Gandhiji Would Have Welcomed Micro-finance To Support Khadi Sales

Spotlight By Harsh Shrivastava*

Gandhiji Would Have Welcomed Micro-finance To Support Khadi Sales

Gandhiji would have welcomed one part of the microfinance model that was not common during his time - the concept of joint liability by a group of women borrowers. He would have only insisted that perhaps one women in each group should have been from what he described as Harijans – or Dalits.

Gandhiji's 149th birth anniversary was celebrated this year on 2nd October. Among the many facets of his life that will be highlighted in the coming months, as India prepares to celebrate his 150th birth anniversary in style, one thing stands out for me. His decades’ long, sustained promotion of khadi, leather, and other village enterprises to improve the livelihoods of millions of poor Indians living in villages. A century later, this is still critical to India's progress.

Gandhiji believed in free markets as a way to transform India. He did not expect the government to provide a "dole" to all. He advocated that the poorest could spin on their charkhas, and sell the yarn. This yarn would then be converted into clothes and garments. He believed that all could, hence earn something to supplement their meager earnings on the farm. In this, he especially exhorted women and the youth to spin every day. He backed this by creating Khadi bhandars to sell handspun clothes and an All-India Spinners Association to support spinning and charkha.

For the poorest, charkhas were not that cheap. Spinners also needed working capital to buy cotton and slivers. Weavers of cloth would also need money to buy yarn and to then stock the cloth or garments before they were sold. Gandhiji never answered where exactly would all this money come from to finance tens of millions of charkhas, spinners, weavers, and sellers of clothes. For there was no answer during his time. Banks would never have lent against the collateral of a charkha, because they never had branches in rural India--they still don't have too many, and are still unwilling to finance, such small loans. Gandhiji believed that individual savings would pay for the cost of the charkha and the working capital.

Here is where microfinance comes in. If it had been invented in 1918, rather than in 1978, it would have been the ideal method to convenient finance and thus dramatically expand the reach of the khadi movement. Lending to poor people. Check. Lending for small investments. Check. Lending against collateral. Check. Lending to women. Check. Lending in rural areas. Check.

Gandhiji would have welcomed one part of the microfinance model that was not common during his time - the concept of joint liability by a group of women borrowers. He would have only insisted that perhaps one women in each group should have been from what he described as Harijans--or Dalits. His belief in a strong organization would have let him accept that a group of women borrowers would be a good first step in organizing individuals to work collectively, leading to future capabilities for bigger struggles like swaraj.

Gandhiji would have required some convincing about the interest rates that microfinance comes with. But I believe he would have accepted it; not because of the lack of an alternative such as bank finance, or because moneylenders charged more (against which he often railed). But because Gandhiji was rational and commercial in his outlook. He understood finance - bills, hundis, banks accounts, insurance - all were part of his daily job as a commercial lawyer. He would have understood that microfinance companies have higher costs of funds - and he would certainly have lobbied with banks to lower their refinance rates to microfinance companies.

Gandhiji created large nationwide institutions that employed many people - the Congress Party, AISA, etc. In many of these, he used to argue that those who worked for them deserved a reasonable salary and not just be volunteers. This logic of "feet on street" would have convinced him that microfinance operating costs had to be reimbursed; and that can only come through borrowers' interest, since there is no other income. Of course Gandhiji would have asked for donations to subsidize some of these costs.

Once convinced that the availability of convenient and affordable microfinance was an essential ingredient to faster use of charkhas and the entire handloom business, Gandhiji would surely have brushed aside objections. Rather he would have found ways to integrate finance, production, and sales in more and more villages to benefit many more poor Indians and thus advance his objective of economic independence for all.

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Diplomatist Magazine was launched in October of 1996 as the signature magazine of L.B. Associates (Pvt) Ltd, a contract publishing house based in Noida, a satellite town of New Delhi, India, the National Capital.

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