Critiques of Microcredit
== Microcredit Movement: The Downside ==
The microcredit movement has been successful in reaching out loans to millions of poor people worldwide and directly helping in the alleviation of poverty to some extent. According to Newsweek, April 9, 2007 issue article titled "The microcredit backlash," so far about 500 million poor worldwide have reportedly benefitted from some $6 billion in microloans and is expected by aficionados to increase up to $300 billions. The United Nations declared the year 2005 as the year of microcredit and last year Muhammad Yunus, the founder of Grameen Bank received the Nobel Peace prize. Yunus predicts that " one day, our grandchildren will go to museums to see what poverty was like."
However, as some critics have observed, microcredit is far from being a succesful instrument to eradicate world poverty.
Sustainability:- In Guatemela, it is estimated that only 300 out of nearly 25,000 microlenders have reached financial sustainibility.
Poverty lending: a bad social policy, a bad development and a bad business:- Thomas Dichter, an international aid expert who spent decades working with microfinance concludes that while some borrowers never get off the debt treadmill others use their credit on consumer goods.So microcredit rarely serves the poor.
Small credit is not a tool for the underclass to leverage its way out of want through enterprise. Skeptics say that most small businesses get started not from small amount of money borrowed from the bank but through personal savings and raising cash among family and friends. Richard Posner, a US circuit court judge and economic historian is unaware of any historical examples of nations that climbed out of poverty on the backs of small entrepreneurs financed by credit. Alex Counts, director of the Grameen Foundation, which is incharge of replicating the Bangladesh based Grameen Bank around the world, reports that only a tenth of the world's 7 million clients are true entrepreneurs who started out by borrowing $100 are now borrowing $10,000 to $20,000 whereas the rest are just making their ends meet. He says," In developing countries, where there are few jobs and no safety nets, your alternatives are to work for yourself or starve," "Not everyone is an entrepeneur but everyone is a survivor."
Microcredit and Women's Poverty Many policy makers ignore the fact that poverty has structural causes, they simply believe that poverty is a problem of individual behaviour, so they deny the notion of collective responses. In fact, they believe that broad based civic commitments to increase employment or provide income supports only make matters worse: helping the poor is pernicious because such help undermines the incentive for hard work. this ideology is part and parcel of neoliberalism.
According to an article by Susan F. Feiner and Drucilla K. Barker on Microcredit and Women's Poverty in the November/December 2006 of Dollars & Sense magazine, "For neoliberals the solution to poverty is getting the poor to work harder, get educated, have fewer children, and act more responsibly. markets reward those who help themselves, and woman, who comprise the vast majority of microcredit borrowers, are no exception. Neoliberals champion the Grameen bank and similar efforts precisely because microcredit programs do not change the structural conditions of globalization-such as loss of land rights, privatization of essential public services, or cutbacks in health and education spending- that reproduce poverty among women in developing countries."
Feiner and Barker argue against the idea that the microcredit programs help women to generate income by using the borrowed funds to start a small scale business as being concentrated in the informal sector, which is highly competitive and unregulated, There are no laws that protect these workers or ensure their rights. And women make the majority of these workers in the informal sector and are heavily represented at the bottom of its already-low income scale.Microcredit encourages women to work at home doing piecework like sewing garments, weaving rugs
The gender division of labor in developing countries assigns men to paid work outsde home and women to unpaid labor in the house mainly domestic chores. This sometimes include hard labor such as fetching drinking water from miles away, taking care of children etc. So the very notion of accessing microcredit and working hard towards repaying loans sonds like double day job for these poor women who simply have no choice. On the one hand they can't reject loans as they see it as a hope of getting out of dire poverty and on the other hand they are already burdend with domestic responsibilities which gives them hardly any free time.
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