Is greed killing microfinance?

Vijay Mahajan of Basix talks about SKS, the Andhra ordinance and the future of microfinance

Civil Society, November 2010

The single most important reason why the sector gets beaten up is with relation to interest rates. Now if you want to give someone any commodity in small lots, then the transaction cost as a percentage of the price is always high. This is equally true of credit as it is of tea or surf or anything. So, to say that the interest rates charged by MFIs are high is not coming to terms with the math. The sooner one comes to terms with the math, the better. After that the world can decide if the microfinance sector is useful or not.

A typical financial sleight-of-hand resorted to by Grameen is to reschedule short-term loans that are unpaid after as long as two years; thus, instead of writing them off, it lets borrowers accumulate interest through new loans simply to keep alive the fiction of repayments on the old loans. Not even extreme pressure techniques – such as removing tin roofs from delinquent women’s houses, according to the Journal report – improved repayment rates in the most crucial areas, where Grameen had earlier won its global reputation among neoliberals who consider credit and entrepreneurship as central prerequisites for development.
The danger of Grameenism
by Patrick Bond, Himal South Asian, 01 October, 2010

Debt-hit Vidarbha farmers stare at land loss

Economic Times, 23 July 2010.

More-than-half of Vidarbha's 35-lakh farmers own more than two hectares and, therefore, according to the government scheme, can only obtain a loan waiver of 25% of their outstanding loan instead of a total write-off. Now, the state government wants to recover the remaining 75% of the loans that have not been paid back until now.necessary orders to take over the properties of farmers have been issued and the powers to take possession of defaulters' land have been vested with the respective district deputy registrars.

NABARD has set up a ‘Farmers Technology Transfer Fund’ (FTTF), with a corpus of Rs.25 crore from out of its operating profit for the year 2007-08 to help farmers in accessing appropriate technologies for improved and increased productivity. Informing this at a function here on Monday, K.V.Raghavulu, Chief General Manager, National Bank for Agriculture and Rural Development, said the fund would also be utilised for transfer of technologies by State Agriculture Departments, Krishi Vigyan Kendras, and State Agriculture Universities.
NABARD fund to help farmers access appropriate technologie
by , Hindu, 18 March, 2009
In the open market, the price of ragi per quintal is not even Rs 725. With this sudden drop in price, the government has stepped in to buy ragi at Rs 915 per quintal. The State Food and Civil Supplies department had taken the responsibility of buying ragi. It had also taken the responsibility of distributing it through fair price shops.
Rs 235 crore loss to govt in Ragi scam
by Shivakumar Kanasogi, The Deccan Herald, 09 March, 2009
At Rs 12,602.95 crore, crop loan is listed for the larger share (46 per cent) of the total Rs 27,543 crore credit potential of the state, in the assessment for the year 2009-10 made by Nabard (National Bank for Rural Development and Agriculture) The credit potential as the allocation for priority sectors focuses mainly on agriculture and allied sectors and rural non-farm sector. The state credit Seminar convened by Nabard, in Bangalore, on Tuesday discussed the strategy each sector may adopt to reap the benefits of its respective credit potential.
Crop loan tops credit potential list in state
by , The Indian Express, 11 February, 2009
New Book on Agricultural Micro Insurance

Agricultural Microinsurance Global Practices and Prospects by Jim Roth and Michael J. McCord

This book has been written for people who would like to know how agricultural insurance could play a role in improving the livelihoods of the rural poor. It will be useful for development agents such as donors, development banks and development workers in NGOs, co-operatives, credit unions and microfinance institutions (MFIs). It is written for a reader who has no prior knowledge of insurance. The first chapter introduces the principles of insurance. The second chapter presents four agricultural microinsurance case studies, using the principles described in the first chapter to analyze the successes, failures and challenges of providing agricultural microinsurance in practice. The third chapter summarizes a comprehensive literature survey to establish what kinds of agricultural microinsurance products exist worldwide, and how they function. The fourth and final chapter discusses whether, given all the challenges, agricultural microinsurance can play a role in improving the livelihoods of the rural poor.

You can download from this location (file size: 3711.12 KB)

http://www.microinsurancecentre.org/

Vasanta Ratansinh Rathod is the best investment for any wily banker. On a crop loan of Rs 12,000 for a 15-day period, this illiterate farmer from Tivsa village paid his \"friendly\" neighbourhood moneylender Rs 14,000. A cool Rs 2,000 was charged as interest. Had Rathod carried forward the loan for 12 months at the same interest, he would have had to shell out a mind-boggling Rs 48,000 in interest by the end of the year.
Debt and depression a way of life Vidarbha farmers
by Nitin Yeshwantrao, The Times of India, 03 July, 2006
AS Prime Minister Manmohan Singh announced Rs 3,750-crore package for Vidarbha farmers on Saturday, hundreds of kilometres away in a tiny village Akolekati, nearly 15 km north of Solapur, 2,500 people—all farmers— are fighting a losing battle against moneylenders. Having borrowed heavily from these private players to finance their cash crops, almost all these farmers have now fallen into a debt trap; some of them having lost their farms have even taken to working in other fields.
Solapur village falls into debt trap
by Bakhtiyar Tangsal, Indian Express, 03 July, 2006
BIG loan waivers are back. Prime Minister Manmohan Singh is set to announce the first instalment of debt relief of Rs 1,300 crore for the distressed farmers of the six most backward districts of Vidarbha on Friday. The debt relief would include a waiver of over Rs 1,000 crore of debt, apart from debt rescheduling. The government has identified 31 districts where farmer suicides have been reported, for distress relief.
Farmers in for a relief package of Rs 4,300 Cr
by Devesh Kumar & Prabha Jagannathan, The Economic Times, 30 June, 2006
IF debt is the root cause of farmers\' suicides in Vidarbha, private moneylenders are its prime agents. Last year alone, the Maharashtra government registered cases against 1,234 of them, arrested as many as 1,478 for illegal money-lending—at interest rates as high as 50 per cent—and coercive recovery measures. When Prime Minister Manmohan Singh arrives with his relief package tomorrow, chances are the state government won\'t tell him a few things. That one of the biggest sahukars in Vidarbha is Congress MLA Dilip Sananda and his family based in Buldhana district. That the Sanandas are still plying their trade when police records show over 40 cases registered against them for illegal money-lending, M A H A R A S H T R A MLA family and associates face 40 cases for moneylending, kidnapping, torture; Deshmukh pulls up local Collector, police for crackdown land-grabbing to kidnapping, manhandling to torture.
Suicide belt\'s key moneylender is cong MLA, CM tells police go easy
by Mahesh Mhatre, The Indian Express, 30 June, 2006
BETWEEN 1993 and 2003, 1,00,248 farmers committed suicide in India. Acknowledging the gravity of the situation on the floor of the House, Agriculture Minister Sharad Pawar has quoted figures from the Home Ministry\'s National Crime Bureau, adding: \"The most important factor is debt.\" The minister was presenting \"common points\" from a plethora of studies by experts and institutes on suicides during a debate in the Rajya Sabha on wheat imports and agrarian distress.
1 lakh farmers ended life, debt major factor: Pawar
by , Indian Express, 20 May, 2006
CIRCA 1965. The then Union agriculture minister C Subramaniam sat huddled with his senior staff. There was tension in the air. Depending upon imported foodgrains coming from 12,000 miles away and particularly when it came in driblets following US President Lyndon Johnson\'s directive to \"teach India a lesson\", was already humiliating enough
Demise of green revolution
by Devendra Sharma, Sahara Time, 20 May, 2006
The proposed India-US knowledge initiative on agriculture, announced jointly by Prime Minister Manmohan Singh and US President George W Bush in Washington in July, seems to be taking off. A knowledge initiative board with two co-chairs representing the two countries is going to be set up soon to concretise a work plan. For this purpose, a formal pact was signed during the recent visit of US trade representative JB Penn to India. Significantly, this initiative is being conceived as a coequal partnership that will help the two countries mutually achieve important goals and jointly assist even others in need.
Partners in agri knowledge
by Surinder Sud, The Business Standard, 22 November, 2005
  1. A `final' note on credit
  2. 'Now I'll be forced to borrow'
  3. Structural solutions
  4. Five more farmers commit suicide