Surely once for-profit companies get involved there is a conflict of interest between poverty alleviation efforts and the interests of share holders/investors.
Suicides in India show the dark side of micro-finance
31–40 of 69 posts
Re: Suicides in India show the dark side of micro-finance
#32Earlier quoted context omitted.
>Good old capitalism, always there to turn nice things into shit. The best thing about this meme is that it WILL turn everything nice into shit if people believe it. Capitalism and free enterprise produced everything good. The issue with suicides is not related to capitalism, it's related to cultural norms and lack of bankruptcy laws. Your communist spin on this turns my stomach. If you really care about the poor you…
While I agree with your general gist, "Capitalism and free enterprise produced everything good" is a bit of an exaggeration. Capitalism didn't "produce" labour rights, it didn't "produce" national parks, the sexual revolution or the abolition of slavery. I don't think we can simplistically say that captialism is the cause of all that is great in this world, even though it's a pretty major component.
I said "capitalism and free enterprise".
Not just capitalism alone.
Pretty much everything good came from free enterprise. The parts of society that engaged in free enterprise came up with the good stuff that would slowly spread free enterprise to the other parts of society.
Specifically:
Are labour rights really a thing? Were they created? "Labour rights" are a communication of certain realities, e.g., treat everyone nicely or we will poke your head with pitchforks.
National parks were not created either. They're an abstract political concept that simply communicates the wishes of a group and the consequences to those who contradict the wishes of a group.
The sexual revolution, another abstract thing, came directly from free enterprise because free enterprise produced the prosperity and technology that caused the changes. e.g. The Pill.
These above good concepts, which are all really just recognitions of the power of the masses, are tightly linked to the power of the masses. And the power of the masses comes from their productive interdependent free enterprise labour.
Re: Suicides in India show the dark side of micro-finance
#33Earlier quoted context omitted.
>Good old capitalism, always there to turn nice things into shit. The best thing about this meme is that it WILL turn everything nice into shit if people believe it. Capitalism and free enterprise produced everything good. The issue with suicides is not related to capitalism, it's related to cultural norms and lack of bankruptcy laws. Your communist spin on this turns my stomach. If you really care about the poor you…
Capitalism and free enterprise produced everything good? A bit over the top aren't we?
Maybe but not really.
Show me a slave who made something good. There are degrees of freedom, and the good stuff tends to come from those with a lot of it.
Re: Suicides in India show the dark side of micro-finance
#34[I was involved in a project for SKS Microfinance in a previous job, and I've gotten up-close and personal with their numbers for a few months, all pre-IPO] A majority of the small-ticket loans are given out under the umbrella called IGLs (Income Generating Loans), which is basically capital for asset development and/or small-time business building. (e.g. the spice shop woman in the article) These are the loans given…
If SKS microfinance is charging 24% they are a loanshark, period.Rates as high as that are usury and should not be lawful. I'm of half-Indian and half-European descent and I am always ashamed of my Indian heritage. The Indian people as a collective simply do not know what it means to be humane and have never heard the word solidarity. I don't mean that Western countries are perfect, just that they are lightyears ahea…
Interest rate is basically the price of money. In a developing economy like India, growing at 8-10% the demand for money is greater as a result, it's price is also greater.
If you make a term/fixed deposit in India for a year it attracts an interest rate of 8-9%. Education, Car and Home Loans for credit-worthy individuals from established banks range from 12-18%. Personal Loans, not backed by a security range from 20-24%. So a micro-finance institution lending at 24% p.a to 'non-professionals' in rural areas with no known credit history is not bad at all considering the risk that they take up and the cost of funds that they incur(as pointed out by someone else)
Re: Suicides in India show the dark side of micro-finance
#35[I was involved in a project for SKS Microfinance in a previous job, and I've gotten up-close and personal with their numbers for a few months, all pre-IPO] A majority of the small-ticket loans are given out under the umbrella called IGLs (Income Generating Loans), which is basically capital for asset development and/or small-time business building. (e.g. the spice shop woman in the article) These are the loans given…
Is it possible to combine the microfinance program with the assests , at least for some classes of assets ? maybe things that increase agricultural productivity , or decrease energy costs , i.e. things like drip irrigation tools or solar panels or efficient stoves ?
That way you have some partial collatera- so you might reduce the interest , and you can help people choose the best income generating assets , so you increase loan repayment chances.
Also you can share distribution costs between loans and assets.
Does this model make sense ?
Re: Suicides in India show the dark side of micro-finance
#36[I was involved in a project for SKS Microfinance in a previous job, and I've gotten up-close and personal with their numbers for a few months, all pre-IPO] A majority of the small-ticket loans are given out under the umbrella called IGLs (Income Generating Loans), which is basically capital for asset development and/or small-time business building. (e.g. the spice shop woman in the article) These are the loans given…
If SKS microfinance is charging 24% they are a loanshark, period.Rates as high as that are usury and should not be lawful. I'm of half-Indian and half-European descent and I am always ashamed of my Indian heritage. The Indian people as a collective simply do not know what it means to be humane and have never heard the word solidarity. I don't mean that Western countries are perfect, just that they are lightyears ahea…
Interest rate limits for people (not corporations) are generally and histroically limited to about 8-12%.
[citation needed]
The evolution of the relationship between social and legal norms re: what are acceptable interest rates is a very interesting topic, with much cultural diversity and a broad range of case studies from canonical usury regulations in medieval Europe to the prohibition of pay day loans in much of the West in the 20th century, but blanket statements about 'loans being restricted from to 8-12%' lack any basis in reality and economic fundamentals. Just one counter example, I know of many people who took out mortgages (i.e., asset-backed securities!) right here in Belgium (a perfectly normal 'Western' country) less than 30 years ago with interest rates of 15 to 18%, and that was perfectly normal at the time, given inflation rates.
Re: Suicides in India show the dark side of micro-finance
#37[I was involved in a project for SKS Microfinance in a previous job, and I've gotten up-close and personal with their numbers for a few months, all pre-IPO] A majority of the small-ticket loans are given out under the umbrella called IGLs (Income Generating Loans), which is basically capital for asset development and/or small-time business building. (e.g. the spice shop woman in the article) These are the loans given…
I was so far unable to grasp the justification for the extremely high interest rates of micro loans. What is going on, and how can such high interest rates ever work?
Re: Suicides in India show the dark side of micro-finance
#38Earlier quoted context omitted.
There's no 'general and historical' interest rate limit of 8-12%. Credit card APRs in the United States range up to 30% or so, and payday loans can have APRs of well over 100%. In other countries, rates for products catering to the poor are similarly high - this is just the cost of doing business when extending small amounts of credit to poor prospects with high default rates. The wisdom of that is what should be deb…
Check your facts: http://www.lectlaw.com/files/ban02.htm E.g. Alabama: ALABAMA, the legal rate of interest is 6%; the general usury limit is 8%. The judgment rate is 12%. Like I said, it's not perfect, there are many exceptions. The US has devolved quite a bit from the humane society that built it up. But generous bankruptcy laws still make it possible for Americans to escape high debt. In India, suicide seems to be…
Did you even read your own link? Here's the second (!) paragraph from it:
"But my car loan is higher than that"; "But I'm paying way more than that on my credit cards." That's right! Banks have separate rules. In fact, due to high inflation, in 1980, the federal government passed a special law which allowed national banks (the ones that have the word "national" or the term "N.A." in their name, and savings banks that are federally chartered) to ignore state usury limits and pegged the rate of interest at a certain number of points above the federal reserve discount rate. In addition, specially chartered organizations like small loan companies and installment plan sellers (like car financing companies) have their own rules.
Re: Suicides in India show the dark side of micro-finance
#39Earlier quoted context omitted.
Of course any developing entrepreneurs will have higher interest rates - they are greater credit risks, and the costs of making the loan are similar for small loans an large loans. To properly compare, you have to compare the the 24% rate to the previous lenders, who, if I remember correctly charged rates from 100-300% and up.
That's all well and good provided that the loan is unsecured and generous (i.e. humane) bankruptcy laws are available. In India, bankruptcy means a rural farmer will lose everything, including his land and his seed corn. You can't have it both ways. Either the loan is secured and farmers pay low interest rates. Or a high rate is allowed because the loans is an unsecured loan with high credit risk. But then the debter…
You're posting many claims of this nature in this thread, but like my gran used to say 'when you're in a hole, stop digging'. Much of the West does not have what you call 'humane bankruptcy laws', most debts in most of Western Europe is non-dischargeable. The US is quite the outlier in this respect.
Furthermore, bankruptcy is not a counterbalance for high interest rates! It's a purely pragmatic tool, not a designed part of the system! It's very delicate to fiddle with what is fundamentally a relationship of trust between lenders and people taking loans through statute, and while improvements are possible everywhere, just saying 'India should have liberal bankruptcy laws' (i.e., discharging loans should be easy) is nonsense because the shocks this would cause in the financial system (at the micro level) would be severe and there's no telling if the long-term benefits (if any) will outweigh the sure short-term catastrophe.
Re: Suicides in India show the dark side of micro-finance
#40[I was involved in a project for SKS Microfinance in a previous job, and I've gotten up-close and personal with their numbers for a few months, all pre-IPO] A majority of the small-ticket loans are given out under the umbrella called IGLs (Income Generating Loans), which is basically capital for asset development and/or small-time business building. (e.g. the spice shop woman in the article) These are the loans given…
If SKS microfinance is charging 24% they are a loanshark, period.Rates as high as that are usury and should not be lawful. I'm of half-Indian and half-European descent and I am always ashamed of my Indian heritage. The Indian people as a collective simply do not know what it means to be humane and have never heard the word solidarity. I don't mean that Western countries are perfect, just that they are lightyears ahea…
Keep in mind transaction costs which usually can't come down very much.
A $100 transaction cost on a $10000 loan is comparatively insignificant to us.
A $100 transaction cost on a $1000 loan is pretty crappy.