Is greed killing microfinance?

Vijay Mahajan of Basix talks about SKS, the Andhra ordinance and the future of microfinance

Civil Society, November 2010

The single most important reason why the sector gets beaten up is with relation to interest rates. Now if you want to give someone any commodity in small lots, then the transaction cost as a percentage of the price is always high. This is equally true of credit as it is of tea or surf or anything. So, to say that the interest rates charged by MFIs are high is not coming to terms with the math. The sooner one comes to terms with the math, the better. After that the world can decide if the microfinance sector is useful or not.

A typical financial sleight-of-hand resorted to by Grameen is to reschedule short-term loans that are unpaid after as long as two years; thus, instead of writing them off, it lets borrowers accumulate interest through new loans simply to keep alive the fiction of repayments on the old loans. Not even extreme pressure techniques – such as removing tin roofs from delinquent women’s houses, according to the Journal report – improved repayment rates in the most crucial areas, where Grameen had earlier won its global reputation among neoliberals who consider credit and entrepreneurship as central prerequisites for development.
The danger of Grameenism
by Patrick Bond, Himal South Asian, 01 October, 2010
NABARD has set up a ‘Farmers Technology Transfer Fund’ (FTTF), with a corpus of Rs.25 crore from out of its operating profit for the year 2007-08 to help farmers in accessing appropriate technologies for improved and increased productivity. Informing this at a function here on Monday, K.V.Raghavulu, Chief General Manager, National Bank for Agriculture and Rural Development, said the fund would also be utilised for transfer of technologies by State Agriculture Departments, Krishi Vigyan Kendras, and State Agriculture Universities.
NABARD fund to help farmers access appropriate technologie
by , Hindu, 18 March, 2009

Debt-hit Vidarbha farmers stare at land loss

Economic Times, 23 July 2010.

More-than-half of Vidarbha's 35-lakh farmers own more than two hectares and, therefore, according to the government scheme, can only obtain a loan waiver of 25% of their outstanding loan instead of a total write-off. Now, the state government wants to recover the remaining 75% of the loans that have not been paid back until now.necessary orders to take over the properties of farmers have been issued and the powers to take possession of defaulters' land have been vested with the respective district deputy registrars.

In the open market, the price of ragi per quintal is not even Rs 725. With this sudden drop in price, the government has stepped in to buy ragi at Rs 915 per quintal. The State Food and Civil Supplies department had taken the responsibility of buying ragi. It had also taken the responsibility of distributing it through fair price shops.
Rs 235 crore loss to govt in Ragi scam
by Shivakumar Kanasogi, The Deccan Herald, 09 March, 2009