During recent visits to a micro finance institution in Maharashtra, we came across a micro credit very different from traditional loans which are usually given for income generation activities. We met a group of people living in slums. These people were primarily in the business of making snacks and selling them in the local markets. Prior to availing the loan, the group barely made enough to make both ends meet that they had no money to spare to build themselves a permanent shelter to call “home”. They rented houses for which they had to shell out Rs.300, which was eating into all their earnings. When a local MFI approached them for giving micro loans to run their business, they opted not to take it. Instead, they asked if they could avail loans to build their houses. They reasoned that the loan would help them avoid paying high rentals and the same could be diverted to pay as EMI’s at the end of which they will have a home to call their own. The MFI agreed. Every member of the group got a loan (below 10000), which was used to make houses made of wooden planks.
As of date, the loan has been repaid in full without a default. The group went back to the MFI to avail another loan afterwards — to expand their businesses. Another case to prove convincingly that poor are both reliable and prompt in repaying loans whether it is a commercial loan or a low cost house building loan.
In another case of finance of infrastructure through microfinance, the borrowers of Joint Liability Groups (JLG) from a remote village in Chitradurga district of Karnataka have been given credit (Rs 3000 each )for LPG and electricity connections for their homes. Access to electricity and LPG connections have made their life easy and they are able to now use a vital couple of hours on other income generating activities resulting in extra earnings for the family.
This may not be much, however, Microfinance is an incremental concept and it takes one step at a time to climb the ladder out of the pit called “poverty”.
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