Today we visited a remote village outside of Hyderabad to see micro finance in action.
Micro finance involves giving small loans to the poor, who can then use it to invest in an entrepreneurial venture. It's a means of channelling funds to these individuals and an attempt to break the cycle of poverty.
We were hosted by SKI Micro finance company, who's business model is very much similar to that of Gramean Bank. Loans are made to individuals to fund various projects- agriculture, trade, services etc. The business model depends heavily on the intense community atmosphere in the villages. Loans are non-collateralized, instead it's almost as if the collateral used in the individuals reputation in the village. Surprisingly, the loss of name seems sufficient to prevent loan defaults in these areas.
It was very eye-opening to see exactly how the system was executed at this grass roots level. Firstly, loans are made primarily to women, who are viewed as the more reliable target market. Each village elects a center leader who oversees membership. Meetings are held once a week, every week. Women gather in a central area, and sit in a semi-circle around on the dirt floor. The money collector is at the front of this semi-circle.
The money collector proceeds to call out the names of women with outstanding amounts due, the respective women proceeds to hand over her money to the collector in the presence and view of her peers.
Loans are also given to new or existing members. However, it is the group of members present who have the power to okay or deny these new loans! The loan collector asks for permission to lend and the membership will collectively deny or accept the request.
Individuals are placed in groups of five. Should one or more members default, it is the responsibility of the remaining members to honor the loan and ensure repayment.
Social accountability and peer pressure seems to be the key in ensuring the success of this system.
In addition to attending the meetings, we had the pleasure of viewing the businesses (small village shop, Buffalo's kept for milk, offspring) and interacting with the villagers and children.
Poverty in this region is not pretty. It's stark and dirty and real. Breaking the cycle of poverty here seems almost a herculean task.
However, by making funds available to these individuals, they have a very tangible means of not only surviving, but breaking the trap of poverty over themselves and family.
Very inspiring to know that alot of the villagers had children who were going to university and such...their ability to earn wealth opened up opportunities to further advance their economic status and elevate their standard of living.
2 comments:
This is quite frankly one of the most racist schemes I've come across in recent years. For years, western colonial and corporate interests have raped South Asia of its resources. The state you're in....Andra Pradesh....has witnessed the highest number of farmer's suicides since the onset of schemes like the micro-credit program. Do you have anything to say about that? Do you feel any sense of responsibility for even supporting such schemes? The poverty in India persists to fill the fat bellies of the west. And the saddest part in this whole matter is that now it's our own people who have decided to feed on the carcas.....squeezing what blood there's left of the world's poor. The micro-credit program has been detrimental to the poor of South Asia. There has been no trickling down of wealth. People continue to die to find ways to pay off these loans, while big corporations continue to kill the competition and corner any given market.
When will we learn? Your paycheck tomorrow will not be a result of your hard work. You are sadly mistaken if you think it is. That claim to success is connected to the blood and sweat of millions around the world who continue to slave for pennies.
The problem we're seeing here is a blatant distrust for business. I completely sympathize with this individual's views as I feel they are probably based on his/her own personal experiences. When corrupt organizations employ micro-lending as a business model solely for profit, the poor are obviously going to suffer. But looking at basic economic growth models, micro-lending (when executed ethically) is essential to spurring economic growth in impoverished communities. So, to discount the entire concept is counterproductive. I feel this responder should research the generic micro-lending model and analyze the benefits it provides to the poor. Then look at new organizations like Kiva.org, Unitus and the Grameen Bank as models for the way micro-lending should be conducted.
To chalk micro-lending and other forms of poverty alleviation up as a loss will not solve the problem. The purpose of Ria's trip to India is to see what hasn't worked and understand WHY it hasn't worked. This is in an attempt to fix the broken models and finally do good in the world.
Business has done and continues to do a lot of damage to the world. But there as long as there are people like Ria trying to change business for the better, there's still hope in the world.
- Rehan
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