Microfinance is a noble concept which in its entirety has the potential to help the needy get access to capital and raise their standard of living. It has the ability to help in development because everything in this world ends up being capital-centric. Considering the huge opportunity, the standing capital is being pumped in the economy with a generous hope that it may end poverty to some extent and make the poor self sustainable. But all the hope was not so generous because companies were eyeing big payoffs since the capital invested was based solely on trust and at huge risk (no collateral). This is the reason why initially Micro finance companies charged upto 36% interest, which in itself was not justified and equalled extortion similar to what is done by traditional moneylenders. Today, since MFIs are regulated by RBI, the interest rates are curbed to a maximum of 24%. Microfinance was envisioned as a tool which has the ability to change the Indian rural context in a big positive way viz to increase production, alternate livelihood development as well as reviving traditional arts, crafts and culture. After so many years and so many organizations having pumped lakhs of crores there has to be a mechanism to look back and reflect on what microfinance has done for rural population's development and the impact it has created on sustainability. What also needs to be assessed is the effect of microfinance on rural psychology keeping in mind many government and private sponsored rural development projects.
In the current context the meaning and significance of the word 'Microfinance' is lost somewhere. In reality the finance done by Microfinance companies is not micro at all since the individual loans are given to an extent of Rs. 50,000 to 1,00,000 depending on a person's credit history. Sometimes these companies form their own women groups and give loans to group members. The basic thing to look forward is that these so called Microfinance companies often laugh at the concept of self help. Their basic notion of “capital solves it all” is not a viable argument in general sense because we should be encouraging the capacity building of poor and collective action to raise their living standards. The capital being pumped into the rural economy through microfinance loans needs to be channelized in a more structured manner. Having seen the things done by some MFIs myself I sense that it has harmed and changed the psychology of rural people where they have inclined towards being individualistic and money centric (Govt. is equally responsible for bringing in schemes relying heavily on subsidies to the poor like SGSY). When we try to instill the ideals of collective action in community institutions we face a very tough and arduous task. Every once in a while some case happens where an individual drifts away from the basic principle of unity and collectivism which should be the core belief of any self help group and thus renders the effort put into rural development in vain. It is an undeniable fact that capital is required for development. But the point remains that pushing too much money in rural setting where you are not keeping track of the usage of money is a big hazard to economy. In my view microfinance must work on the lines of or at least promote collectivism. Merely targeting rural population for profit and business will make things worse for government as well as diminish NGOs rural development effort.
- Vaibhav Pandey (can be reached at: javatute@gmail.com)
Related:
Participatory Development | Still a Dream!!
Related:
Participatory Development | Still a Dream!!
