While some argue that microcredit or microfinance empowers women, critics say that it has not increased incomes, but has driven poor households into a debt trap, in some cases even leading to suicide. One borrower named Vimala Rajan told German broadcast network DW, “It has become very difficult for us to pay back the monthly installments”, she says. “I took out another loan from a different microfinance institution just to pay back the earlier ones. But now all these loans have become too much for us”.
Vimala shares her story with thousands of other women across India. The exponential growth in the microfinance sector has led to increased access to credit for the rural and urban poor. With “quick and easy” loans being offered at people’s doorsteps, many have fallen into a pattern of multiple borrowing, often merely on the pretext of starting a business. The women in Vimala’s neighborhood claim the lending institutions are aware of this, but still continue to supply loans.
The problem is most acute in the southern Indian state of Andhra Pradesh, which is home to some of India’s largest microfinance institutions, and also has the highest number of borrowers.
The vicious circle of debt, coupled with exorbitant interest rates as high as 50 percent, have reportedly led to 88 suicides in the state.
The state government has responded with an ordinance placing severe restrictions on microfinance operations, from interest caps to a ban on door-to-door collections of repayment. Moreover, politicians in the state are openly encouraging borrowers to refuse repayment of their loans.
Microcredit is an element within microfinance that provides credit services to poor clients. It is widely accepted in developing countries, such as Bangladesh, where NGOs, operating as quasi corporations under a veil of benevolence, have deployed microcredit as a development tool that it intended to eradicate poverty and empower poor women. Top Bangladeshi NGOs, including the Grameen Bank, Bangladesh Rural Advancement Committee (BRAC), and the Association for Social Advancement (ASA), receive substantial foreign funds with which to mobilize microcredit services, resulting in their operation as quasi corporations.
The corporatization of NGOs as providers of microcredits is, arguably, the product of neoliberal, market-centric development policy. In the creation or extension of such NGOs as quasi corporations, the poor become increasingly vulnerable.
Microcredit gained a new prominence and acclaim when the Grameen Bank and Professor Muhammad Yunus jointly won the Nobel Peace Prize in 2006.
Aminur Rahman, a Bangladeshi anthropologist, published a research-based book on microcredit that challenged its effectiveness and pointed to its dark side. Rahman’s criticisms of microcredit made it impossible for him to publish his book through any Bangladeshi publishing house.
Ten years later, expert studies of three villages in Bangladesh exposed and questioned the roles of powerful NGOs and heavily criticized the microcredit practices carried out by leading NGOs. It is learnt that NGOs, such as the Grameen Bank, claim to have high loan-repayment recovery rates (around 97–98 percent). This is possible only because the poor are pressured to repay by deploying cultural manipulation, such as shaming practices.
The BBC in 2013 reported that the pressure was so intense that recipients of microcredits in Bangladesh sold their organs to repay their loans; and there have been numerous reports of Bangladeshi microcredit agencies being violent toward poor borrowers. Their activities have undermined social cohesion and created or widened social divisions. The use of microcredit is seen to bring further misery to the lives of the poor, and it has not brought the development, poverty eradication, and women’s empowerment that its proponents hail.
According to the report, a microcredit borrower named Mohammad Akhtar Alam, 33, bears a 15-inch scar on his stomach where he had a kidney removed. The organ removal – which is illegal in Bangladesh unless the organ is being given to a spouse or family member – combined with the inadequate post-operative care he received, has left him partially paralyzed, with only one eye working and unable to do any heavy lifting.
There are also serious allegations against microcredit companies in Bangladesh of forcing borrowers in selling their body organs (particularly kidney) in exchange for loans they have borrowed. In most cases, these borrowers were secretly transported to India for organ transfer through well-organized human organ trafficking racket.
Blitz is further investigating this matter.
