Appendix Six – Micro-credit, Small Businesses and Farms

Often a woman may never have travelled more than a few kilometres from her matrimonial home, be regularly attacked by her husband and fail to get her children educated. However, micro-credit includes training and she gets a chance to pay for education. Thus she can become the bread-winner and so, over time, the power imbalance with her husband and men in general becomes corrected.

Unfortunately, the ‘free market’ has battened onto e.g., Bangladeshi women – rural lenders charge 100-250% p.a. and commercial lenders charge 50-60%. Grameen Bank (and similar organisations) charge about 34% because they borrow at 17% and then the next 17% is for:

  1. the high administrative cost of collecting small sums in rural areas
  2. the training given to potential borrowers. Grameen Bank and similar organisations achieve a 98% repayment rate. With interest-free loans (at an effective rate to the borrower of 17%), repayment would be 100%.

Start-ups, small businesses and small farms are often crushed by interest-bearing debt. But interest is not necessary when money is put into productive capacity. As long as there is provision for collateral and administration cost, there is no reason at all for interest. Interest-free finance is essential (Alam, 2005).

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