http://www.nytimes.com/2010/11/18/world/asia/18micro.html?ref=world
This is an interesting article on the microfinance industry in India, which is now on the verge of collapse due to widespread defaulting. It seems that many microfinance companies began to treat these loans as a profit oriented venture, instead of as a development assistance program. As a result, companies began predatory lending practices, resulting in a similar backlash to the US sub-prime lending crisis.
This case study is important; this could have serious implications for the future of the entire microcredit industry. It also serves as a reminder of the dangers of lack of regulation in development practices. Microcredit by its own right is not necessarily problematic; for example, Peru has generally been seen as a country that has benefited from microcredit programs in terms of increased quality of life. The difference between Peru and the current problem in India is that the role of predatory lending institutions has become exaggerated in India as the industry has become more affluent. Perhaps the lesson to be learned here is that, if microcredit is to be seen as part of a development agenda, then it should be channeled through centralized international authorities and/or subject to much stricter international regulations regarding to whom loans can be extended and at what interest rates, which should be fixed according to pragmatic concerns, and not profit concerns.
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