Microcredit-a credit in itself

A few days back, I read a wonderful article on ‘Microcredit’. I just had a little idea of this concept and that too, was known after Mohammed Younis of Bangladesh got Nobel Prize for this revolutionary idea in 2006. As the name suggests, it is lending a small loan to the people, but the catch-point is that the borrowers are generally poor people deemed unfit for loan-credit by the established money-lenders, viz commercial banks, institutions etc. Furthermore, the borrowers don’t have to deposit any collateral or securities.

Well, there is nothing like free-lunch in this world. And, unless you are doing charity, there is no point or motive in giving money with a great doubt over it ever coming back. Microcredit institutions were/are brave enough to fight this skepticism and in the end, have largely been successful. Small loans, some as low as $10, are given to people to start a new business or enterprise to generate income for them. The people in want of money generally know what money is like, and so, more often than not, with the help of credit institutions, have been successful in not only starting and running their small businesses, but also repaying in time. The peer pressure of the borrowers also helps in utilizing the money properly and returning it on time. The credit institutions have been smart enough to select women only as the borrowers since they are more money-savvy and diligent.

The above is not such a grandiose and novel idea, but it is just a reaffirmation of the theory that output can only occur if there is an input. Most of the people in our country and other poor countries suffer because they don’t have enough money to start with. Even if they have and invest it somewhere, they don’t have any guard against failure. Then the vicious cycle of debt, high interest money-borrowing, further debt, pressure, suicide etc gets built up. ‘Microcredit’ theory has tried to break this.

It has gained more credence and popularity in the last few years. In fact, I found one site too, Kiva, which does this type of micro-financing. There is another one called ‘Microplace’. People have been so fascinated by this idea that they consider it the most potent way to alleviate poverty. Add me to the list too.

The current food crisis

I would start off with a famous quote by Mahatma Gandhi, “ There is enough in this world to feed everyone” We have always stood by its truism, but struggled to make this a reality.

The current food crisis highlights our indifferent and lost approach to it for a long time. As per various reports, the current increase in prices is attributed to the rising living standards of people in the developing countries, use of more bio-fuels and lack of concomitant investment done in agricultural sector. Each has its contribution, but the third reason is more important for me. Whenever there was a need, we pushed for newer and ingenious ways to produce more crops, viz Green Revolution in India during late 1960s. But in relatively happier times, there has not been a similar approach adopted.

Taking India’s case specifically, it is quite glaring that amounts given in subsidy are almost thrice than those put in investment. Subsidies on fertilisers, water supplies, pesticides etc and minimum support price on crops, are quick-fix sops which if overdone prove detrimental in the long run. Imagine if India would have invested the subsidy amounts more pragmatically.

Similar cases of imprudent methods adopted by other countries are galore. The nations are nevertheless sitting at the HeadQuarters of FAO (Food and Agricultural Association), Rome this week to discuss the crisis. The emphasis is going to be the ways to increase investment, and reduce the disparity in the restrictions imposed on agricultural trade in the developed and developing nations. Let’s hope they come out with decisive decisions.