Microcredit Becomes a Death Sentence The microfinance industry was flourishing in India, a country besieged by poverty. One of the most popular programs was microcredit. How does it work? As an example, let's take a poor woman living in a rural
How to Correct the System without Erasing the Potential
As a result of the grave consequences of predatory lending practices, the Indian government has passed a law that limits the local activity of microfinance companies to an extent that makes it practically impossible for them to conduct business. In addition, local politicians have been encouraging borrowers not to pay back their loans even if they can, leading to a significant decline in debt closure.
"ONE WOULD IMAGINE THAT SELLING THESE PRODUCTS OR SERVICES WOULD THEN ALLOW HER TO 1: PAY BACK THE LOAN AND 2: IMPROVE HER FINANCIAL CONDITION. IN THEORY, THIS SHOULD WORK PERFECTLY..." Nevertheless, long-time proponents of the microfinancial system will not be discouraged. While acknowledging these serious offenses, they continue to advocate for microfinance and to point out its benefits and potential when carried out responsibly. Without microcredit, the poor population of India will continue to be disenfranchised not only from loans, but also checking and savings account, insurance, and other financial services that are freely available to the majority of the world. The challenge is how to deliver financially empowering assets that do not turn the beneficiary into a victim. (Source:http://www.npr.org/2010/12/31/132497267/indias-poor-reel-under-microfinance-debt-burden)
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