Since well before I finished my PhD on the topic of the
political economy of microfinance in 2003, there’s been a
fight for the soul of microcredit. This is what Morduch
(mentioned in the article) wrote in about 1998 is the
‘schism’ between what he describes as the ‘institutionist’
and the ‘welfarist’ approach to microfinance. The
institutionist approach is the one which allows the AEI
(that great bunch who helped to bring us the sub-prime
meltdown) to be all sneery about Yunus, and it goes very
roughly that all MF organizations must be self-sustaining
and make a profit which enables them to lend on, and not
rely on subsidized funding because it is the profitability
and self-sustainability of the organization which is most
important. Two problems with this are that about 95% of
the funding available for MF (i.e. Apex funds) is
subsidized or at favourable interest rates, and no western
bank lends on the basis of self-sustainability, as we’ve
just found out to our very great cost.
The welfarist approach differs in that it puts
microfinance into context; it views MF as just one amongst
an array of tools for enabling the poorest and asserts
that the self-sustainability of the MF organization should
take second place to providing the poorest with a set of
previously unaffordable financial services, the most
important amongst which are access to savings. The
problems that MF keeps encountering are mainly problems
of, if not outright success, at least popularity, and in
this Yunus is certainly guilty in terms of his ability to
generate hyperbolae. Thus:
“Hillary Clinton opened the World Summit on Microcredit in
Washington. The occasion highlighted the effectiveness of
using tiny loans to help the most destitute people on
earth pull themselves and their families out of poverty.
But there is another, astonishing side of this story: the
political consequences of putting capitalism to work for
the have-nots. Microcredit not only liberates the poorest
of the poor from hunger, it liberates them, and us, from
fanatical extremists. Microcredit was invented 20 years
ago in Bangladesh by Muhammad Yunus… Microcredit does what
billions of dollars worth of AWACS and Patriot missiles
cannot. For decades, the West has tried to defeat
fanatical extremists militarily; this has been bloody,
costly and highly unsuccessful. But quietly, every day,
the attraction of militant Islam is being blunted, at the
ballot box and in people's hearts and minds, thanks to the
economic development of the poor. We have known that
micro-credit helps solve a host of in-tractable, long-term
social ills related to poverty: In Norway's arctic circle,
it is helping repopulate the Lofoten Islands. In Oklahoma,
thanks to Chief Wilma Mankiller of the Cherokee Nation,
microcredit is helping reduce alcoholism. In Chicago, it
is helping get unwed mothers off welfare.” (Jolis 1997)
So it is useful to visit the facts about MF and thus
appreciate the viewpoint from which this article was
written. It is fact that MF institutions have lent money
to millions and millions of poor people who would not
otherwise have had access to it; they have also provided
access to a lesser extent to savings accounts. It is fact
that the lending that MF institutions do is overwhelmingly
to women because (if it is attributable to Yunus) the one
thing Yunus seems to have discovered is that women are far
more reliable as repayers of loans and contributors to
rotating funds, mainly because they have far more to lose
by not being able to access them. It is fact (according to
my research, anyway) that many of the people who gain
access to MF are making extremely good use of it but are
only just able to keep their noses above water because of
the interest rates. It is fact that the formal banking
sectors in the countries which are of most interest to MF
institutions in Asia, Africa or Latin America have no
interest whatsoever in the poorest communities and have
spent a considerable part of the post-WWII period going to
great lengths to erect barriers to keep the poorest out –
consider the report from the World Bank (2005, I think)
indicating that in Mexico, which has a mature and
relatively sophisticated financial services system, 75% of
people over the age of 18 have no access to a single
financial services product at all. How could that be
without deliberate efforts by formal banking systems, even
where they exist, to keep financial services access
exclusive?
And so to the AEI article. You have to remember that to
the AEI, to which Rupert Murdoch is a substantial
contributor, any taint of subsidy equates to government
interference and thus Obama-type socialism. It is quite
amusing how the AEI gets all sniffy about what it deems
the dodginess of Grameen accounts when it did such a
lamentable job of any such concerns about Bear Sterns,
Lehman, etc. But then, to have done so would have been to
offend the world view of Wall Street and the Wall Street
Journal in particular (prop. Rupert Murdoch esq.) and you
don’t go around biting the hand that feeds you, do you?
Far better to go around poking fun at dodgy brown men in
squalid third world countries, because we all know what
they’re like, don’t we? Quite unlike our own clean,
transparent and efficient white capitalists who would
never knowingly take a subsidy, not even if it were
billions of dollars to keep their banks from drowning in a
sea of idiocy of their own making… oh, you know what I
mean!
--
Dr Jon Cloke
Lecturer
Geography Department
Loughborough University
Loughborough LE11 3TU
E-mail: [log in to unmask]
Tel: 00 44 07984 813681
On Mon, 22 Mar 2010 08:49:34 +0100
Manuel Aalbers <[log in to unmask]> wrote:
> since when do we value information coming out of the
>American Enterprise
> Institute so highly? it's a (neo-) conservative think
>tank, what else did
> you expect?
>
>
> 2010/3/22 George Oguntunde <[log in to unmask]>
>
>> You do know Muhammad Yunus is a fraud:
>> http://www.american.com/archive/2007/may-june-magazine-contents/micro-man
>>
>>
>>
>> On Sun, Mar 21, 2010 at 3:15 PM, Deb Ranjan Sinha
>><[log in to unmask]>wrote:
>>
>>> And the guy is a geographer by training!
>>>
>>> *Six million adults in Britain do not have access to a
>>>bank account. These
>>> are
>>> the people for whom credit has always crunched. Of these
>>>at least four
>>> million
>>> each week borrow from "doorstep lenders" just as they
>>>did when Rahman's
>>> parents
>>> first came to Britain and just as they have done since
>>>Victorian times.
>>> Another
>>> million and a half people are indebted to so-called
>>>"payday lenders", the
>>> mostly
>>> American-owned high street operations – the Money Shop,
>>>Cash Converters
>>> and the
>>> rest – who make short-term loans with few questions
>>>asked at APRs that
>>> often
>>> start at 600% and can escalate to 2,500% or more. "When
>>>I tell people that
>>> is
>>> the financial reality of Britain," Rahman says, "they
>>>don't at first take
>>> it on
>>> board. But to unlock that system, it seemed to me, you
>>>cannot approach it
>>> only
>>> as a money-making business – though that must certainly
>>>be part of the
>>> aim. You
>>> need to also explicably do things that don't make
>>>money."*
>>>
>>>
>>> http://www.guardian.co.uk/society/2010/mar/21/microfinance-faisel-rahman-muhammad-yunus
>>>
>>
>>
>
>
> --
> Manuel B. Aalbers, Ph.D.
> University of Amsterdam
> Department of Geography, Planning and International
>Development Studies
> Nieuwe Prinsengracht 130
> 1018 VZ Amsterdam
> The Netherlands
> http://home.medewerker.uva.nl/m.b.aalbers/
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