Tuesday, March 09, 2010

Two pieces worth reading if you are interested in understanding farm subsidies in India and the not quite charitable business of microfinance.

This year alone, the budget gifts over Rs. 500,000 crore in write-offs, direct and indirect, to the Big Boys. That's Rs. 57 crore every single hour on average — almost a crore a minute. Beating last year's Rs. 30 crore an hour by more than 70 per cent... Maybe the pro-farmer claim was merely a typo or proofing error. They just dropped the word “corporate” before “farmer.” Reinstate that and all is true. This is a budget crafted for, and perhaps by, the corporate farmer and agribusiness.

From the same piece:

Several of the loans disbursed as “agricultural credit” are in excess of Rs. 10 crore and even Rs. 25 crore. And even as loans of this size steadily grew in number between 2000 and 2006, agricultural loans of less than Rs. 25,000 fell by more than half in the same period.

The rest here. And what an interesting word: 'Kleptocrats'.

From a piece on microfinance: An extensive ET research across India shows that although the sector continues to be in denial mode, worried regulators, lenders and the borrowers themselves are distancing themselves from the Gold Rush and evaluating future options. RBI deputy governor Usha Thorat agrees that there is aggressive pushing of loans to groups without ascertaining the repayment capacity of the ultimate borrowers...

25% of borrowers in Kolar had more than five loans, while three loans was the average for all borrowers. Take Karnataka, and the penetration of microfinance loans among poor households stands at 263%. In Andhra, the number is a staggering 823%... To be fair, MFIs didn’t invent the credit needs of Indian households. Money enters the village economy only after the harvest, and the rural population has always borrowed to meet expenditure requirements. But what is new is the MFIs’ insistence on weekly repayments. It is not easy to sustain weekly repayments in agricultural areas where money supply itself rises and falls with the agricultural cycle.

The whole piece here.


Hari Batti said...

Both of these are interesting; enjoyed the first piece especially.

maejrus said...
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