Blog referred to
https://blogs.ubc.ca/jonkim/2017/10/15/mega-microloans/
Within the wide world of economics, there are four main hemispheres – microeconomics, macroeconomics, international economics, and developmental economics. Each of them progressively provide a larger and more long term perspective of decision makers, and the responsibility that falls upon them. The most beloved and cherished offering bestowed upon the universe of developmental and international economics is microcredit – a financial ladder out of the abysmal chasm of poverty. It is considered a lifeline for those who borrow, a winner for those who lend, and an opportunity to independently finance and fuel the train out of circumstances that spiral out of control into hopelessness for many.
It began in Bangladesh, when Muhammmed Yunus offered a loan of $27 to a stool maker who was a prisoner to her necessitousness, that led her to be exploited because she did not not have the 22 cents needed in order to get around the various agents of her business. In 2006, Yunus was honored with the Nobel Peace prize – but as of today, microfinance as a whole has morphed into a disputatious discussion.
Rapid commercialization of this industry has brought its altruistic and economic aspects at opposite ends. With hostile measures of client enlistment and steep interest rates charged on loans, it has become a game of high stakes and megaprofits. Entrepreneurs like Vikram Akula have reaped the returns of generational debt and deficit, by launching a public IPO for SKS Microfinance and raking in crores of rupees. Likewise, Mexico’s Banco Compartamos IPO gathered a sum of over five hundred million after turning to a for profit organization. To this, Yunus Mohammed responds saying – “Microcredit was created to fight the money lender, not to become the money lender.”
This situation of a counterintuitive Robin Hood that rips off the poor and deposits to the rich questions the basis of microcredit as a self sustaining system. Pointing the blame at any stakeholder in this loop is futile – what can be brought to examination here? Is it the profit centralized approach encouraged and adapted by capitalism? Can it be the inability of the poor to preserve and maintain the wages they receive? Or can it be the process of issuing loans without extensive discretion? Lending in itself requires delicate balance. In United States, too much led to the housing bubble bust and too little led to the long drawn recession.
In my opinion, there is no neat answer to qualify microcredit as positive or negative. Coming together with collective ownership of financial, human and physical resources and long term programming of a development plan that is both feasible and fast is the only way to claw out of impoverishment and indigence.
Websites referred to
Toyama, K. (2011, January 28). Lies, Hype, and Profit: The Truth About Microfinance. Retrieved October 29, 2017, from https://www.theatlantic.com/business/archive/2011/01/lies-hype-and-profit-the-truth-about-microfinance/70405/
Flounders, S. (n.d.). Retrieved October 29, 2017, from https://www.workers.org/2010/world/microloans_0304/
Blog referred to