Daily VideoMarch 31, 2011
Micro-Lending Poses Challenges in India
Micro-lending, or giving small loans to entrepreneurs in developing countries, has become a worldwide trend in recent years and has largely been linked to positive economic growth. However, competition has become so stiff among micro-lending organizations that some borrowers are having a hard time paying off all the loans they are being offered.
Some micro-lending organizations began as nonprofits with the goal of improving lives in developing countries. However, many of those micro-lenders have since begun making profits, and debate rages over whether this is the right direction for the micro-lending sector. Some argue that profits are necessary to make sure there’s enough money to meet lending need, while others say that making money off of the loans goes against everything micro-lending stands for.
Some people who have borrowed money from micro-lending organizations report being hounded by aggressive money collectors that even drove some villagers to suicide in desperation. Now, new legislation in popular micro-lending countries like India is making sure that lending is done responsibly without overwhelming borrowers. The proposed changes include collecting money monthly instead of weekly, working with borrowers to overcome their payment challenges and lowering interest rates.
“The lesson is you can make profits, and society will support you. They might even, actually, respect you for it. But if you are seen to make excessive profits, if you are seen to being profiteering or being — you know, personally enriching yourself beyond what is considered reasonable — and that varies from location to location — then society will revile you.” -Vijay Mahajan, BASIX lending organization
“I have loans from three different companies, about $700 in all. I use the money from one to pay off the others, and I will continue to do that until I can’t anymore, and then I will stop making payments.” – Maria Polepaka, borrower
“We have grown too fast. And we have pushed credit on the same client, and therefore, they have defaulted.” – Roshaneh Zafar, microfinance lender
Warm Up Questions
1. What is a loan?
2. What does it mean to default on a loan?
3. What is the difference between a nonprofit and a for-profit organization?
1. Do you think all of the blame for excessive microlending can be placed on the lender, or can some also be placed on the borrower? Why?
2. How do the borrowing practices described in this video compare to the situation behind the housing crisis in the U.S.?
3. Do you think micro-lending organizations should be allowed to make a profit off of their operations? Why or why not?
Tooltip of related stories
Tooltip of more video block
Submit Your Student Voice
Invasive lionfish have devastating effects on native species and ecosystems in the Western Atlantic Ocean and Caribbean Sea, but robotic technology offers a new way to stem their spread. Continue readingArts & CultureEconomicsHealthScienceU.S.UncategorizedWorld
The third party candidate Dr. Jill Stein of the Green Party says she remains the only candidate in the presidential race who is not corrupted by lobbyists’ money, corporate money or super PACs. Continue readingArts & CultureEconomicsHealthScienceU.S.UncategorizedWorld
The large disparity in campaign spending between presidential nominees Hillary Clinton and Donald Trump highlights the differences between the candidates’ campaign strategies.Arts & CultureEconomicsHealthScienceU.S.UncategorizedWorld
The first-ever Refugee Olympic Team competed in Rio de Janeiro during the 2016 Summer Olympic Games. Continue readingArts & CultureEconomicsHealthScienceU.S.UncategorizedWorld
July was recorded as the planet’s hottest month since records began more than 100 years ago, prompting some to question the influence of climate change will have on weather. Continue readingArts & CultureEconomicsHealthScienceU.S.UncategorizedWorld