India's poorest reel under microcredit debt burden [View All]

[TheMightyFavog]

http://www.npr.org/2010/12/31/132497267/indias-poor-reel-under-microfinance-debt-burden?ft=1&f=1001&sc=tw&utm_source=twitterfeed&utm_medium=twitter

The idea behind microcredit is to give a small loan to a very poor person to buy some asset that will help her work her way out of poverty.

A typical client is a poor woman who lives in a slum or a rural village. She might earn money as a farm laborer or in small trade, such as selling vegetables by the side of the road.

As little as $200 — the theory goes — could allow a woman like that to buy more goods to sell, or a couple of goats to milk, or a sewing machine to make clothing. A working asset could increase her ability to earn a living and make enough extra to repay the loan with interest.

(snip)

"Just so your audience can brace themselves, the typical interest rates are in a range of 24 to 30 percent per annum," says Vijay Mahajan, president of the Microfinance Institutions Network, a trade group. "Most people find it very hard that this interest rate does any good to poor people who are the recipients."