Microloans? Isn't that that predatory lending thing with the collection tactics so aggressive that dozens of people in India killed themselves over them?
No.
http://www.kiva.org/about/howLooks like that's exactly what it is?
http://www.npr.org/2010/12/31/132497267/indias-poor-reel-under-microfinance-debt-burdenBut microcredit in India doesn't come cheap.
The cost may be shocking to anyone in the United States who's ever borrowed for a car or a house.
"Just so your audience can brace themselves, the typical interest rates are in a range of 24 to 30 percent per annum," says Vijay Mahajan, president of the Microfinance Institutions Network, a trade group. "Most people find it very hard that this interest rate does any good to poor people who are the recipients."
One reason interest rates are so high, Mahajan says, is that microlending is both time and labor intensive.
Microfinance lenders do their business on the client's doorstep, meaning that representatives have to travel to slums or rural villages to make the loans and then come back weekly to collect the payments. But microfinance was also very profitable. So much so, says Shubhankar Sengupta, director of a Kolkata-based microfinance company called Arohan Financial Services, that it made sense to run it as a commercial venture, tapping into investment banks for the vast amounts of money needed to fuel the growing number of microloans.
It was so profitable that one company, SKS Microfinance, raised $357 million when it went public on the Mumbai stock exchange in August.
One Woman's Story
Rama is an example of microfinance gone wrong. She makes her living rolling bidis, the cheap little cigars smoked by India's poorest people. She lives in the town of Warangal, a farming center in Andhra Pradesh, one of the poorest states in southern India.
One woman cuts the leaves into shape, while Rama and others roll the smokes and bundle them into baskets. A quick, persistent worker can earn between 30 and 40 rupees rolling bidis, less than $1 a day.
Rama says microfinance representatives offered her a loan, with almost no questions asked. She took it, though she didn't have a plan to invest the money or pay it back. She used the money for household expenses, for medical treatment for family members, and to celebrate a birthday. A second company offered her another loan, which she used to make payments on the first.
Kurapati Venkatanarayana, who teaches economics at Kakatiya University in Warangal, says Rama began a downward spiral that's common among debtors in Warangal.
"They get loans from the second company, and pay to the first company. They take the third loan from third company, and pay to the first and second company," he said.
Before long, Rama had five loans from different companies, and no way to pay.
She says the collectors from the finance companies hounded her day and night, shaming her in front of her neighbors. They told her to get the money any way she could, by stealing if necessary, she says, and they told her she'd be better off dead.
Venkatanarayana says that's because, unbeknownst to her, Rama's loan payments had included a life-insurance premium.
"If the people who borrow die, the microfinance companies get the insurance amount," he said.
Rama says her 17-year-old daughter, Mounika, took the threats to heart. Mounika believed that if anyone in the family committed suicide, the debts would somehow be erased: She doused herself with kerosene from the stove. It took two days for her to die from the burns.
That's some fucked up shit for you to be into, Atlas. I don't know about this.
