One thing that seems to stand out in all such surveys is the fact that mere micro-credit does not necessarily help in alleviating poverty. In a sense, to use a much-battered term, the "ecosystem" as a whole needs to improve. The ability to de-risk the ability to earn a livelihood is as much a criterion as others in being able to create a sustainable model for microfinance. Micro-credit alone, exposes the customer to the risk of default on repayments, thus taking him further into indebtedness. For instance, death of the bread-winner, or an ailment that leaves the person without an income for a significant period of time can cause untold hardships on the family. In the current scenario, since micro-credit is given primarily to assist income-generating activities, these people end up borrowing from money lenders or other sources for such unforeseen expenses.
While covariant risks like floods and storms are difficult to cover, I think basic insurance like medicare should become an integral part of any micro-credit. In a country like ours, where social security is absent or very poorly administered, micro-insurance to protect the breadwinner can make all the difference between eternal poverty and economic transformation. Similarly, in the case of death of the bread-winner too, the family can come under severe financial strain; insurance to cover funeral costs, and a cover that will help some other member in the family take over the reins of the family will help in softening the death blow.
I am curious to know if there are any studies which show a correlation between non-payment or default of loan repayments and medical expenses of borrowers.
