Small borrowers rely on moneylenders: Study
October 11th, 2011 - 12:52 am ICT by IANS New Delhi, Oct 10 (IANS) Small borrowers continue to rely mainly on moneylenders,
as despite having access to savings accounts they are unable to get credit from banks, says a study.
According to a study released by the National Council for Applied Economic Research Centre for Macro Consumer Research, 64 percent of individuals who borrow money from moneylenders own bank accounts. The study, titled “Assessing the Effectiveness of Small Borrowing in India”, concluded that “access to savings account does not guarantee access to credit from the bank”.
The study also concluded that a “doctrinaire approach towards poverty alleviation” involving developmental aid, subsidies and other government support “is unlikely to be sustainable” and “micro-finance institutions (MFIs) could be part of the solution.”
However, Rural Development Minister Jairam Ramesh, who released the report, had a different view and said “MFIs are not solving the poverty problem.”
“The issue is not about MFIs or self-help groups (SHGs), who lend to the poor. We should focus on expanding financial assistance for the needy,” said Jairam.
Stating there had been a backlash against MFIs in Andhra Pradesh, he said the ongoing comparison between MFIs and SHGs was not correct.
Ramesh said while MFIs functioned on a credit model, the SHGs were linked to formal bodies like banks to provide loans to the poor.
The study further said that compared to other sources of borrowing like moneylenders, SHGs and banks, a higher percentage (45 percent) of MFI loans are used for business promotion.
The study also found that the interest on loans from moneylenders are highest (44 percent) against 12.6 percent from banks.
Director of the Centre for Macro Consumer Research Rajesh Shukla said “the poor need not just greater access to financial services but also regular access to help them with business opportunities.”
The study was done in five urban centres including Kolkata, Jaipur, Chennai, Hyderabad and Lucknow with a sample size of around 11,000 households, said Rajat Kathuria, who led the research.
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