Your opinion on Microfinance?

[Prentasid]

Hello!

I work at a school where the students have - for one week now - raised money for a foundation that help poor people around the world with microfinance.

A representative from the foundation was at our school to have a lecture about microfinance. He told us how great is was; how it helped the poor out of their misery, and into the "rich world".

Then I started thinking: How "great" is actually Microfinance? The only positive I can think about, is that poor people get help. In my opinion, they get help the wrong way.
Why couldn't the poor farmer just get the sickle he needed for his work?
I just think it's wrong that the poor farmer have to borrow money so he can buy the tools he need, and then repay the money (With tax of course).

I would love to get your opinion on microfinance!

[The Idler]

there is a critical article here
http://www.newrepublic.com/article/w...-drive-poverty

[Creative Destruction]

I don't understand how putting poor people into any amount debt is supposed to be helpful.

[Vladimir Innit Lenin]

It's not helpful at all - the problem being that because its target market is the ultra-poor, the repayment and the default rates are high.

I believe that whilst it initially had a successful level of take-up, it is now struggling from low take-up of loans and high defaulting.

So probably a decent enough idea at the time, but not really any solution at all to poverty in the long-run.

[Red Commissar]

It's useful to look at the bust of the "microloans" deal. That was big a few years ago I remember- they were painting it I remember to people as a way to empower the poor in developing countries, especially marganalized parts of society (women, ethnic groups, etc). It reached a peak I think at around 2005-2008, with one of its pioneers in South Asia, a Bangladeshi banker Muhammad Yunus, even securing a Nobel Peace Prize back in 2006. Nowadays you hear little about microloans, at least to the scale it was back then, and for good reason- they weren't immune from some of the predatory effects of normal loans or insulated from market downturns (especially in the aftermath of the 2008 crash).

http://www.bbc.co.uk/news/world-south-asia-11997571
http://www.nytimes.com/2010/11/18/wo...a/18micro.html

Or an older one in response to the nobel peace prize being given to Yunus:

http://www.counterpunch.org/2006/10/...of-microloans/

Examples of the kind of stuff that was common when it was being pushed as a positive way to help with development

http://news.nationalgeographic.com/n...bel-peace.html
http://www.npr.org/templates/story/s...toryId=6519553

[tuwix]

I would love to get your opinion on microfinance!

It's another way to preserve capitalism. All those bourgeois media are saying: There is a chance to being rich and everyone has it. But they "forget" to add that odds are similar to odds to get rich by winning any lottery...

[bricolage]

Posting block quotes is generally not very helpful but when it's Silvia Federici I'll make an exception.

The Tyrannies of Microfinance

MV: I think I'd also like to come back to your talk on microfinance with regard to this. What you said, that was so important, was how community bonds are actually used by microfinance banks to hyper-exploit the recipients of the loans. I guess that’s what I had in mind, how these forms of non-capitalist or pre-capitalist communal bonds are actually de-composed by capital and how that can be resisted. Witch-hunts would be another aspect of this.

SF: The World Bank and other financial institutions have realised that social relations are crucial, they see them as a ‘social capital’ and they used them, manipulate them, co-opt them to neutralise their subversive potential and domesticate the commons. The World Bank, for instance, uses the idea of protecting the ‘global commons’, presumably preserving them for the well being of humanity, to privatise forests. They expel the populations – fishermen, indigenous people – who lived in them. In the ’90s, in Africa, the Bank also set up communal groups, artificially created, often made up of local authorities, that had the power to alienate land. This allowed them to get around the fact that people resisted the dismantling of communal land ownership and introduction of individual land titling.

In the case of microfinance, banks and other financial agencies are turning the support groups that women have organised into self-policing groups. I’ve read that in Bangladesh, when one of the women in the group does not pay back the loan she has taken, the others put a lot of pressure on her and even attack her physically to force her to pay. The banks’ or the NGOs’ officers and the other women in the group ‘break her house’ and take away her pots, which is a great humiliation for a woman.

This is more than an attack on people's means of reproduction. It is an attack on the bonds that people have created on the basis of shared resources. This attack on communal solidarity, on the forms of co-operation people have created to strengthen their capacity for resistance, is probably the most destructive aspect of microfinance.

We need to understand the historical conditions that make it possible for these groups to be destroyed. Generally the areas in which microfinance has taken root are areas where the population has been weakened by years of authoritarian rule, or by austerity programs, or by natural disasters or all of the above, as in the case of Haiti after Hurricane Sandy, which prompted the intervention of the World Bank with a two million dollar investment in micro-loans. There is also the ideological work of the religious sects, fundamentalists of one type or another. Not all communal forms have the same capacity to resist the assault made on them through various forms of privatisation and dispossession.

This is something that has to been taken into account in the discussions of the commons. We need to examine what is happening to the existing commons. In parts of Latin America, new commons have been created, as in the case of the Zapatistas or the MST. Also, in response to structural adjustment, women have set up communal kitchens, communal cooking, communal shopping. In other parts of the world, like Africa and India, communal lands have become battlefields. In parts of Africa, as the land is shrinking because of massive land-grabbing and giveaways by governments to companies (mining, agro-fuels, agribusiness), the male commoners are pushing women out of the commons. They are introducing new rules and regulations concerning who ‘belongs’ and who doesn’t. They may expel a wife from the usufruct of land, saying she belong to a different clan. It is important to see in what context commons can be turned against themselves.

The story of microfinance demonstrates how pernicious the idea that salvation comes through money borrowing is. Reports from many parts of the world, e.g. Bangladesh, Bolivia, Egypt, show that most women who took micro-loans are worse off than they were at the time they took them. Their support group may not be there any longer, they are far more in debt than before, so that they have to go to moneylenders to pay back the debt. Often they have to keep their children at home (working?) to help them pay the debt. So the World Bank’s argument that money is the creative power of society and borrowing some will pull you out of poverty has to be rejected. Some women do profit from the micro-loans, but they are usually those who co-operate with the managers in the policing and supervising work.

http://www.metamute.org/editorial/ar...ilvia-federici

[The Jay]

The idea of microfinance isn't really different from someone in the first world having people in the third go into debt for them. It basically just enrolls the poor into more debt that they couldn't get from banks. Financialization at its finest is what is being proposed here.

[The Garbage Disposal Unit]

I'll avoid posting another block quote, but I'm actually reading a book that explores this issue right now, Umair Muhammad's Confronting Injustice. I'll just make two quick points:

1. Mircofinance hasn't worked. We're thirty years into microfinance as a strategy for alleviating poverty, and there's no evidence that it has significantly improved conditions in poor communities.

2. The very poor don't tend to have the leeway to use loans to start businesses/make investments - they tend to need them to pay rents, pay off creditors, etc. The high rate of defaults is partially because people often take out loans from one microfinancier to pay off another. If you're familiar with payday loans in the first world, this phenomenon should be familiar. There's further similarity in that the rates of interest on microloans are often in loan-shark territory (though, of course, concerned public are always assured this is an aberration).