It’s easy to understand the appeal of microcredit. Poor women from the Global South use loans as small as $20 to start businesses and lift themselves from poverty. The creditors make a profit when the loans are repaid. Win-win.
What do they say about things that look too good to be true?
A whopping 90 to 99 percent of these loans are paid back with interest, another shining indicator of microcredit’s success. But there is an ugly side to ensuring repayment, where poor women are made to police one another and punish defaulters with collective acts of aggression.
In her study of Grameen Bank microcredit programs in rural Bangladesh,* Leila Karim finds that the focus on the 98 percent loan recovery rate hides how beneficiaries are co-opted into “a political economy of shame.”
Microcredit works by appropriating the only social capital poor women possess — their virtue and family honor. Among the Ifugao women in the northern Philippines,** microcredit beneficiaries are grouped into cohorts of five to fifteen members. They are given clear instructions: “You are all responsible for the loan and have to make sure that no one defaults.”
This lays the foundation of a very effective surveillance system, wherein poor women monitor other poor women. And the poorest women, the ones who need loans the most, are evicted from the group to minimize the risk of default.
Given the surprising lack of entrepreneurial or job skills training in microcredit schemes, it’s not unusual for a member to default on her loan. This is when things get even uglier, as the other women in the cohort are forced to extract payment.
In Bangladesh, for example, women march off together to publicly scold a member who falls behind on her loan payments. The cohort would also scold her husband in public. If she could not produce the money, the other women in her cohort would take anything that could be sold for loan payments — her cows and chicks, grain from her family’s pantry, uprooted trees and plants from her yard. Even her gold nose-ring, an important symbol of marital status for rural women.
When even these repossessions were not enough to repay the loan, the cohort could instigate the ultimate dishonor of ghar bhanga (literally, “house-breaking”), where the defaulting member’s house is sold off to pay for the microloan.
The institution of microcredit has thus forged social relations based on shared debt, undermining previous ones based on shared labor and trust. Women informed on potential defaulters or members who used the capital for unauthorized purposes, such as buying food. Women who defaulted on loans have been taken to police stations and locked with criminals until their families made payments. The resulting shame from all these actions cause wives to lose their honor and virtue, and have led husbands to file for divorce.
Small wonder then that women go to great lengths to make their loan payments. Ifugao women reported an increase in their workhours, taking on additional income activities selling homemade foodstuffs. Other women have reported cutting back on family expenses like food and children’s school items.
In emergencies, women who have diverted loans to subsistence purposes have turned to moneylenders. Women who took on microloans to achieve self-sufficiency instead found themselves even more baon sa utang.
These difficulties illustrate a failure that microcredit programs share with other top-down antipoverty strategies. Aid workers from Manila dictate the development programs’ strong emphasis on microcredit and entrepreneurship, instead of the healthcare and education programs that Ifugao representatives have requested. Instead of addressing the roots of poverty among rural and indigenous women, microcredit schemes have generated credit-related strife.
Also among the Ifugaos, microcredit programs are undermining existing local arrangements. Governed by the principle of innabuyog (“sharing the good”), Ifugao women have long organized themselves into reciprocal labor collectives to cultivate rice and raise livestock. These collective also provide members with short-term loans when needed. These organic and vibrant arrangements are being supplanted with the homogenous, competing entrepreneurial projects championed by microcreditors.
I do not doubt that individual microcredit workers mean well, and that people like Prof. Mohammed Yunus have good intentions. But microcredit has been turned into a panacea, the star of antipoverty programs around the world, to the exclusion of more responsive strategies. That’s very problematic.
The supposed success of “compassionate capitalism” strategies obscures the enormous social costs behind statistics such as amazing loan repayment rates. Social costs that are ultimately borne by women who are already marginalized by their socioeconomic and indigenous status.
————
* Data from Bangladesh is from Lamia Karim, “Demystifying Credit: The Grameen Bank, NGOs, and Neoliberalism in Bangladesh,” Cultural Dynamics, Vol. 20, No. 1, 5-29 (2008)
** Data for the Philippines are from Lynn B. Milgram, “Operationalizing microfinance: Women and craftwork in Ifugao, Upland Philippines,” Human Organization, Vol. 60, No. 3 (2001)
[…] themselves. This includes turning a critical eye on programs that present capacity-building and microcredit as solutions to poverty, rather than stopgap measures to systemic problems that are exacerbated by globalization. This […]
Very interesting. My question is this, especially when there were older/other systems in place such as the innabuyog you mention, what was the draw of the microloans then? What allowed them to gain a foothold?
Good question, anon.
My sense is that two factors in the mid-1990s really pushed microcredit — the structural adjustment loans from the World Bank and corollary to this, the passage of the Mining Act of 1995.
The structural adjustment loans required the govt to increase exports, and communities that were being displaced demanded assistance. Thus the aggressive push for microloans for handicraft start-ups.
Microloans were also the chief form of assistance offered to communities that were reeling from the foreign companies that were allowed to mine in their ancestral lands per the new Mining Act. The combination of loss of land, environmental damage, and militarization (brought in to protect the mining companies) had deleterious effects on the reciprocal labor collectives, making women turn to microloans as well.
These are the immediate causes I could think of, I’ll look more into this and write as I learn. Salamat!
This is junk science. The author has never seen microfinance in action. Much of this “shaming” that she speaks of is actually part of the traditional finance structures that she speaks so highly of and has been around for thousands of years. Microfinance is designed to break many of these social practices by providing a fairer alternative.
Having said that, microfinance is not a silver bullet to poverty, and I would welcome any (acurately supported) criticism. Keep seeking the truth for yourselves from as many sources as you can.
[…] My girl Tanglad opened my eyes to the other side of microcredit. In her study of Grameen Bank microcredit programs in rural Bangladesh,* Leila Karim finds that the […]
actual microcredit expert,
We can talk about this without your making assumptions about what I have not or have seen. Because I have seen these effects and I have lived in such communities. I’m very troubled at how microcredit has become the cornerstone for anti-poverty programs in SEAsia, and how “economy” has become synonymous with an inevitable capitalism. I’ll respond more tonight after getting home from classes. And no, I’m not an expert on microcredit but I listen to people who are–the actual women whose communities and lives are impacted by these imposed, top-down policies. You should listen to their truths as well.
@tanglad
hi! i stumbled onto your blog, via racialicous.
I’m not sure what the problem is. The problem is that they need credit, but they don’t have the assets to back the loan.
if they can assure a high repayment rate, then they can borrow more if they want to.
You are saying that SHAMING is more damaging to them, then the credit that they get. If thats true, why borrow money if its too costly. Don’t some people benefit from this? Specifically, those people (responsible ones) who otherwise cannot get money, who, via microcredit, can now get money?
second, u say that forcing people to be entrepreneurs in exchange for money is bad.
however, isn’t this only to ensure that the borrowers have the ability to repay their loans? Education is a more long-lived investment, and is thus difficult for the private sector to provide alone. In fact, shouldnt education be mostly subsidized (public educ in RP is free, i don’t know anything about africa…)
I agree that microcredit is only a first step to breaking out of poverty. But that doesn’t mean its not useful to the people that avail of it, no?
dear tanglad & micro expert,
I work in SEAsia “doing development” in communities impoverished (in part) by major private sector development.
My job puts me in the position of actually being the one expected by the World Bank & Friends of merrily spreading micro-credit around like rainbow sprinkles as a treat for affected people to enjoy. i’ve got the document with the 4 lines instructing me to use microcredit because it is “very effective” (with no specifics of why/how nor data to back the claim up).
My project has been using microcredit for 6 years (just like they were told to). On arrival, i started my own assessment because i’ve seem what this “help” has done elsewhere in SEAsia (good and bad). Environmental NGOs campaigning against the project say microcredit is the one thing good about our project. It’s not. We have contributed to loss of trust and solidarity in local communities. We’ve created local leaders that feel justified ripping off community-owned funds because they feel ripped off by the project. We’ve got women abandoning children to migrate illegally to make money to pay back their community loan. And not one gram of evidence showing the schemes have reduced poverty.
So now i’ve begun the process of weaning the project off micro-credit. But i’m up against World Back instructions and enviroNGO recommendations. 12 months in and we’re only to first base. I can’t blame the people on the ground who started this cause they believed they were doing the right thing but we must learn the lesson of unintended consequences!
When any poverty solution gets so hyped and over simplified so as to be touted in a Benetton ad, it’s a pretty good chance we’ve got a problem.
Hi khamphy, welcome to the blog and thank you so much for sharing this. I appreciate how you also pointed out the link to the role of private sector development in creating the conditions of impoverishment. You’ve shared powerful examples of the loss of community trust, and the image of mothers leaving their children to pay loans should illustrate just how selective “development” can be. And yes, I definitely agree that people get into this with good intentions. If anything, it just illustrates how systemic the problem of poverty is.
Hi GabbyD,
Thanks for visiting and commenting. The shaming is a result of the credit, which I’ve since realized is a concept that’s used to disguise how communities are being mired in debt. Microcredit is not the first step towards breaking out of poverty, it’s only a coping strategy and not a good one. The first step would be not to generate or exacerbate poverty in the first place, and for indigenous communities, much of the poverty comes from private development. Check out khamphy’s points.
khamphy said:
“We’ve created local leaders that feel justified ripping off community-owned funds because they feel ripped off by the project. We’ve got women abandoning children to migrate illegally to make money to pay back their community loan.”
Why were they ripped off? Could it be that they entered something that they didnt understand? I’m not trying to slam your project; i don’t know anything about it.
what i am trying to understand is how this is a problem for people who KNOW what debt means, and KNOW how to create a sustainable business to repay the loans.
yes, simple applications of an idea (even a sound idea) probably don’t work. But that means we should tweak the application, no?
@tanglad
i agree its a coping strategy if the loans are for consumption, when consumption is so low that they need to borrow to eat for example. is this what you mean?
But isn’t this the point of training, entrepreneurship? I’ve read studies that say training combining with credit is better than credit alone.
yeah, so back to my original query. Is your problem with microcredit a fundamental problem about the concept of providing credit itself? OR is your problem that current implementations of microcredit leave more to be desired?
thanks! and merry christmas!
@GabbyD:
Majority of this post is recycled from a comment at this Racialicious post
because it’s Christmas and I’m too lazy to write 🙂 Latoya’s post also provides a general framework for my feminism, why I view issues like microcredit and development aggression as feminist issues
But the short answer, I’m critical that problems caused by capitalism and development aggression (like the displacement of Ibaloi and Kankaney to make way for Lepanto mines) will be solved by capitalist solutions, like give them a loan to be entrepreneurs. I’ll ask you to examine why you equate economic development with globalization/capitalist development. There are many forms and measures, many of which are not measurable by GDP and similar indicators (which are generally incompatible with the way a lot of marginalized peoples live). Economic policies should be built around people’s lives, not the other way around, don’t you think?
Other problems:
– It’s a top-down approach, often instituted in line with development strategies imposed by the World Bank. No consultation from the community as to what they need. No consideration of how the gender dynamics in the communities can affect the women’s decision-making processes in the businesses. The sole focus is access to credit.
–Income from these livelihood programs often gives a skewed picture of any net gains from microfinance. There have been cases where women take on additional loans to pay for their microfinance loans. Women have also reported cutting back on family expenses (not buying schoolbooks and supplies, putting off health clinic visits, eating less, ) to make their loan payments. So these are hidden costs that are not factored when economists measure the “success” of microfinance schemes.
–Microfinance is used as a smokescreen. It obfuscates the role of “development agencies” like the WB in creating these conditions of poverty by making it look like they’re doing development work. And this success is measured in terms of “income,” ignoring social costs such as health, displacement from communities, etc
In many countries in Southeast Asia, microfinance schemes and capacity-building programs are the cornerstone of devt strategies for women. Neoliberal schemes not only further disempower women but also placate any resistance (because it seems like the programs are helping women). And it’s really frustrating to me that many feminist groups like UNIFEM and other NGOs in the Philippines, for example, often present microcredit as a long-term solution rather than a stopgap.
thanks for replying. many things are clearer now 🙂 I’m glad we’re having this conversation…
1) About mining:
“the displacement of Ibaloi and Kankaney to make way for Lepanto mines” — do you think this is about lack of regulation and corruption?
Still, i see your point, which i think is: ZERO deaths from mining is practically impossible, even if regulation is perfect. So, is your postion that mining is immoral unless ZERO deaths is assured?
2)”There are many forms and measures, many of which are not measurable by GDP and similar indicators (which are generally incompatible with the way a lot of marginalized peoples live). Economic policies should be built around people’s lives, not the other way around, don’t you think?”
Ok, i think i see what you are saying. Do you believe that the marginalized people’s status quo should be preserved no matter what? Example: if their lives are about small scale agri, then policies should be put into place that preserve this, no matter what?
3) On “Other Problems” — i see you’ve identified lots of problems with implementation of the programs, and how success is measured. Maybe one day, if you have time, you can write about some of the details. For example:
3a) “No consideration of how the gender dynamics in the communities can affect the women’s decision-making processes in the businesses” What does gender dynamics mean, and what does it mean for business? I guess this has something to do with the ROLE women play as mothers, but i can’t imagine what that would mean for business… would they be worse businesswomen by being mothers?
3b) On sacrifices: so these are business loans for which the women sacrifice education of their kids to repay? So i ask: Could it be that if they didn’t have the capacity to repay, they shouldn’t have borrowed, and the lender shouldn’t have LENT? Couldn’t this be a knowledge problem? that they don’t understand that borrowing money means repayment? Also, the lenders should also explicitly incorporate this limitation into the contract.
3c) On Smokescreen: Development is a multi-dimensional problem. These costs should be included. From what i know about the WB, they seem cognizant of this [for example, my girlfriend is working on medical facilities access/child health with WB]. Then again, i haven’t worked with them directly on microcredit.
Let me end with a final point, on the larger philosophical issues [see (1) and (2)]. I’ve always believed that development is about giving opportunities to people that they DID NOT have before. To answer your question, economic policies should be about expanding the possibilities available to people. These possibilities include the status quo, if they desire to continue living that lifestyle…
Giving credit is one way to do so because it allows people to invest, etc, and is a good thing but only IF they have the ability to repay. It goes without saying that loans for development purposes should have a longer time for repayment, (than normal loans).
Also, I believe that people know whats good for them and that they should make decisions based on knowledge.
So if we see a miner working a dangerous job, could it be that he’s doing that coz he wants to? That he finds it better than his next best opportunity (whatever that is)? That if a mother uses credit, then she’s the better for it, vis-a-vis a world where credit was not available to her?
If marginalized people want to continue being farmers, then they should! But if they do not, shouldn’t economic policy afford them the choice?
Hence, i’m concerned about the freedom to choose here. are people FORCED to borrow? if they wanted to, can people continue living their lives the way they always have?
Are you saying that development policies/ loan officers/development workers FORCE people to take on loans they didnt want in the first place?
So i guess, this is the crux of my concern, whether developing agencies force people to borrow.
Thanks again! You can write about this at your leisure, now being the holidays and all… I’ve learned alot already!
off-topic:
love the chow-chow too 🙂 my fav breed…
It’s not about zero deaths from mining, GabbyD. It’s that people’s ancestral lands were stolen and indigenous populations were displaced because mining was opened up to foreign corporations. Because the needs of a marginalized population are always easy to sacrifice for the profit of an elite group.
About your principles of development, again, consider your language. You use words like “giving” and “DID NOT have before.” “Expanding possibilities.” What I don’t see are words like coalition and partnership. The key is to stop equating capitalist and neoliberal economic programs with human development.
These top-down approaches are problematic, with people coming into communities to tell people what they need. That’s the problem, not that they don’t understand the loans, not that they can’t repay. The problem is that all policies like mircrocredit are being effected in communities where they can’t work. It’s pretty impossible for people to “continue living their lives” when the military comes to evict them from their land at gunpoint and kills activists, for example. Or when the mines poison the river and make it impossible to farm. Then when you’re resettled, there are no provisions for new land, for education programs, etc. The only welfare program being pushed is microcredit and open up a handicraft business.
And these so-called development policies are mostly carried out in line with Structural Adjustment Programs, NOT because the state is genuinely concerned with the rights of indigenous populations. In this sense, there are developing agencies that force women to borrow b/c microcredit are the only strategies being pursued, in line with SAP. Again, marginalized populations pay the price.
If you genuinely want to work in partnership with populations, you need to examine your reasons why. What motivates you. And you need to listen to the community, when people like Vernie Yocogan-Diano of Innabuyog say that development aggression exposes women to violence and decimates communities.
Regarding the gender aspect, that’s what the blog post is about. But you can read the Karim and Milgram articles for greater discussions on this. There were also lots of examples in the racialicious thread too, especially in cases in Africa.
I’ve written about how various development policies are built on the backs of marginalized Filipina women, and will continue to do so as I learn. Pls check the globalization and social justice categories if you’re inclined. That’s for starters, we can talk some more.
@tanglad
thanks for telling me to read Karim’s article on microcredit, and reminding me of the link u provided.
It had one interesting twist that you didn’t mention, which i think is KEY in the bangladeshi experience: women, except for Ms. Jahanarra which Karim profiles indepth, DO NOT control the loans they take out; the MEN do.
This is because of the gender power inequality, which is ingrained in their culture and can’t be snuffed out overnight.
I assume you are against this. As am I. This also explains the problems that microcredit (or any kind of credit) will have. This is also tied into the financial crisis….
The costs of the loans are given to women. But the decisions on how to spend the money (which affects the ability for repayment) are taken by the men. Despite being in the same family, their goals are probably NOT the same. This is never a good thing, not for families, not for big corporations, not for anybody.
thanks, now this whole shame thing is clearly bad. Women are given the raw end of the deal when they can’t repay. Men walk away unaffected.
Add to this the local competitive environment of lending, where lenders search high and low for borrowers and their standards fall (also in the article, also a big part of the mortgage meltdown).
If anything, the article points to implementation as the main reason why microcredit is failing as a development tool. Karim recounts that the NGOs themselves see it as a business, not a development tool. So the NGO’s don’t care about what the money is used for, only the it is repaid. So even successes like Jahanarra would rather train her kids to be money lenders rather than educate them. (ironically, this is, in principle, a contrast to the SAPs you criticize… more on this below)
Also, like any credit business, one would think some regulation would be useful here. Your thoughts on regulation and microcredit?
Also, as a feminist, i wonder what your policy response is to gender power inequality? How can a society solve a problem like this? Microcredit wasn’t designed primarily to solve this problem; as the article says, the gender issue hijacked the innovation that grammeen had. How can a country like bangladesh solve this problem? On the other hand, we can also say that for some classes of women (i.e. widows, coz they have fewer men to boss them around), microcredit has been a source of empowerment.
About SAPs, I’ve begun looking into them, and started from the macroeconomics literature. The most famous is Barro and Lee, 2002. They found a negative effect on average. Others findings are inconclusive (some were helped, some not) although one thing leaves me troubled: why did governments borrow in the first place?
Also, you intimated there was a DIRECT link between SAP and microcredit. Is there any article link about that? a citation?
About mining, you have mentioned the use of violence to force people to accept the terms of resource extraction. this is antithetical to development of whatever ideological stripe. This is akin to the mafia, organized crime, shakedowns, etc…
But i ask you: would giving the (absolute) rights to reject a mining development proposal to a local community help at all? Would giving the indigenous group the right to negotiate with the firm help at all? Would mining regulation help as regards safety? (mining is off-topic, so maybe you can write another entry later…)
Resources possessed by these indigenous people should benefit them, don’t you agree? Ideally, it should benefit everybody. Untapped resources benefits NO ONE.
@GabbyD
It’s obvious you are doing some hard thinking on these issues. If you’ll allow me to put my cents in…In response to your question, “why did governments borrow in the first place?”:
ONE of the reasons nations borrowed anyways is because they were heavily recommended (arm twisted) to do so. All the ‘experts’ said they should. Said it would fix the country’s problems. There’s a lot of literature on just how SAPs were implemented but my favorite is the non textbook: Confessions of an Economic Hit Man. Explains how the system work(ed)s really well and reads like no other macro economics text to boot.
ONE other reason nations borrowed is because when you borrow, you can skim. Highly placed individuals agree to borrow millions and the ways the money is spent directly enrich your family, your friends businesses, your party, etc. Happens all the time in the US, why not everywhere else? The skimming is authorized by, and benefits the few while putting the whole nation on the line. Kinda like the US war machine that has now created an incredible budget deficit that my future children and I will be partly expected to pay for (not trying to topic jack…)
Your conclusion that “Untapped resources benefits NO ONE” jumped out at me because this statement might be true on the surface but the real issue is there are NO untapped resources. Its a question of what is tapped and how and what the tapping of one resource does to another.
Let me give you an example from hydropower. Gov’t in SEAsia says rivers are untapped resources, that the country is obligated to develop schemes to tap them to develop the country, grow the economy, and get off foreign aid. But rivers are more than a hydro resource-they are a huge contributor to the economy–in the form of fisheries and natural irrigation of crops for the people. The rivers directly feed millions. But these are largely subsistence farmers/fishers so this benefit is not added in the GDP and the government doesn’t get a cut. Build a dam and lose crop land, water for crops, and fisheries but gain millions in greenback$ for the central economy and the GDP goes up and the loses are invisible past the village boundaries. And the central gov’t gets congratulated for making the country more developed and less dependent on aid.
This is the same case in mining–you need ask what resource is being tapped NOW that will be lost by mining. Forests? Crop land? Rivers (clean water)? So yes, it’s true that “Untapped resources benefits NO ONE” but we have to get a lot more careful about what we label “untapped”.
on tapping resources:
oh yes! i totally agree, and this is uncontroversial. the key notion here is opportunity cost (the only important thing in economics IMHO :p )
What i meant is, choices are meant to benefit the holder/owner of the resources. The opportunity to negotiate with firms that can develop the resource should be a good thing. If they have a choice to develop a resource, and IF it makes them better off, they should develop said resource.
In your example of hydro power, environmental economists are very much aware of ‘externalities’ (or thats what they tell me in school!). I think, alot of the problems we’ve got here is a lack of regulation.
Moreover, this is true when the transaction is voluntary (w/o force). Again, you mention examples where violence is resorted to. Definitely, this happens. For me, it is a sign of a deficiency in market regulation also.
i also think this is a deep problem. Even when NO coercion is involved, there is still a problem regarding community decisions. Everytime you have differences in a society, you have to make decisions/rules as to who’s preferences/beliefs win out in a decision when these differences clash. Societies deal with this issue all the time; sometimes satisfactorily, sometimes not.
This links with the debt issue. A country has different constituents, but one might believe that the leaders get to make decisions for the whole country? What if there was corruption? What if the leaders are dictators? What if they were gullible? Can they rightfully negotiate and represent the rest of the country?
Tough stuff, to be sure. Happy New year!
Kamusta, khamphy! I was hoping you’d come back and weigh in on this, thanks for taking the time to share your insights. I will definitely check out Confessions of an Economic Hit Man. You give an excellent and frightening example of how easy it is to render people’s invisible thru labels like “untapped resources.” Salamat for sharing.
@GabbyD – Well, what khamphy said for starters. I’m glad you recognize gender inequality, and that is one reason why microcredit is problematic. Poor women were specifically chosen because they would be easy to manipulate, and because they have the infrastructures of trust that microcredit can hijack. So it’s not accurate to state that Grameen’s gains are hijacked by gender inequality. Grameen is built on gender inequality.
You’re right that Grameen workers don’t care how the loan is used, just that it’s repaid. But it definitely won’t be repaid if it’s used for food. Hence, the entrepreneurial model.
And my thoughts about the regulation of microcredit are irrelevant. Because microcredit is NOT a pathway to development, and it should be done away with altogether, for all the reasons I’ve written previously.
As to why governments borrowed, well, what khamphy said. They were forced. There’s a very visceral account of this in the chapter “Let Asia Burn” in Naomi Klein’s The Shock Doctrine. They were forced because gutting the Tiger Economies and leaving them at the mercy of loans benefits the Washington consensus.
The link between SAPs and microcredit is because SAPs mandate neoliberal developmental models. Export-oriented economy, export your labor. Microcredit directly feeds into this neoliberal paradigm, instead of programs like, say, universal healthcare or strengthening the public education system or welfare. Again, development is much much broader than capialist economic development.
And finally, mining. Indigenous groups have already made it clear that they DO NOT want the mines. That’s why the military is sent in to displace them, intimidate them, silence them. That’s why people like James Balao get kidnapped.
To echo khamphy, the forests and rivers and subsistence farms are NOT untapped resources. These are their lives, and not to get all sappy or anything. But it should be obvious that life and survival interests should trump profit interests every time.
@tanglad
Just to focus on microcredit:
i think gender power inequality is a powerful reason to criticize microlending. You are right: its because men benefit from the lending, and the women carry the cost of it.
Microcredit isn’t designed to combat this, and in a sense, assumes this is not a problem (which in bangladesh maybe an incorrect assumption. also, this is what i meant by ‘hijack’). The implicit assumption is that the money is used by the women for their needs, NOT their husbands. If this is true, the costs and benefits are aligned.
I also recognize that gender power inequality is a deep problem. Which led me to ask, whether you discovered how policy makers have found a way to combat it? [@Dec 28].
In your latest response, i suppose you have other problems with micro-credit (hence, you reject the notion of regulation)
If true, lets be fanciful a moment and assume that that the gender power inequality issue is solved, either by some implementation feature or some other event (you may not like thought experiments, but if you might indulge in this once, just for fun 🙂 )
Specifically, lets say women control where the money goes and how much debt to take on, without the interference of men. Lets also suppose that women understand what debt means, something which you mentioned previously.
What is left of the microcredit critique?
Re mining:
yes, i agree that violence by either side is bad. My original choice of words, ‘untapped’, was confusing. My mistake. What i meant was that owners of the resource should have a choice with what to do with it (see in: December 30, 2008 at 9:34 pm)
thanks!
@khampi
i don’t know about ‘confessions’ (its too James Bond, too little analysis according to reviews), but in researching about SAP, i encountered a book on third world debt by Naveena Hertz “The Debt Threat”, among other books. interesting stuff, this development history stuff…, as well as work by Bill Easterly.
so thanks for sharing that. i’m learning lots! 🙂
[…] only this but, as Blogger Tanglad writes in a powerful article A Political Economy of Shame, “given the surprising lack of entrepreneurial or job skills training in microcredit schemes, […]
Hi all
Thought you might be interested to read a blog piece I wrote about our work with Self Help Groups in India:
The groups we support are formed with the goal not just of increasing access to credit in an efficient way but of empowering communities to manage their own development process. This is reflected in the fact that the group itself owns the pool of money, rather than it being owned and managed by an institution outside the community……
Comments welcome!
NGO assist communities with (a) development programs, that is grants in good and services, accompained by (b) microfinance services and capital.
While receiving the grants from the NGOs, the community impose to the microborrowers to return the loans.
Once the NGOs stop the communities development programs, the microfinance actives should be transferred to finance institutions. What do these microfinance institutions do with the assets: (a) they don’t accept them, (b) they turn them to the community development boards.
It could be argued that often the development grants pay the interest rate and capital of the microloans. Although microloans are rated as high as 2% per month, they are not an asset for banking institutions. Recover credits in the field is too expensive along formal credit lines.
Thus, microfinance is a booster of development projects. Sometimes it is viable as such, other times it is not viable.
It could be said, that since NGO microfinance is subsidised by its parallel development activities (grants), it is not a source but a product of development.
In a country there is room for 1,000 microloans per year, in another for 10,000, in another 100,000, in another 1,000,000. In one country there is no room for microfinance banks, in another there is room for one or two, in another for ten. To push microfinance over its level of market acceptance, that is also when its marginal return is negative, is not an economic but a political decision (subsidize the rural world).
The justification for such decision is political, not economical. You can subsidize ten microfinance institutions to booster the market and let that nine of them die. That means that in that country there is room for only one microfinance institution, for 1,000 microloans per year.
The market is the final judge. Going against the market, you lose your savings and you distort the market (that is you interfere with the traditional microsavings systems).