The 'Micro Credit' Business Model

Today's Hindustan Times Op-ed has an article by Sujata Anandan around Vidarbha farmer suicides etc. It throws light on how misuse of credit by people compounds the situation created by poor rains and lack of proper irrigation. I quote:

My sister spotted a vegetable vendor at the local market who had been defaulting in payment for months. When she swooped on her, the lady brazenly told my sister she had taken the loan not to buy a stall, as stated in her application, but to marry off her daughter. "Mera kaam ho gaya. Muzhe ab zaroorat nahin. (My purpose has been served. I do not need you now)," she said.

Most of the money borrowed by farmers goes not into seeds or crop but into paying off their debts to moneylenders, the dowries of daughters or gambling dues...

Moneylenders were big business in Andhra Pradesh's villages, too, but then the state government came up with a scheme to settle with those bloodsuckers and banned their return to the villages. Suicide rates in Andhra have been on a noticeable decline since then.

I wonder how micro-credit agencies, which are created more from the intent of welfare than profit making are able to circumvent problems such as above.

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