Should rich countries provide loans to poor countries without any interest?
Should rich countries provide loans to poor countries without any interest?
Today, the world is becoming smaller as countries get closely linked. Trade volumes have increased and the movement of people between countries is higher than ever before. However, billions of people still live in poverty, and in many regions the gap between rich and poor is widening. This essay will look at the arguments for and against providing loans to poor countries without interest.
There are many reasons for helping poor countries.
Firstly, there are humanitarian reasons. Like individuals who contribute to charity, many countries feel it is their religious, social, or moral duty to help people in other countries who are suffering from famine, drought, war, or disease. However, many rich countries also donate money for political or diplomatic reasons. They want to maintain a relationship of dependency with the recipient, or simply to influence the government and direction of the country.
A further reason why many countries help poorer ones is for economic reasons. The donors may want to control the supply of commodities such as oil, water, or wheat. Alternatively, the richer country may want to ensure markets for their own products, whether these are food products, medicines, planes, clothes, computers or shoes.
However, aid is not necessarily the best way to help a country. For one thing, billions of dollars of aid often goes missing, into corrupt governments or inefficient administration. A second point is that many foreign aid projects are unsuitable for the target country. Many agencies build huge dams or industrial projects that fail after a few years or that do not involve the local people.
Furthermore, much aid returns to the donor. This can be in the form of expensive specialized equipment and experts from the donor country.
There are many other ways we can help poor countries. Opening up trade barriers, so that poor countries can sell their goods is one way. Another is to remove subsidies so that imported goods from poorer countries can compete fairly. A third method is to forgive debts. Many poor countries have huge interest repayments on old loans.
The needs of the poorer countries may seem obvious. However, although our humanity makes us want to help eliminate poverty and suffering, we must examine the real needs of poor countries and implement solutions that will benefit both them and us.
Discussion
- RE: Should rich countries provide loans to poor countries without any interest? -Deepa Kaushik (04/14/14)
- Loans are the help extended in case of emergency and need. Providing loan to other nations is no bad in terms of the donor, especially if that is done on humanitarian grounds, then that would be very much appreciable.
Loans are usually provided with an interest topped over it. This is one of the means by which a rich country grows more rich in a much faster rate. If we analyse deeply, then levying interest is also good from one point of view, that the receiving country would be sincerely working to the best to repay the loan off, as the non-payment might pose to be a threat to the economy of the country.
On the other hand, the interest free loan could be a relaxing move for the receiving end. The can work with a relaxed state of mind with high efficiency and rebuilt the lost infrastructure. this type of interest free loan is highly appreciable in cases of natural calamities leaving millions of people shelter less. These are the genuine times of need when people are already in havoc.
To sum up we can just say that the interest free loan should be an on the spot decision, which depends on the extent of damage and the condition of the citizens.
- Should rich countries provide loans to poor countries without any interest? -Janhvi Johorey (04/04/14)
Should rich countries provide loans to poor countries without any interest?
Introduction
Lending financial aid has become the prerogative of poor countries which are concerned with the amelioration of world poverty. However, there are quite a few problems regarding interest. If rich countries provide loans to poor countries without charging any interest, this can be a good way out. Equitable growth and development is necessary for the world to become a better place. Poor countries are facing crime due to inequitable growth. It is necessary to provide loans at low interest rates as this will enable poor countries to stay out of debt. Poor countries depend on richer nations for crucial financial aid to improve infrastructure and promote social welfare programs. World poverty is a major problem and rich countries should definitely lend money at no interest.
Viewpoint
Borrowing financial aid from rich countries has become a big problem because of high interest rates. If the aim of the loan is to improve the socioeconomic status of the poor country, charging an interest seems counterintuitive. Due to this reason, financial aid has become a bone of contention between rich and poor nations. If the intention of the loan is to initiate social welfare, it becomes very incorrect to burden a poor country with heavy interest rates. This can only cause a deeper problem as poor nations will be caught in the debt trap.
Charging interest on loan implies that rich countries want to make a profit rather than help poor nations. Poverty is a major problem in many developing countries. Developed nations have the best infrastructure and stable economic growth. Many nations that are poverty stricken lack adequate food security, sanitation, infrastructure, health care facilities and educational institutions. If the lag between the developing countries and the developed world has to be completed, there is critical need for adequate capital. Recipients of international loans will only benefit if they are able to pay back the money without the added burden of hefty interest rates.
Loans that are accompanied by interest are counterproductive for poor countries. Rich countries have benefited from unprecedented economic growth due to a fortunate combination of resources and favourable social, economic and political conditions. In such a case, it becomes very difficult for poor countries which are often facing adverse conditions such as war or famine to catch up with the developed world. Unless rich countries follow principles of social justice, the world will continue to grow at an inequitable pace and problems associated with this will continue to exist for a long time to come. Social justice implies that rich nations should extend a helping hand to the developing countries so that they can reach a more reasonable state of economic growth.
Huge amount of capital is needed for poor nations to develop infrastructure, open more educational institutions and impart adequate health care. If the poor nation is stuck with interest on top of the loan, adequate capital will not be freed to be able to handle the challenges of initiating desirable growth and development in the country. Financial aid can actually be detrimental if poor countries take too many loans coupled with interest. If rich countries give loans without interest to needy countries, they will be able to provide their debtors with better growth opportunities and protect them from insolvency.
Conclusion
Poor nations should be given loan in a way that does not handicap them. Charging interest rates serve no purpose. If rich countries charge interest on the loans, how are they any different from a bank or any other lending institution? In the interests of social justice, it is important that rich countries should be able to provide loans that are easy to repay. Charging no interest is one way of ensuring this. No interest loans are ideal for initiating positive social change and desirable economic growth in poor nations.
