Monday, February 27, 2012

microloans; no panacea

"The Associated Press has obtained portions of a suppressed independent investigation into the role that debt collectors working for microfinance giant SKS played in the suicides of desperately poor borrowers in the Indian province of Andhra Pradesh. SKS made global headlines when it received backing from a US venture capital firm, the Boston-based Sandstone Capital, and then had a highly successful IPO. The independent investigation, commissioned by SKS itself (though the company has disavowed it) documents a pattern of usurious practices by vicious debt-collectors working for the company that drove several borrowers to grisly suicide."

I've posted about micro loans previously.  I think they are great, but then this kind of stuff happens.  People in poorer countries and locations need access to capital to start or expand businesses, just not as much.  Micro loans can allow a woman to open a seamstress business by giving her enough to purchase a sewing machine and some supplies.  Or let a farmer by a next-door plot to expand his income.

But of course, not all ventures work out.  The solution, then, is not to harass the loan taker until they commit suicide.  It is to work with the person and see what can be done from this point, or try to recoup what can be.  If micro loans become loan sharking, then they have failed.

No comments: