In the wake of the award of the Nobel Peace Prize to Grameen, some more critical looks at microlending:
[Walden Bello in The Nation] There is no doubt that Yunus, a Bangladeshi economist, came up with a winning idea that has transformed the lives of many millions of poor women, and perhaps for that alone, he deserves the Nobel Prize. But Yunus–at least the young Yunus, who did not have the support of global institutions when he started out–did not see his Grameen Bank as a panacea. Others, like the World Bank and the United Nations, elevated it to that status (and, some say, convinced Yunus it was a panacea), and microcredit is now presented as a relatively painless approach to development. Through its dynamics of collective responsibility for repayment by a group of women borrowers, microcredit has indeed allowed many poor women to roll back pervasive poverty. However, it is mainly the moderately poor rather than the very poor who benefit, and not very many can claim they have permanently left the instability of poverty. Likewise, not many would claim that the degree of self-sufficiency and the ability to send children to school afforded by microcredit are indicators of their graduating to middle-class prosperity. As economic journalist Gina Neff notes, “after 8 years of borrowing, 55% of Grameen households still aren’t able to meet their basic nutritional needs–so many women are using their loans to buy food rather than invest in business.”
[W]hat have microloans achieved? I put the question to P. Sainath, author of Everybody Loves a Good Drought and India’s most outstanding journalist on rural destitution and the consequences of economic policy. Yes, he said, microloans can be a legitimate tool in certain conditions, as long as you don’t elevate the tool into a gigantic weapon. No one was ever liberated by being placed in debt. That said, a lot of poor women have eased their lives by using microloans, bypassing bank bureaucracies and money lenders…
Sainath points out that the interest rates micro-indebted women are paying in India are far higher than commercial bank lending rates.
“They are paying between 24 and 36 per cent on loans for productive expenditures while an upper class person can finance the purchase of a Mercedes at 6 to 8 per cent from the banking system.”
The average loan of the Grameen bank is $130 in Bangladesh, lower in India. Now, the basic problem of the poor in both countries is landlessness, lack of assets.