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| COMMUNITY BASED ACTION : MICROFINANCE |
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Over-indebtedness is a common characteristic of poverty. When an individual or household owes more money than they can afford to repay, they become vulnerable to the whims and wishes of the lender. Lacking access to formal credit as well as any capital assets, especially in rural areas, the very poor will sell the only asset that they have -- their labour -- in order to satisfy the lender's demands for repayment. Consequently, people can find themselves and their family members trapped in a bonded labour situation.
Microfinance is one tool that can help prevent debt traps and rehabilitate people released from bondage. Often seen as a way of boosting income generation, it is important to realize that poor households need a range of financial services to protect them against risks and crises. However, financial services for persons vulnerable to bondage or released from bondage must be designed carefully to take into account their circumstances; if not adapted appropriately microfinance could even worsen the family's situation, by pushing them further into debt.
The documents follow the process of identifying the realities of poor people in state of over-indebtedness and their struggle to cope with shocks and crises, offering practitioners and policy makers a new way of thinking about the financial needs of very vulnerable families in the South Asian context
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