SKS, world's largest microfinance service, drives debtors to suicide

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33 Responses to “SKS, world's largest microfinance service, drives debtors to suicide”

  1. well that’s a little bit horrifying. 

  2. Teller says:

    Read this story a couple days ago.  It’s a billion-dollar loan-sharking business with often tragic results, since one way out of debt – allegedly suggested by the agents -  is suicide.

  3. gwailo_joe says:

    “usurious practices by vicious debt-collectors”.  Nothing new here.

    Micro finance shocks the world by actually working.  Big money gets involved.  Bonuses for agents to get more loans.  Too much credit is extended to people that can’t afford it.

    To the collectors the equation is simple: Default = Death.  Driving desperate people to suicide for a pittance:  Nice, real nice.  Bastards.

    Of course chump change to some is a fortune to others: still, why did the person making $48 a month borrow three thousand dollars?  That’s goddamned irresponsible……

    Unscrupulous lenders and ignorent borrowers help to make the whole world fall apart.

    • Marco Antonio Morales says:

      You’re right. How goddamned irresponsible to suddenly have a need that surpasses your income. Accidents, house plumbing or roofing breaking, a child with medical needs, a broken car which supplies your income… how dare anyone have sudden monetary needs, specially in places where the income is so low, you only live day by day?

      Ignorants…

      /sarcasm

      • Teller says:

        60 Minutes recently ran a piece on how gold is practically a cultural necessity in India. While Americans find gold a luxury, it isn’t to Indian families of every stratum. Maybe gold plays a part in this need to borrow.

      • blueelm says:

        It is ignorance though, ignorance of how this will progress once they take the loan. Most people who fall into this kind of mess are really unaware of how things can go afterward for them. Remember, ignorance isn’t that big a deal until some one exploits it.

        • digi_owl says:

          was it Einstein or someone else that said that the greatest problem for man was our inability to grasp exponential functions?

  4. David Yoon says:

    Invention of the epoch: debt!

  5. jtegnell says:

    Whatever happened to debtor’s prisons? That’s the way to go.

  6. phisrow says:

    The studious banality of the various besuited flacks quoted in the article is as impressive as it is alarming.

    “The growth was very rapid. That growth led to some suboptimal outcomes,” “”Mistakes were made, but I find it difficult to believe there was anything people did at a managerial level to encourage field officers to do that,””It must take practice to say things like that with a straight face. Can’t make an omelet without killing some people, I suppose…

  7. Brian Hansen says:

    Though the callousness of their practices is immoral, the base cause is the inability for the borrower to fulfill their commitments.  The losses by the borrowing company ultimately drives the cost of their products higher or the cost of interest higher for everyone else.  

    The education system surrounding credit and personal finance may be the core problem.  However given that rampant credit is the only item running “progress” in business, this is not likely to reach the consumers.

    • phisrow says:

      ‘Commitment’ cuts both ways: The borrower agreed to pay the money back. The lender agreed to provide the loan without collateral(assuming the usual microfinance practice) based on the bet that enough of the loans would pay off to make that a profitable line of business.

      Attempting to turn an unsecured loan into a secured loan by making default impossible, or inciting others to seize the borrower’s assets, or similar means, isn’t merely ‘immoral’ it is theft and a violation of their commitment.

      People are free to offer unsecured credit; but they take on the risk of default by doing so. If you squeeze the defaulter to the point of suicide and they still haven’t paid up, it seems pretty likely that they aren’t just hiding their assets in a sham bankruptcy of some sort…

    • SedanChair says:

      My, what a superior tone. I’d like to see what you’d do if someone offered to loan you $30 million USD.

      Don’t bother answering. The point is you don’t know what you’ll do until the opportunity presents itself.

      • Marc Mielke says:

        Take it! It’s EASY to disappear yourself with that much scratch! Harder with the smaller amounts discussed here.

        I would not be surprised if this somehow gets blamed on Obama. Didn’t his mother invent microloans or something?

      • Brian Hansen says:

        The loan would not be taken as simple math can presume that few would be able to fulfill the commitment and consciously theft and bankruptcy fraud is not a viable option.

        My first comment appears misconstrued, the primary point was that companies would not be placed into predatory collection actions given more education/time was presented during the initial lending commitment.  Further the impact of defaulting borrowers (consumer or businesses), directly impact for any inter-related business partners.  

        • This is so often the case when microcredit goes wrong. The borrowers are not educated enough by the lender as to what microcredit is for or how it works, there is not enough business consultation support from the lender, the loans are made without a true assessment of the viability of the borrower’s business idea, the lender uses debt collectors instead of more of the above and educational business counsellors.

          Microcredit borrowers in the developing world have a lower debt default ratio than borrowers in the western world. The errors here pretty much lie with the lender and are in many cases traceable back to a lenders suspect motivations for being in the microcredit industry.

    • The point is they’ve taken a system built for humanitarian purposes & used it for their own profit while selling it as the same system. It’s not. 

  8. MrEricSir says:

    Makes you wonder what the bankruptcy laws are in the countries where microfinance companies operate.

    • phisrow says:

      Given the target demographics of the ‘microfinance’ model(poor, collateral-less borrowers, often possessing some other socially marginalizing characteristics, that the usual lenders won’t touch) the bankruptcy laws probably end up not mattering all that much. Unless the local DA equivalent happens to be on a crusade, getting even the most favorable law applied is going to cost more than you can afford…

  9. journey46 says:

    The appetizer ?
    The Constitutional right to spend money to buy elected officials who will insure business and banking are unregulated and fair business practice laws are eliminated.
    The soup du jour.
    Bankrupting nations and brow beating 3rd world debtors into suicide.
    Wait, wait, don’t leave, you’re gonna love the main course !
    Loss of all property and liberty in perpetual servitude.
    And for dessert ?
    The grease and flour scrapings of cake pans.

  10. stephenl123 says:

    This story isn’t particularly about Microfinance.  That part is misleading.  This same story happens all the time in the US with mortgages, shady loans, credit card debt, etc.

  11. I am so, so sad to read this. Micro finance as developed by Muhammad Yunus has been a fantastic tool for poverty reduction, and as Muhammad Yunus tells it Grameen Bank works compassionately with borrowers who find themselves unable to pay - to do otherwise would nullify the whole point of Micro Finance which is of course to alleviate poverty. It’s a system born out of compassion.

     Muhammad Yunus is a dear, humble man who created a brilliant system. The system was created precisely to provide a different experience for borrowers than this kind of horror that was unfortunately the norm before the dawn of Micro Finance. I am so so sad to see Muhammad’s brilliant idea being misused by greedy bankers who do not know how to put anyone first other than themselves. 

    SKS you have massively failed here. I suggest you bring in Grameen to reorganize all aspects of your training and entire operation.

  12. atimoshenko says:

    The only thing separating a (genuine) micro-finance operator from a loan shark are the ethics and motivations of the company and its employees. Shame on SKS and Sandstone.

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