THE MOST AFFECTED

Financial support from the UK to India (about €276m per year) will be virtually eliminated by 2015. In this regard, India’s Foreign Minister Salman Khurshid, said “Aid is the past and trade is the future”, but charities warn that the poorest will suffer the consequences.

The announcement of the cessation of economic aid does not come as a surprise to the government of India, which holds that, while it welcomes financial support of countries that choose to offer it, it will never actively seek it. Although the measure can be seen as a recognition of India's economic transformation, much of the money that the UK has provided so far has gone to fund projects in the most needy social sectors, which gives grounds to the fear that these will be negatively affected when said projects are stopped due to a dearth of funds.

Save the Children believes that the decision is “premature”. “Despite impressive economic progress in India, 1.6 million children died there last year” according Kitty Arie, their advocacy director, who added “We agree that in the long term, aid should be phased out as the country continues to develop, but we believe that the poorest children will need our ongoing help”.

With a similar vision, Keith Vaz, former president of the Indian-British parliamentary group, said “Although undoubtedly India has progressed in the last 20 years, there are still an estimated 360 million people living on less than €0.42 a day. By removing our aid to India, which will clearly only affect the most vulnerable, we need to see the plan of the Minister for how she will work with other organizations to ensure the gaps we are creating gaps will be filled”.

In light of this new panorama and the detrimental effects that will ensue, the need for other sources of support is unquestionable. The work of NGO’s, particularly those of local character and focused scope, will become more important than ever as they face new, bigger challenges in order to fill the gaps. In keeping with its vocation, Asha-Kiran will continue to bring present and future development opportunities to disadvantaged populations by relying on, and being the instrument of, the sponsors and donors who wish to build a better world for vulnerable children, their families and communities.

Source: BBC News

ALL IS NOT GOLD THAT GLITTERS

Even though the principle of microcredit is basically sound, and in spite of there being institutions that manage them wisely, in India, some people’s ambition took a toll of 60 lives in Andhra Pradesh this year. In the districts of Krishna, East Godavari, Guntur and Prakasam, suicides may exceed 200. However, the wave of suicides went largely unnoticed in the media.

The crisis in Andhra Pradesh is just the tip of the iceberg. As the microcredit movement spreads across the country, the risk of suicides related to micro-credit is a possibility to consider. The time bomb has been set. Unless the government evaluates the seriousness of the situation and applies strict measures, poor rural households will remain at the mercy of these ‘new’ lenders.

The microfinance institutions in question (MFI) have been accused of exploiting low income people with usurious interest rates and of intimidating borrowers with ‘forced loan recovery practices’. A worried Chief Minister said: “MFIs have proved worse than conventional lenders by charging interest rates above 20%”.

Until recently, microcredit had been sponsored by both government and donors in Andhra Pradesh. Over 5.5 million women have been engaged in the microcredit movement, so the objective of eradicating poverty did not seem too far. Reality has been very different, since it seems that microcredit can be designed to maintain a low level of savings so that the credit cycle can continue.

Charging a prime interest rate of around 11%, the provision of financial services to SHGs is impractical for most commercial banks, so that, by default, MFIs have gained a client base of over 200 million rural households. Clearly, when it comes to economics, MFIs have an eye on their interests. Poverty is a good deal. Otherwise, how could these MFIs charge such interest rates knowing that no business can generate enough profit to pay them? It seems that the strategy is to keep the vulnerable in perpetual cycles of debt-credit-debt.

The crucial question is: was not the government aware of the modus operandi of MFIs? Is it not it an open secret that micro-credit institutions charge rates above 20%? Has the incidence of harassment to both rural and urban borrowers not increased? After having participated in the creation of self-help groups and having promoted micro-finance institutions, the government cannot ignore its responsibility in this mess.

It comes as a surprise to many that although micro-financing institutions were launched as a way to free the poor from the clutches of traditional lenders, some MFIs have gone far ahead of their predecessors at the practice of exploiting those whom they purportedly seek to help.

Source: infochangeindia