Introduction
Borrowing financial aid has become the perquisite of poor countries to relieve themselves from poverty. However, few issues regarding interest associated with loans need consideration. A favourable approach would be to provide loans to poor countries without charging any interest. For the world to become a better place, impartial growth and development is necessary. The inequitable growth opportunities are leading to increase in crime rate in poor countries. Providing loans at low interest rates would enable poor countries to stay out of debt. For the improvement in infrastructure and promotion of social welfare programmes, poor countries are dependent on richer nations for crucial financial aid. To alleviate the evil of world poverty, rich countries need to lend money without interest.
The Perspective High interest rates have made it a big problem for the poor country to borrow financial aid from rich countries. Charging high interest rates seem unreasonable if the loan is taken with the purpose of improving the socioeconomic status of the poor country. Financial aid has become a subject of dispute between rich and poor nations because of this reason. It cannot be held correct to burden a poor country with heavy interest rates if the sole purpose of the loan is to initiate social welfare. As it will cause the poor nations to get trapped in the debt cycle, this will cause the problem to get more intense.
The motive of rich countries in making profit rather than help poor nations becomes obvious because of their charging interest on loan. A major problem faced by many developing countries is poverty, while developed nations in contrast enjoy the best infrastructure economic growth that is stable. Many poverty-stricken nations lack adequate food security, sanitation, health-care facilities, infrastructure and educational institutions. There is critical requirement of adequate capital to bridge the gap between the developing countries and the developed world. Borrowing international loans will be beneficial to its recipients only if they are able to repay the loan without the added burden of high interest rates.
Loans borrowed with hefty interest rates are harmful for poor countries. Availability of adequate resources along with favourable social, economic and political conditions combined together has been fruitful for the rich countries for their unprecedented economic growth. Such a scenario further aggravates the adverse circumstances for poor countries already going through untoward incidents like war or famine to catch up with the developed world. The rich countries must follow the principles of social justice to contain the unjust rate at which the world is growing and the problems associated with this. Social justice in this context implies that rich nations need to adopt a more reasonable approach by supporting and assisting the developing countries to help them reach a fair enough state of economic growth.
Poor nations need huge amount of capital to develop infrastructure, open more educational institutions and impart adequate health care. A poor nation stuck with the liabilities of heavy interest on the loan will not be able to release adequate capital to tackle the challenges of inducing desirable growth and development in the country. Financial aid in the form of too much loans coupled with interest could be really damaging to the poor countries. The needy countries can have better growth opportunities and protection from insolvency if rich countries give them loans without interest.
The Way Forward
Loans should be provided to the poor nations without causing added burden that hampers their economic development. Charging interest rates put the rich countries in the same league as any bank or lending institutions, which serves no purpose. To comply with social justice, rich countries should be able to provide easily repayable loans. One way of ensuring this is to charge no interest at all. To initiate positive social transformation and desirable economic growth in poor nations, loans without interest is an ideal way.