This refers to the article "Microcredit, NGOs and poverty alleviation" (Nov. 15). Microcredit reaches out to the people near the bottom of the pyramid (perhaps not the poorest of the poor) who would rather `sell the goat for food today than rear it for the kids tomorrow.' People who can benefit from larger credit to promote enterprise development that implies the ability to invest, take risks, and make profits to re-invest, belong to a different class. They are not the target group for microcredit.
As for the interest rate, in most cases the groups themselves fix it at a higher level in view of the opportunity cost of credit and the moral hazard of taking a low interest loan from the group and passing it on to non-members at a margin. For many in the development sector, the first objective of microcredit is women's empowerment and collective action. One cannot undermine its value using a purely financial analysis.
Although many rural development programmes have failed, microcredit through self-help groups has proved helpful. It is possible to achieve macro benefits through microcredit. Microcredit is the basis of assuring credit for livelihood finance. It is accompanied by empowerment and together they attack the root causes of poverty no empowerment, no capital.
K. Pandimuruga Chinnan,
Microcredit abolished private money-lending in several villages. The grassroots level NGOs played a significant role in bringing women together under self-help groups. Loan is only one component of an SHG. Its main objectives are women solidarity, information sharing during weekly meetings, decision-making, enhancing the confidence and willpower of women, spreading awareness on dowry harassment, importance of enrolling children in schools, and so on.
Unfortunately, the government and SHGs themselves have forgotten the principle objective and give undue importance to loans. The World Bank and social activists repeatedly stress on the importance of involving grassroots level NGOs in poverty alleviation programmes because they work in small areas and are subject to social audit. The Government alone cannot alleviate poverty.
It is true that microcredit alone is not the right strategy for poverty alleviation. The strategy of targeting livelihood finance is not ideal either. In the light of LPG (liberalisation, privatisation, globalisation), there is need for a paradigm shift in the approach to eradicating poverty.
The traditional space for livelihood (including agriculture) of the poor is being gradually encroached by MNCs. Even their lands are bring grabbed in the name of SEZ. There is no scope for the poor to accumulate assets and they are being left behind in the LPG market. They should be trained to improve their marketable labour skills and earning capacity, and guided to new avenues of opportunity.