A/HRC/43/45 however, proved to have, in many cases, effects opposite to those intended, 34 including increasing overindebtedness and generating a “poverty trap”. 35 A number of studies have shown that, far from serving to enhance local entrepreneurship or productive undertakings, loans were often used for other expenses, such as for rent payments or guarantees, schooling fees or health-related expenditures. While some short-run benefits of microfinance could be found, it has also been associated with spiralling debt that results in deeper impoverishment, family breakdown and even suicide. Furthermore, evidence was found of “antidevelopmental” flaws,36 blocking other development policies that might have more potential for sustainable impact, and major opportunity costs. 33. It is true that, when microfinance is well targeted, there have been cases in which it has benefited recipients. 37 Nevertheless, there have been many cases of overlending and overborrowing that led to microfinance crises in countries such as Bangladesh, the Plurinational State of Bolivia, Bosnia and Herzegovina and Cambodia. In general, the lack of safety nets for people living in poverty, once their private debt escalates, and the failure of certain States to regulate microfinance and lenders are essential concerns. 34. The use of loans to cover for basic needs and a range of economic, social and cultural rights is commonplace. In Cambodia, as apparently in many other countries,38 studies suggest that the majority of microcredit loans were used for non-productive purposes, including consumption, servicing existing debt, and covering unexpected expenses, such as illness and accidents.39 35. The interest rates levied on loans often render borrowers helpless in the face of mounting debt. In Morocco, where the microcredit model has been encouraged with public funding, this type of credit may range from $52 to $5,200, with an average interest rate as high as 35 per cent. 40 Abusive contractual terms and predatory practices by lenders are frequent, such as charging interest rates of 220 per cent and abusive practices from debt collectors, including harassment, pushing them to desperation, even suicide.41 Women are often among the beneficiaries of microfinance, therefore they are specifically affected by such practices. The collapse of the microfinance industry in Andhra Pradesh (India) in 2010 was a tragic example of how corporate-driven microfinance institutions targeted the poor with usurious interest rates on loans, fuelling overindebtedness and pushing borrowers over the edge, leading to the loss of more than $1 billion in loans.42 36. During his country visit to Sri Lanka, the Independent Expert learned about the number, frequency and seriousness of lender abuse, affecting women in particular. He recommended that the Government, inter alia, extend the current legislation covering microfinance licenses to ensure that all lending institutions were regulated and that usurious microcredits were voided (or voidable), ensure that those in need benefited from debt relief programmes, and provide victims with the right to request the return of money as compensation.43 34 35 36 37 38 39 40 41 42 43 See Isabelle Guerin, Marc Labie and Jean‐Michel Servet, The crisis of microcredit (Zed Books, London, 2015). Milford Bateman and Ha-Joon Chang, “Microfinance and the Illusion of Development: From Hubris To Nemesis in Thirty Years”, World Economic Review, No. 1(2012), p. 14. Milford Bateman, Stephanie Blankenburg and Richard Kozul-Wright, The Rise and Fall of Global Microcredit: Development, Debt and Disillusion (Routledge, New York, 2019). Gershman and Morduch, “Credit is not a right”, p. 22. Hugh Sinclair, Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor (Berrett-Koehler Publishers, San Francisco, 2012). Maryann Bylander, “Credit as coping: rethinking microcredit in the Cambodian context”, Oxford Development Studies, vol 43, No. 4, p. 546. Le microcrédit au Maroc : quand les pauvres financent les riches, ATTAC/CADTM, 2017. A/HRC/40/57/Add.2, paras. 78–80. Philip Mader, “The Instability of Commercial Microfinance: Understanding the Indian Crisis with Minsky”, in Bateman et al., The Rise and Fall of Global Microcredit, chap.10. A/HRC/40/57/Add.2, para. 97. 9