Does Microcredit Hurt the Poor More Than it Helps?
August 18, 2008 · Print This Article
Bangladeshi Mohammad Yunus, along with Grameen Bank, won the Nobel Peace Prize two years ago for their concept, ‘microcredit’, which offers ‘a helping hand, not a handout’ to poor people who want to start businesses. Grameen has partnered with big businesses like yogurt giant Danone to give small loans to impoverished Bangladeshi residents, with the hopes of helping them get on their feet. The concept seemed promising, as many poor Bangladeshis were able to make incomes up to twice as much as their fellow countrymen.
Unfortunately, all is not as rosy as it sounds. Instead of prospering, many of the people who received loans are simply deep in debt. They’ve had trouble making enough to pay Grameen bank back, and Grameen has reportedly been less than accommodating.
From France 24:
The villagers here who have taken a loan are unable to reimburse their credit, and claim to be harassed by Grameen Bank representatives. Korshed Alom, a former debt collector, was put into early retirement for having questioned the Grameen Bank’s methods: “Their technique is to scare borrowers and insult them. We tell them to sell their clothes, that they have no other choice. I’m not proud of myself, but several times, I had even been obliged to say ‘sell your children.’”
The bank, which has more than 100 million clients in the world’s poorest countries, hasn’t responded to the accusations.
Isn’t this just the way it always seem to go? The poor get screwed over, and the rich get richer. No surprise here.
Link [France 24]
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Stephanie, I think you need to be careful here in saying that this is all bad. I am sure it is not.
There is a lot of microcredit that has been very successful at lifting people out of poverty, especially women. Also, most of it is given to groups of women, who are responsible for the total of the loans given the group — so if one person isn’t able to pay then the group covers it. This way, they also keep the deadbeats out of the group in the first place. I am sure there are bad stories, but how many among billions of dollars of loans?
Here’s a 2-minute video that shows a microcredit success story about one woman in Bolvia:
http://globaldevelopmentmatters.org/why-care-right-thing.asp
You can also see more about microcredit at kiva.org
Hi there ~ I think you may be confusing (or France 24 may have been confusing) Grameen Bank with the Microcredit Summit Campaign when you stated that Grameen Bank has over 100 million clients in the world’s poorest countries. Actually, Grameen Bank operates only in Bangladesh - with 6.9 million clients at the end of 2006. (More this year, but you have to look for that yourself
.) The Grameen model operates in many countries, though, which causes confusion sometimes. I think your 100 million comes from the numbers published each year by the Microcredit Summit Campaign - http://www.microcreditsummit.org - a network that counts the number of clients its members report. (It’s a bit more complicated than that, but I won’t get in to it!) Now, whether the credit part of microfinance hurts or helps, that’s another story open to debate - but I wanted to make sure to point out that the numbers reported here might not be entirely correct.