Microfinance in India a retrospect

For a few years now micro-finance has been held up as one of those ideal ways of combating poverty in the developing world. Essentially a system of small loans to people who wouldn't otherwise be able to get credit the idea is that it enables the poor to buy that shovel to help themselves dig themselves out of poverty.

So the companies that have been managing the micro-financing operations make their money by charging interest well over the odds and because the system works by lending to small groups it allows the company to put pressure on entire communities with weekly meetings monitoring what they're doing to repay the mini-loans despite that fact that many workers are paid yearly. That's right, it turns out that micro- finance is another word for loan shark but, and here's a sweet spot, they aren't regulated in the same way as money le Because the ideology behind micro-finance says that you beat poverty through enterprise it was held up uncritically as a success even before the schemes were operational.

What started out as an idea to alleviate poverty has become a way of getting the poorest into the kind of debt they hadn't been able to get into before, and that has a very real price - including a wave of suicides, like that of 16 year old student Lalitha Mursilmula who was told by the company she would have to become a sex worker in order to pay off her families debts. She ran home, wrote a note to her family and then drank a lethal concoction of fertilizer. The unethical behavior of the micro-finance has deepened an already existing problem.

In India politicians have ordered people *not* to pay back their loans because of the social harm the industry is doing which in turn is leading to India's own little sub- prime crisis. It seems to me that the way to solve the problems of capitalism is not to find new and more ingenious ways of tightening capitalism's grip on the world.