Microfinance has been dubbed a method of empowerment in impoverished communities. With the backing of many leaders including India’s Prime Minister Narendra Modi, it is a financing movement that has taken off. Micro financing aims to give small sums of money in banker’s terms to individual people for small business ventures.
Over the past few years credit schemes, group loans and individual investments have been made backed by NGO’s in the hope of alleviating the poverty felt by many and providing a sense of agency in the process.
The promise this scheme once showed has been tainted with tragedy as over 100 in India have committed suicide due to pressures felt by an inability to pay back the loans. It should be noted that this is a conservative number as it is felt that many cases have just not been reported yet. Dr Laurel Jackson from the University of Western Sydney spoke to Pedestrian TV on the matter and shed light on the realities of the loans. Jackson divulged that the money allocated to small business ventures was, in fact, being used to support the families more pressing needs being food, water, energy and rent. The loans were often given to those whose income fell under $2 a day meaning that once the loan was spent on necessities there was no way to pay back the funds, often resulting in extreme stress felt by the loan recipients and, in turn, a growing number of suicide cases as a product from the microloan scheme.
These tragic examples show that policy, especially in the humanitarian sector must look at the issue as multifaceted and not simply put money on the table. Jackson suggests that this money is put into infrastructure rather than directly to individuals. Although this would mean that immediate returns wouldn’t be possible it would allow for the communities to gain the stability needed to alleviate poverty and avoid further accumulation of debts that prevent the alleviation of poverty.
Poverty continues to be a worldwide epidemic in which loans are yet to create long-term poverty eradication.