The micro-credit revolution
Associate since 1991
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December 15, 2010
Last night I went to bed feeling like a frozen corpse. I was up in the Himalayas, not dressed for the occasion. Fortunately, the little hotel in which I lodged, built simply of cold concrete, provided its guests with duvets almost half a metre thick. Once asleep all was forgotten- and once awake in the morning all was forgiven. I was in the Ganges valley in the foothills of the Himalayas. From where I stood it was a mighty drop to the river. I was spellbound. The river was a turquoise green, something I, and I suspect you, have never seen. I was told it was because of the absolute purity of the glacier-fed river and the colour of the rocks beneath. In this forbidding environment cultivation is almost, if not quite, an impossible task.
I came to see a project run by my favourite UN agency, the International Fund for Agricultural Development in the Indian state of Uttarakhand. Twenty-five years ago they invited me to go and see the then budding Grameen Bank in Bangladesh. I was the first international journalist to write about it (in my weekly column in the International Herald Tribune).
After transforming Bangladesh, Grameen has spread the idea of micro-finance all over the world. Micro-finance, dreamt up by Mohammed Yunus who later won the Nobel Peace prize for his efforts, operates mainly through women who form cells of 7 or 8. With a seed loan from outside they each take small loans to start some enterprise - a shop for example - or to buy a couple of cows and start selling milk - or to buy a dozen egg-laying chickens - or to start growing ginger as a cash crop. They borrow at 25% interest which is a quarter of what some moneylenders charge. They have to repay the loan on time to their group and then if everyone is willing they can take up a new loan from the funds the group has accumulated. In the project I have just visited the default rate is an unbelievably low 10%.
There are 42,000 families living in around a 1000 villages in the area covered by this project, most of them living high up with only footpaths for access. In the cluster of villages I visited 80% of the households are members - there are a few men, but Grameen has always worked with women as they are less spendthrift than the men and are usually the ones who do the agriculture while the men go to the cities to find work. Young women, agile and earnest, who have been trained for the task, visit the remote villages on foot starting these groups, giving them the advice they need, including agricultural and medical support, and providing seeds or a cow or whatever it is they want to buy with their loan. (All this, apart from the medical side, is organic.)
Sarojana Devi got a micro-loan to build a rain harvesting tank to collect water for irrigation. This year she irrigated her apple crop and grew 102 cartons of apples. Her income was 9,690 rupees (£140 or $210) of which 6,000 rupees was profit (£90 or $120).
Bal Krishna, who lives in an area unsuitable for cultivation, took his first micro-loan to buy 1000 immunised chicks. Before he started he had been sent by the project for a training course on poultry rearing and the project contributed 60% of the cost, as seed money to get him started. After a month’s hard work he was able to earn a profit of 2,800 rupees (£40 or $60).
Champa Devi is one of those who decided to grow ginger. She bought seed at the cost of 20 rupees per kilo. The crop harvested, she sold the ginger for 30 rupees a kilo. Some she sold to fellow members and some to the local market. Altogether her annual crop was worth around 15,000 rupees (£250 or $350) - a good income for a woman who had no cash income before. She was able to repay her loan and later take another. Other members in her group and village cluster now are following in her footsteps.
Micro-finance has had a bad press lately because of a new breed of for-profit micro-lenders in the state of Andhra Pradesh. Local politicians recently decided to jump on them demanding that they lower their interest rates. It brought the micro-finance business in the state to a shuddering halt. But how many journalists, Indian or foreign, have bothered to look at the hundreds of successful micro-finance projects in other states? All have been tarred with the same brush. It is the fashion to slam aid and that combined with the propensity of journalists not to do their homework has totally misrepresented the situation at large.
Don’t anyone tell me that aid doesn’t work. It all depends on how it’s done. And you can see it at work high in the Himalayas.
Copyright © 2010 Jonathan
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