Before explaining what is the ‘vicious cycle of poverty’, I will start by throwing a graph at you. It summarizes the status of rural finance.
Above graph clearly indicate that lesser the land holding in rural area, lower is the access to formal financial institutions, typically this is the rural poor class of India.
Poverty for them, once started, is likely to continue because of certain set of factors or events unless there is outside intervention. These factors are together called vicious cycle of poverty.
Due to little landholding, the income generating ability of this class is low, further because of having little assets ownership, their ability to provide collateral for loans is limited, resulting in lower capital available for income generation. Further this leaves them no other resort than moneylenders who charge exorbitant rates to access credit in case of emergency, often resulting in further deterioration of their financial health.
As it can be observed, lack of capital & skills are the key reasons for perpetuation of poverty, hence attacking these reasons is the key to improving economic status of poor people and making them active players in mainstream economic activity. Access to affordable and timely credit is primary requirement to break out of this vicious cycle.
30DF is doing its bit to provide access to affordable and timely credit to the poorest of the poor.
