Tanda Srinivas was to rest in the courtyard of his house with two rooms in the southern Indian town Mondrai shortly after noon on Oct. 28 when his wife, Shobha, burst through the door covered in flames and screaming for help.
The mother of 30-year-old, two boys had poured 2 liters of kerosene on her and lit a match. The couple had argued bitterly the previous day about how they would repay multiple loans, including micro-credit lent him small sums of money to dozens of villagers, says Venkateshwarlu Masram, a doctor who called the ambulance.
Shobha, the heads of several groups of women borrowers, was being pressed to pay the interest on its 12,000 rupees (265 dollars) loan. Lenders were also demanding that the coverage of other women, even though the state had restricted the activities of microfinance two weeks earlier.
When Srinivas, 35, tried to snuff out the flames with a blanket, polyester clothes caught fire. Within three days, both parents had died, leaving their children orphans.
Now, in this November morning, the grandfather of sick children 70 years old and blind grandmother say they are taking care of Aravind, 10 and Upender, 13, in the farming village, where men earn an extract of palm collection of life to make alcoholic beverages.
None of the families of children can help full-time, says her grandmother 60 years of age, Saiamma, breaking to mourn.
Hub microcredit in India
Mondrai horrible scene, 80 kilometers (50 miles) from the city of Warangal, has played in dozens of ways in Andhra Pradesh, the fifth largest state in India by area and site of about one third of the country $ 5.3 billion in microfinance loans as of September 30.
More than 70 people committed suicide in the state on March 1 to November 19 to escape or terminate payments to the agony he had shot his debt, according to the Society for Elimination of Rural Poverty, a government agency collected data on microfinance related deaths of police reports and the press.
Andhra Pradesh, where three-quarters of the 76 million people live in rural areas, suffered a total of 14,364 cases of suicide in the first nine months of 2010, according to state police.
A growing number of deaths related to microfinance, spurred the state to curb the practices of collection in mid-October, says Ramos Subrahmanyam, principal secretary for rural development.
"Every life is important," he says.
Turn evil
On November 8, police arrested two leaders of the lender Share Microfin Ltd. allegations of complicity in another suicide, this time from a mother of 22 years of age. Share Microfin not respond to requests for comments on this story.
In India strives to provide a decent education, healthcare and employment to millions of people remain trapped in poverty, microcredit - lending small amounts to the most needy of the world to help them make a living - has taken a perverse twist.
Microcredit has become "Walmartized" by the unrestricted sale of cheap goods to the poor, says Malcolm Harper, president of the company's ratings Micro-Credit Ratings International Ltd. in Gurgaon, India.
"The sale of debt and the sale of drugs," says Harper, 75, has authored over 20 books on microfinance and other issues. "The sale of debt for illiterate women in Andhra Pradesh, one has to be more responsible."
Effect against
K. Venkat Narayana, professor of economics at Warangal Kakatiya University, has studied how microfinance lenders convinced of women's groups to borrow.
"Microfinance is supposed to empower women," she says. "Microfinance boys spent the social and economic progress, and these women ended up becoming slaves."
boom in microcredit industry in India is part of a worldwide phenomenon that began as a charitable movement, but now attracts private capital seeking high growth and profitability.
Banco Compartamos, SA, a former nonprofit that is now the largest lender to Mexico's working poor, raised about $ 467 million in 2007 its initial public offering. IPO August SKS Microfinance Ltd., the largest microfinance institution in India, drew further attention to the industry.
SKS started operations in 1998 as a nongovernmental organization run by Vikram Akula, 42, an Indian-American with a doctorate in political science from the University of Chicago.
The company raised 16.3 billion rupees from the sale of 16,800,000 shares at 985 rupees each. SKS stock peaked at Rs 1404.85 on 15 September. As of December 28, which had fallen to 652.85 rupees.
Andhra Pradesh crisis
On 15 October, the Andhra Pradesh government imposes restrictions that bar microlenders' collection agents visiting borrowers and businesses must obtain local authority approval of new loans. The rules have stopped lending and repayments. levels of recovery of loans in the state have been reduced to less than 20 percent from 98 percent previously, according to an industry group.
The agitation in Andhra Pradesh is a long way from the vision of Muhammad Yunus.
The former economics professor won the Nobel Peace Prize in 2006 for his pioneering work in Bangladesh to provide small amounts of money to entrepreneurs too poor to get bank loans.
Yunus, 70, discovered more than three decades ago when money is lent to women in poverty can begin to make a living, and most of them pay for it.
Yunus started the Grameen Bank project in 1976 to extend banking services to the poor. Since then it has provided $ 9870000000 and recovered 8.76 billion U.S. dollars, 97 percent of the 8,330,000 borrowers are women.
'Wrong direction'
Yunus says he is not against making a profit. But companies seeking to claim windfall and pervert the original intent of microfinance help the poor.
The golden rule for a loan should be the cost of funds, more than 10 percent, he says.
"Marketing is the wrong direction," said Yunus, speaking in a telephone interview from the capital of Bangladesh, Dhaka. "An IPO is the trigger point for a lot of money personally and for the company and shareholders."
David Gibbons, president of CASHPOR micro credit, micro-credit institution without profit to poor women in India in Uttar Pradesh and Bihar, says public for nonprofit lenders face a conflict.
"They have to decide between the interests of their clients and the interests of their investors," he says.
"You can not do"
Gibbons, 70, says he learned that lesson when he tried to raise 4 million pounds ($ 6.2 million) from two wealthy London-based non-resident Indian investors in November 2006.
The talks collapsed due to differences on expectations of return on capital and other terms of the contract, he says.
"That's what made me think of this simply can not do," he says.
Indian microlenders Grameen Bank Yunus differ in fundamental ways. To protect the depositors' money after bankruptcies among non-bank financial companies in the decade of 1990, the Reserve Bank of India in 1997 made it more difficult for them to meet the requirements to receive deposits from the public. Only 36 microfinance institutions are registered as non-banking financial companies, according to information supplied by the Reserve Bank.
"I feel so sad"
Indian microlenders same bank loans by 13 percent or more on average and extend credit to the poor. They charge interest rates that may rise to 36 percent, says Alok Prasad, executive director of the Microfinance Institutions Network, representing 44 microfinance institutions. He said that 44 companies are registered with the Reserve Bank.
SKS Microfinance gets funds to about 12 percent interest and paid to the 24.52 percent in Andhra Pradesh, a spokesman Atul Takle said.
In Bangladesh, the Grameen Bank has a banking license in 1983, enabling it to take deposits. Which charges 5 percent for education loans and 8 percent for home loans. Beggars can borrow for free, and the main loan interest is capped at 20 percent, says Yunus.
"Microfinance has been abused and distorted," he says. "I feel very sad because this is not microcredit I created."
Microfinance India has its roots in the financing of the community's decades-old informal.
The NGOs pioneered cooperative loans, now known as SHGs, with initial capital of National Bank for Agriculture and Rural Development. Encouraged by these projects, the state bank worked to link groups backed loans to local bank branches in 1992.
For profit companies
nonprofit organizations, subsequently became involved as intermediaries between banks and borrowers. For 2005, non-profit such as SKS and Share Microfin had become lucrative businesses.
Akula SKS attracted investors such as Khosla Ventures, the company Sun Microsystems Inc. co-founder Vinod Khosla, venture capital.
Capital flowed into the new industry of commercial banks, joint ventures and private equity.
Sequoia Capital in Menlo Park, California, and Bangalore-based Infosys Technologies Ltd. Chairman NR Narayana Murthy were among the sponsors. George Soros's Quantum Fund has a 0.37 percent stake in SKS.
private equity investors has only 515 million U.S. dollars in India microfinance firms since 2006, the Risk Research Service Intelligence, said.
"The explosive growth"
More than half of the 66 microfinance India followed by Micro-Credit Ratings are for-profit companies. Some 260 had 26.7 million microfinance borrowers and 183.44 billion rupees of loans outstanding as of March, according to the State of India's Microfinance Sector Report 2010.
"In the last two years we have been seeing explosive growth," says N. Srinivasan, who wrote the report. "Microfinance institutions found it easy to make money. Not that making money is bad, but when you go overboard and say he needs money for growth, you get in trouble."
Polelpaka Pula, mother of two, says she saw her running microlenders Pegadapalli people to compete for business - with tragic results.
Her husband, Prakash, a painter who made 250 rupees a day, first borrowed from a group of villagers to build a house. Each participant called chit fund contributed 1,000 rupees a month and took a turn collecting the full fee.
microfinance staff from L & T Finance Ltd., Financial Ltd. Sphoorty Spandana, SKS Microfin Share and began offering loans in the village since 2004, she says.
The couple, as they contribute to the bottom of the village, had five loans totaling more than 64,000 rupees. It charged them with payments of 7,300 rupees a month, over 5,000 maximum monthly income Prakash rupee.
Usurer
When Prakash ran out of microcredit loans, went to a village moneylender, who charged 100 percent interest.
End and the debt of the globe several lenders, Prakash was hanged in November 2009, his wife said.
The small house he had dreamed of was never completed. Only the foundation is located next to the house of his parents, a small structure with a roof of palm leaves.
Spandana said that none of the names of the couple is in their database. The company says the media mistakenly attributed the harassment to microfinance, especially when Spandana is mentioned.
"Triggers of suicide are multiple, such as stress at home," the company said in an email response to questions about death.
"Subprime" in parallel
SKS Takle spokesman said that his staff has been practicing responsible lending over the past 12 years. Your employees are not paid according to the size of the loan or the reimbursement rate.
"This ensures against giving loans larger than a borrower can pay," says Takle. A spokesman for L & T Finance declined comment.
Overlending in Andhra Pradesh suggests the U.S. subprime crisis, says Lakshmi Shyam-Sunder, director of corporate risk IFC in Washington, which invests in microfinance institutions.
"These loans were originally seen as the expansion of home ownership to poor people, doing good," says Shyam Sunder.
As the industry expanded, so it became a major benefit for some borrowers, she said. "The tension arises when working in activities with social objectives and commercial interests," she says, adding that it is important to find the right balance.
The companies pursue profits in the midst of poor corporate governance are undermining the intent of microfinance, says Gibbons CASHPOR.
"Loans Gone Wild"
During the past five years, the number of microcredit in India has increased an average of 88 percent annually and accounts of borrowers have risen 62 percent a year, making India the world's largest microfinance industry add Micro-credit, he says.
"It is rampant consumer loans Gone Wild" says Gibbons. "There is more poverty reduction."
Sumir Chadha, managing director of Sequoia Capital Advisors SA in India., Says nonprofit that is difficult to find someone to lend to the poor.
"Capitalism is not necessarily a bad thing," says Chadha, whose company has a 14 percent stake in SKS. "If they can not benefit the poor, which means that no company will serve the poor -. And then it will be worse than before"
Chand Bee's Tale
To Chand Bee, 50 years old, who led three groups of borrowers in Andhra Pradesh, too many loans almost became his undoing.
She says she left home after collectors started harassing her. He took out several loans from 2005, and the names of Spandana as one of the lenders.
Some of the money paid for the funeral of his eldest son. When he was behind on payments, loan officers said threatened to humiliate me in front of the neighbors and took to sell their young grandchildren in prostitution.
She left her neighborhood in Warangal, where she lived with her deaf husband, some of his eight children and more than a dozen grandchildren.
After living as a beggar for a year, the bee Chand returned home in early November when family members told him that the State Ordinance which came into force on October 15 it had suspended some collections. Spandana A spokeswoman said that none of the four customers of the company in the district with the name of Chand Bee has had trouble paying.
Almost every household in the neighborhood of 250 people - where children play barefoot in the lanes between the rows of huts in ruins - has taken several loans. So many microfinance ply their trade as residents refer to them for the days listed: business Mondays, Tuesdays and business, etc.
Debt Free
Rabbani, a widow with four children, is one of the few women who are debt free. She put a spice shop with two loans, which returned with its small profit. After seeing the pain of her neighbors, she vowed never to seek another microcredit.
SKS said that 17 of his clients have committed suicide, because none of the loans are delinquent or harassment.
"Suicide is a complex issue," Akula said.
Sitting in the conference room on the second floor of the seven-story headquarters SKS in Hyderabad, where posters of smiling women running crafts and tailoring decorate the doors of the elevators, Akula says there is nothing wrong with the pursuit of profit.
"So what if a poor woman the amount of an investor?" Says Akula, dressed in his trademark kurta shirt Fabindia knee, ethnic clothing salesman by rural artisans. "What matters to her is to get a loan on time at a reasonable price that allows you to earn more income."
Commercial risk
SKS become a trading company allowed the company to take advantage of an unlimited source of funds from private investors. That, in turn, that company grow and reduce the incidence, Akula said.
"Interest rates have declined over time," he says. "Because the works, which return year after year," he says of his clients.
His autobiography, "A Fistful of Rice" (Harvard Business Review Press, 2010), gives an idea of the expansion unit.
Akula, a former consultant at McKinsey & Co., studied McDonald's Corp. and Burger King Holdings Inc. in 2005 to learn about the rapid formation of the unskilled. He devised a two-month course to train about 1,000 new loan officers per month.
"We had a goal for SKS, grow, grow, grow as fast as we could," he writes. "We could practice of microfinance in a way that serve the poorest people than anyone had ever thought possible."
Akula said that the commercial model of microfinance is not the only way.
Returning to 'Roots'
"It is an important complement to other forms of financing," he says. The new microfinance firms do not take time to build trust, Akula said. "As an industry, we must return to our roots," he says.
The Reserve Bank is expected to report on the industry in January. The Ministry of Finance is planning new rules.
Sequoia Capital Chadha says she is concerned about "regulatory uncertainty" created by the ordinance of the state and federal regulations preferred. national standards would prevent individual states the credit discipline of resignation damage loans, Prasad Microfinance Institutions "he says.
"It's no different to the need for good regulation for investment shares or start a manufacturing plant," SKS investor Khosla says.
"People not profit"
From the perspective of Yunus, it is essential that the industry is moving away to seek the maximum benefit and to refocus on the poor.
"If not, are helping the lives of the poor," he says. "You're not patient. You are not restricted. You do not have empathy for people. You just use them to make money. That's what the blinds when you're in for-profit world. We must see people, not profit. "
Any change would be too late to Atthili Padma and Shivalingam, a young couple in the village of cotton farming Chennampalli Andhra Pradesh.
Padma, a mother of 22 years of age, in two, left his home on 7 October with her 18 month old daughter and 4 year olds, according to Maruthi Prasad, a superintendent of station Shankarampet police.
Padma's death
Instead of heading to the home of his parents, as he often did, walked 2 miles in the opposite direction. Came to an ancient Hindu temple where the villagers worship the Lord Shiva, the god of destruction. Padma continued until he stood before a pit once used to irrigate crops, his father-in-law, Pochaiah he says. There is no one to dissuade her, she jumped into the well with their children.
The day before he died, Padma had visited his parents after arguing with her husband more loans they could not afford, according to Mangamma, neighbor of the couple.
Her marriage five years ago was arranged by her parents and the couple had become close and had not fought before that day, Mangamma says. The loans amounted to 20,000 rupees, Pochaiah says.
Padma's death is recorded as a suicide related to microfinance in the list by the Society for Elimination of Rural Poverty.
Sad day for Microfinance "
Police arrested the husband of Padma, Shivalingam, October 13 for alleged complicity in the suicide of Padma. It also claimed that he had harassed, provide money to marry him, which is illegal in India, according to Narayana, a police officer at the station Shankarampet.
The police made two further arrests on November 8: Share Microfin managers Raghavender Sriram, Kumaraswami Polapalli 27, 22, also for alleged complicity in suicide, according to the superintendent Prasad. Both managers and Shivalingam have been released on bail and are awaiting a court hearing, Prasad said.
Proponents and Khosla say investors and microfinance - when it works properly - is the best way of giving the rural poor a chance at a better life.
The tragedy in India has the worst possible outcome, says Gibbons CASHPOR, whose speech opened November 15 session the morning of the annual summit of Microfinance India in New Delhi.
"This is a sad day for microfinance," said Gibbons, who has promoted the movement of the last two decades.
"People often ask me, 'What are you doing here?" He told the audience. "I was always proud to say:" I'm doing microfinance. "Now when people ask, I feel ashamed. I feel like hiding somewhere."
