The New Nation - Internet Edition

THE poor or extreme poor who take micro credit should be allowed to pay interest at nominal rates. But even the interest rates charged on publicly-run micro credit programmes continue to be higher for their poor receivers. There should be no great difficulty in the way of the government lending to the poor at much lower rates of interest because the government should not be in the business of realising exorbitant interest from the poor. Disbursing credit to the poor to make big financial gains cannot be the aim of the government.

The recommended lower rates of interest on micro credit should meet both the needs of viably running the official micro credit operations while also meeting the intended objectives of these programmes. The NGOs, in many cases, charge high interest on micro credits provided by them. They also need to be persuaded to significantly decrease the interests on loans and ought to base their credit operations truly for the benefit and advantage of the poor and not for only making successful financial operations.

Notwithstanding the increase in opportunities for the poor to be the beneficiary of small credits from micro-credit lenders, they remain still the victims of private money lenders or 'mahajans' also in many cases. Studies on micro credit showed that mahajans continue to be a big factor in the micro credit scene exploiting the gaps in the availability of credits. This indicates the importance of increasing the networks of micro-credit both by the government and NGOs. Such expansion of networks by them needs to be accompanied also by adequate lowering of the interest charged on the credits. It is also an imperative to curb the exploitation of mahajans who in many cases take as high as 300 per cent interest.