Does Microcredit Hurt the Poor More Than it Helps?

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]