Living on the edge

According to a survey of the Grameen model in Bangladesh, about 5% of all Grameen borrowers managed to get out of poverty each year.  However, what was perhaps more interesting was the fact that infant mortality rates had dropped by over 37%.  This seems to suggest that hygiene, medical care and education levels had also increased in the surveyed group. This trend gives us the hope that the next generation of these borrowers will probably live in better socio-economic conditions.  

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.