If Microfinancing Creates a Cycle of Debt, is Handing Out Cash a Better Option?

“Svetha Janumpalli was disillusioned. Fresh out of college, she traveled to India on assignment for Microfinance Focus Magazine to interview hundreds of borrowers. “I could not believe the horrifying stories that I heard,” Janumpalli remembers, “of women being threatened to pay back their loans, taking out ten loans at a time just to pay back one with another.” In households desperate to cover health costs, gain access to a clean toilet or send their kids to school, the specter of debt—however well-intentioned—was pressing in. “It was just a disaster,” says Janumpalli. “I feel like what we do in the United States, we’re applying to the world. We’re basically giving the poor credit cards and incentivizing them to get into debt.”

via If Microfinancing Creates a Cycle of Debt, is Handing Out Cash a Better Option? | Economics on GOOD.

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