The Grameen Bank

[otherlander]

http://en.wikipedia.org/wiki/Grameen_Bank
Muhammad Yunus and the Grameen Bank won the Nobel Peace Prize for microcredit, small loans with no collateral that let people afford to build and sell items for a living.

I'll admit that I don't know all that much about economics, but this seems like it's helping a lot of people. So I don't understand this quote: (from the article)

"Sudhirendar Sharma, a development analyst, claims that it has 'landed poor communities in a perpetual debt-trap,' and that its ultimate benefit goes to the corporations that sell capital goods and infrastructure to the borrowers"

Could someone explain that? It seems like this is doing just the opposite. :shrug:

[sandnsea]

1. Just speculating

One of the things I've noticed about programs for third world countries is that they always teach women to sew. I've never understood that because individual seamstresses isn't a very lucrative job for moms in their homes. Now with this, it might make sense, tragically.

What if these loans are nothing more than methods for corporations to sell the products to these unsuspecting villagers - and worse, electricity and whatever other infrastructure that they know the 'jobs' won't provide for. They get their money through these banks and walk away, leaving the villagers in debt without the economy to support it. Just like some of the 'get your degree by mail' programs we have, maybe they have the same scam artists in these third world countries. I'm sure they aren't all like that, but probably just enough to give all of them a bad name.

I don't know, I hope not, it would just be heart breaking if there were corporations this morally bankrupt.

[Warpy]

2. The usual interest rate is 16%

which is far above what Bangladeshi banks charge wealthy clients. I suppose that's the reason.

However, consider that predatory lenders in the US can charge in excess of 300% and that credit card companies are now up to 39% plus junk fees. That puts it into perspective.

No other bank in Bangladesh was willing to take a chance on making small loans to the people who needed them the most. Most of them have paid off the loans within the specified time and occasionally ahead of time. People, especially widows, have managed to get out of desperation and into poverty, which is a huge step up.

Often, people would be on the street, borrow enough from a loan shark to buy a day's materials, then pay the loan shark at the end of the day, having only enough left over for a little rice for their families. 16% is a much lower rate than the local loan sharks charged.

I suspect following the money behind Sharma and his complaint would be very instructive.

[Boojatta]

3. Kick because the general topic of micro-loans is interesting.

[bobbolink]

4. I'd like to know, also.

Some time back, there was a DUer who was against them, but wasn't willing to exlain it.

:shrug:

[maryf]

5. Seems the Nobel committee

would have been aware of corporate abuses here, but who knows, and I'd like to know more too!

[Naturyl]

6. I'm ambivalent about Grameen

Read this thread if you really care to know why:

http://future.yuku.com/forum/viewtopic/id/1290

Try to ignore the hatred and abuse that gets thrown at me.

[Overseas]

7. If you hunt around you can always find a naysayer.

Perhaps the communities in lending to one another are still technically in a "debt trap" because they still owe and borrow and are paying off. But I think there's a big difference when they are smaller loans made to other members of the credit union.

I think microlending is really interesting and freeing to lots of people.