Earlier quoted context omitted.
You should read a bit about micro finance. Most of the people receiving it are already in debt, micro finance offers debt at a better interest rate, sometimes with training, and often with a support group. Its supposed to be (in theory) better debt.
It also makes the donors who finance Grameen feel better about themselves. The better interest rate is a great idea, as there are many farmers in India and Pakistan that commit suicide because they got trapped into a cycle of debt that they cannot escape. And I suspect that the better repayment rate has a lot to do with social pressure. The support groups are part rah rah team and part shame squad to guilt the delinq…
Thats certainly a large part of it, but there are two other things that tend to help out:
1) If one person can't pay back, the rest of the group helps.
2) The promise of bigger loans in the future.
I agree with you about the interest rates.