last month, over 1,000 women members of 50 self-help groups in Bhubaneswar protested against the high interest charged by MFIS (microfinance institutions). The first farmer suicide in drought-hit West Bengal this year is also traced to the harassment over loan repayment.