Microfinance and its Thandav

Off late I have been reading a lot about Micro-finance, the good it has been doing and the thandav (dance of distruction) too …. I read a couple of blogs and also reviews of ‘A fistful of Rice’… I just thought of sharing my experience with this phenomenon..

Yes, if the intention to set up a micro-finance institution is to empower the women and help them create small businesses for securing their families, it certainly serves the cause. Though the loans given may be as small as Rs. 5000/- ($100) or even Rs 2000/- ($40), the rates of 3% or 4% per month is too steep and high for the poor women to pay back, as it works to over 40%. How many of us, well to do, will ever take a loan at these rates? And that is what MFI business has turned to be all about – how much more loans to be given to the same parties, and what return it generates!

Let me share my first hand experience with a well known and most successful MFI in India. Now imagine, this MFI that managed to give loans to a huge number of women and create the fertile environment to give even more, thinks of getting involved in setting up schools in villages apparently for educating the children of the women they have given loans to. At first I thought it is a great way of helping the underprivileged and empowering the women further.

As the schools started blossoming slowly, and further interactions with this MFI started happening, my feeling of ‘Dal mein kala’ (covert intention) started growing. I got to realize that the only reason that the MFI got involved in setting up schools is to give further loans to women for educating their children, there by the women will keep paying back for ever, at these rates of 40%+. And all interactions that the MFI ‘handlers’ engaged the educationists in were about keeping the children in the school at any cost (even at the cost of not creating and facilitating real good education environment) so that the children are not withdrawn from schools and their loan giving exercises do not diminish. They were least bothered about helping the children enjoy learning!

As months progressed, the MFI, in spite of making huge profits in their business, did not have the patience and perseverance to make the schools excel. They withdrew from the project, leaving everyone in lurch. Thanks to the other party, educationists, who continued to march ahead with schools though with financial struggles, as their real intention was to help the children in the rural India unlike the MFI!!

I always wondered where would this attitude of MFIs lead to. It is very sad that we had to witness many a woman ending their lives for not being able to pay the loans off.

I sincerely hope that the regulatory authorities take steps in such a way that genuine MFIs are not impacted adversely but at the same time the devious ones are taken care of.

I wish that all educationists and genuine developmental facilitators who are really keen in helping the rural India progress, succeed in realizing their ‘Dream India’

One comment

  1. Sorry state of affairs indeed! However, the main cause of this problem is that the big banks like sbi aren’t too keen on the microfinance sector. Thus people are forced to take loans from these MFI’s, as all said and done they are a tad better than the village loan sharks.


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