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  • vithal rajan posted an update 6 years, 11 months ago

    • On the surface a very appealing proposition enabling the talents of the disenfranchised. After all who is better placed and has better local knowledge than the person in situ. However can we assume that all those in situ are talented or would necessarily want to get into debt. Who would advise/protect those who are vulnerable to an ‘easy’/immediate solution? What happens if they can’t pay? There have been problems of suicide and that is before we forget that money lenders haven’t historically had the best rep. Who will regulate? Also is microcredit sufficient to overcome local structural barriers to enterprise. You make a fine point about the willingness of large financial institutions to lend on a large scale. Why can’t they give (relatively) tiny grants with a ‘no win no fee’ option. If successful then subsequent grants and a contract can be built. If not then no more grants…? Just thinking out loud 🙂 Just out of interest where is your figure of 98% from? Also I believe LETS work better locally and, as well, given today’s economies of scale I suspect that macro economical changes would benefit more people with less risk if carried out sustainably.

      • This 10-year old clip is from an hour long interview. I put it in because Galtung-Institut wanted people who register to put in a photo or video and this is what I could find. Anyway I am glad because you are interested. I agree with almost everything you say, but our perspectives and maybe experience is different. The MFI experience was gained by NGOs in Andhra Pradesh long before anyone else in the 1980s. The problem was that despite government directives, even nationalized commercial banks refused to lend to the poor, and in those days never to groups. I have never believed that impersonal MFIs would do good. We built sangams or self-managed associations of the poor and these large groups lent to their poor members. I have pleaded that a large national bank like the State Bank of India could operate local MFIs but there is inertia in the system and that is how MFIs got in and most made a hash of it. Default from the poor was very low, less than 2% because they saw the credit line as a lifesaver. The 2% percent default happened because of death, drought, sudden illness, and the sangam either rewrote the loan or wrote it off completely depending on the nature of crisis. That is the group protected its members and itself. Some of these lessons were learned by govt and this led to the 73rd and 74th amendments to the Constitution. But some exemplary people-based organizations have gone from strength to strength like SEWA. Do also look up KUDUMBASHREE of Kerala which though govt initiated is local people managed. Also if you like look up my article “Killing the MFI Golden Goose,” Economic & Politiocal Weekly, Vol XLV No. 49, December 4, 2010.


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