In our quest to put the blame on the financial institutions, traders etc. for the current crisis, most people have forgotten the biggest issue. Our current society has become a vicious circle. The rich have money and hence the banks lend to them allowing them to get richer. The poor neither have money, nor anyone who lends to them.
Without access to readily available and cheap credit it’s hard for the poor to pursue their dreams and work their way out of poverty. Today whatever little they are able to make is snatched away by loan sharks and mafia to
pay the exorbitant interest rate.
Subprime crisis is soon becoming the thing of the past. However it has kicked all these marginal people out of the today’s modern financial system. Unless they are not brought back, the society is only condemning the masses to an eternal life of misery.
6 replies on “Credit crisis: Access to credit”
Need to study “Muhammad Yunus”‘s ways and see if they work for us.
Crediting to poor people may not be as risky as banks may think 🙂
one thing is sure that the microfinance companies in india do charge between 18-24% as interest rates. so its not less than what a loan shark charges. however i could not find data about what is the NPA and recovery levels of these companies
A reasonably wealthy person can easily give loan for lesser interest to a poor person, who can develop from that loan. But, most of the time, the problem is the wealthy person does not have any of knowing whether the poor person repays or not. In that case, they may loan to micro finance companies, and they charge more interest because of the risk involved in that.
I am not giving any loan to any poor person just because, I don’t know who returns my money and who does not. If anyone can give me 100% assurance of my money, I can put all my investments there. I will be very happy, if somebody develops by using my money. But, in many places, it is very difficult to find people who are going to use that money to improve their state, and who just spends it. If that problem is solved, everything would be solved automatically.
well u just now listed the problem.. nobody trust the poor with their money
what about those that take farm and business loans and invest them into tv fridge ac when they barely get 2hrs e/c and hardly ever pay bills ?and those that are used for a daughters marriage?
this happens regularly.
Plus rich in india have contacts .. some political and then the magical door to PSU debt opens .. havent u talked about that rotten culture?
thats like throwing away baby with the dirty bathwater. i know loans are getting misused but the essense of the article is that poor entrepreneurs often need capital more desperately than the rich