%20Email:%20mian.mazher@gmail.comPoverty%20is%20not%20created%20by%20poor%20people.%20It%20has%20been%20created%20and%20sustained%20by%20the%20economic%20and%20social%20system%20that%20we%20have%20designed%20for%20ourselves;%20the%20institutions%20and%20concepts%20that%20make%20up%20that%20system;%20the%20policies%20that%20we%20pursue.%20(The%20Nobel%20Foundation,%202006)According%20to%20my%20views%20about...){kind=link}
Atrocious Effects of Non-Productive Loans in Deprived Communities
Muhammad Ahmed Mazher (Candidate: Doctor of Business Administration) Email: mian.mazher@gmail.com
Poverty is not created by poor people. It has been created and sustained by the economic and social system that we have designed for ourselves; the institutions and concepts that make up that system; the policies that we pursue. (The Nobel Foundation, 2006)
According to my views about above statement, there are many other reasons that are causes of poverty. Poverty has different dreadful effects in which I will discuss about the foremost and significant effect(s) or harm(s) that is utilization of finances in amenities of life and other needless, infertile and unproductive etiquette. It is truth that poor communities are getting the microcredit facilities from different MFI's at same time and exploits this coinage in their house maintenance, for marriage of their beloved sons or daughters, for purchasing home appliances etc. The bad effects that poor community faces after using the money in non-productive tenacities are following.
Poor people need to build up their assets, by using loans in non-productive ways, they are unable to increase or even sustain their assets.
Productive loans are playing vital role in any economy to increase their import, export and employment level; if loans will be non-productive then all above these benefits cannot be achieved.
By using the loans in non-productive demeanors, financial system can abolishes.
Deprived community living standard can move miserable.
Real story of conventional microfinance borrower
Muhammad Akram was doing his powers looms business very well and upholds his family in good style when he was not creditor of any MFI.
Before, he was businessman and doing well because that time he was the owner of his business with 10 powers looms machines (as per his information cost of each one used machine is Rs.60, 000 to Rs.70, 000 approximately) (Approx. US $706 to US $824). He employed 4 men including his son. He is also expert in his business. Meanwhile, his bad luck period start when his one friend told him about the some MFI's, which were offering the loans to the poor self-employees. He got some money from different MFI's for expansion of his business and used that money for their self needs (he admit that loan officers told him that he can use this money even for their home needs etc.). With the passage of time, the massive interest of that MFI's increase gradually and he feel that his business also going down due to some circumstances in his family and business environment in the market. First he sold out his land of piece one third of its original price because the recovery officers were sitting all the day at his home for installments collection.
Story of non-productive loans not stopped here. After one and half month, again he faced big trouble more than before for paying installments when he offer his 6 powers looms machines for sale. Non-productivity still was playing the role to destroy his family life when again he was unable to pay installments, then he decide to mortgage his remaining 4 machines to an investor (who promised with him for paying his installment) and now he is working on same place as employee on daily wages.
Conclusion of the Story
The MFI's which are given the loan without any purpose of business always creates burdens and problems on the loanee. Poor people not too much educated about this system so most of time they utilize loan amount in their personal needs. Resulting, they do not invest the amount for further business expansions and become debtor and fall in the depth of poverty critically.
Atrocious Effects of Non-Productive Loans in Deprived Communities
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