Mumbai (AsiaNews) – Micro credit is a system to exploit humans, cruel like Nazism, based on the sole criterion of profit. There is no interest in improving the social conditions of the poor, only in making money. “Markets are essential, but markets should be based on ethics and values.” Those operating micro finance institutions “have no ethics,” said Lenin Raghunvashi, a human rights activist. He spoke to AsiaNews about a recent spate of suicides in connection with micro finance institutions.
A recently released study by the Indian government indicated that officials in such agencies were inciting debtors to commit suicide if they could not repay their loan because, this way, insurance companies would pay in their lieu. In the past six weeks, at least 45 suicides can be attributed to such micro credit practices with some certainty.
Sujata Sharma, project director of the District Rural Development Authority (DRDA) in Warangal agrees. Agents for micro finance institutions “are provoking defaulters to commit suicide as all the borrowers are covered by insurance and if the defaulting member dies,” the institutions “will get the repayment from the insurance company," she said.
The study shows quite clearly that micro credit, not only did not help the lower classes, but often made matters worse for the poor. In most cases, "there was an element of wasteful expenditure by the poor due to the availability of the easy loans from the MFIs (micro finance institutions). The presence of easy loans at the doorstep has certainly played a stimulatory role," the study found. In addition, people tended not to take out a loan for business purposes, but rather for futile consumption.
The six main reasons for loans were marriages, death ceremonies and certain other religious rituals, medical expenses for ailments not covered by Arogyasri (health insurance plan), repayment of old debts, and children's education. Largely, micro finance institutions did not lend money for business plans.
The brainchild of Mohammad Yunus, an economist and Nobel Prize winner, the idea of micro financing was an apparent stroke of genius. Instead of setting up bank branches in poor areas and provide loans in exchange of guarantees, micro finance institutions set up a system that would hand out money to local agents (often from upper caste background) tasked with loaning and collecting the money.
According to Raghunvashi, the 2007 Gwangju Prize for human rights, “muscle men” from “upper castes” started working “as agents and earning commissions of nearly 20 per cent on the loans”.
In one village in Uttar Pradesh, four officials from micro finance institutions were handing out the money. However, “People were taking loans from one to repay the other, leading to a vicious cycle of debts,” he said. Some were pushed over the edge, and committed suicide. Many of these agents are upped caste Hindus, who dominate the system and tend to degrade other human beings.
By contrast, in our villages Raghunvashi said, “we are trying to get people not to fall into this trap. We try to help the poor get bank loans, but only if they are really plan to start a business. We want to link banker and debtor in ways that would allow a labourer become an owner and acquire some dignity.”