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The trouble is that microloans don't make any sort of a macro-difference. They have helped some poor women, no doubt about it. But in their own way they're a register of defeat. Back in the early 1970s there were huge plans afoot to change the entire relationship of the Third to the First World, to speed Third World economies towards decent living standards for the many, not just the few. At the United Nations radical economists were hard at work drafting plans for a New World Economic Order. All that went out the window and here are the caring classes thirty years later, hailing microloans. Microloans are micro-bandaids in a scale of things today where - to take the example of India -- well over 100,000 farmers, including a large number of women, have killed themselves because their federal and state governments, plus large international institutions, have promoted the savage priorities of neoliberalism.
As the economist Robert Pollin put it pithily when I asked him what he thought of the award to Younus, "Bangladesh and Bolivia are two countries widely recognized for having the most successful micro credit programs in the world. They also remain two of the poorest countries in the world."
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But today the World Bank and the IMF, along with state-owned and commercial banks are diving into microfinance. The microloan business is fast becoming a gigantic empire, bringing back into control the very banks and bureaucracies women have been trying to bypass. Microcredit is becoming a macro-racket.
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. In the Indian province of Andhra Pradesh, where there are thousands of microloan groups, land costs 100,000 rupees an acre, poor land maybe 60,000 rupees--over $2000. $130 doesn't buy you the ranch, not even a good cow or buffalo. So how many poor women have escaped the poverty trap in AP, Sainath asks. "Try getting an answer."
"With that $130 the most basic assets do not come to you," Sainath says. "The amount is tiny. Interest rates are high and the default sanctions savage. During recent floods in AP, freelance journalists came to a village where everything had been washed away. The first people back in were the micro creditors threatening women, demanding monthly installments from women who had lost everything."
Governments like microloans because they allow them to abdicate their most basic responsibilities to poor citizens. Microloans make the market a god.