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Archive for Microcredit

Ananya Roy on Poverty Capital

July 11, 2011 by and tagged , , ,

Ananya Roy provides critical assessment of microfinances:

In particular, she challenges the idea that microfinance represents the democratization of finances as a form of bottom billion capitalism, but rather represents the extension of capitalist accumulation and markets to previously excluded populations.

She also discusses the role of the World Bank in managing and controlling the poverty agenda and the way microfinance is done through the World Bank agency, CGAP.

Bottom line: as it is done, microfinance is predatory lending rather than financial inclusion, and may very well be the next sub-prime meltdown as it is a perfect example of sub-prime market.

Posted in Development, Economy, Global Governance, Microcredit, Poverty | 1 Comment »

Revisiting Microlending

June 19, 2009 by and tagged , , , ,

Regular readers of this blog know that I am a strong advocate of microlending and a Kiva lender (have you clicked on the widget on the left sidebar yet?). The main reasons why I am strongly in favor of such programs are summarized in this Independent article.

At the same time, I do not consider microlending a substitute for anti-poverty, gender literacy and overall development programs. Microlending is not the magic wand that will solve all the problems of the Global South. It is one tool that should be used and supported, but there is no substitute for things such as public health policy.

One of the things that is often mentioned in microlending discussions is the high rate of reimbursement and the low rate of default. The poor do pay back. Based on this simple fact, it is not surprising to find that investment firms have been interested in moving in on the microlending potential bonanza (there is no shortage of poor women in the Global South) as a mode of investment for 401k-type of investments. That is how for-profit microlending businesses have emerged. And so, Der Spiegel legitimately asks:

Compare and contrast:

Since he received his Nobel Prize for the work of the Grameen Bank, Yunus has been busy promoting his social business model (businesses that are designed to not generate profit but deliver social goods).

In contrast, Choudhury’s ASA has a different model. It is a for-profit business that is based on (foreign) investment. TIAA-CREF is mentioned as one such investor, along with other pension funds.

An even more extreme form of for-private microlending is Compartamos, which was featured in an episode of Now on PBS (video). Yunus has been especially critical of Compartamos which he sees as exploitation:

For Yunus, this defeats the purpose of microlending, which was, in part, to get rid of the system of usury. But for him, the for-profit microlenders are usurers making a comeback.

What is obvious is that there is indeed a struggle for the definition (or redefinition) of the way microlending should work. Is Yunus’s model obsolete compared to the young and hip American-born and trained economists of ASA? I would argue that the for-profit model might have looked good a few years ago, and its proponents might have thought that they had won the battle. With the global economic collapse, things might be different and Yunus’s social business model might not look so obsolete.

Posted in Development, Economy, Gender, Microcredit, Poverty, Sociology | 3 Comments »

Applied Solidarity Economics

January 25, 2009 by and tagged , , , , , , , , , , , ,

Denis Colombi has some interesting considerations regarding the connections between solidarity economics and art / culture (hey, look who posted about solidarity economics before it was cool to do so!). As usual, I’ll summarize as best I can Denis’s points and add my comments when relevant.

There are already common images when it comes to solidarity economics: fair trade, microcredit of the Grameen Bank-type, local exchange systems. In his post, Colombi focuses more on different sectors: cultural and artistic production while locating solidarity economics squarely in the field of economic sociology. Following Polanyi, sociologists emphasize the plural character of the economy organized around three poles: (1) a market economy where resources are allocated by the market based on financial interests, (2) a non-market economy where allocation is based on public policy, and (3) a non-monetary economy where social relations sustain exchanges and activities. Solidarity economics belongs to that third pole (as does nousehold economics).

It is certainly true that the first pole dominates in Western capitalist societies, but not because it is some sort of "natural" or "default setting" but as socially and historically-constructed product. Solidarity economics allows us to rethink the connections between society and economy, whose political, ideological or even academic separation is problematic as they are thoroughly interconnected and interdependent.

But solidarity economics is not just a mode of analysis. It is a political project as well, dedicated to the citizens’ reappropriation of economic behavior. In particular, solidarity economists reject the disembedding of economy from society where individuals are reduced to basic behavior: consume, produce, save, and where a full understanding of the system is left to "experts" such as the economist or the politician. Against such a disembedded view, solidarity economists reestablish the agency and understanding of people’s actions and work to make visible the actual and always present (only ideologically hidden) social embedding of economic behavior as invested with meaning by social actors who modify their behavior based on such meaning (how very interactionist!).

Solidarity economists’ goals do not limit their analysis and action with the third pole of economic activity. They also work toward the hybridization of the market and non-market poles. In this sense, solidarity economics is not simply what’s left unaccounted for once after allocation through the market and non-market poles; it is a thorough social project that touches upon domains beyond the economy that seeks to overcome the three poles conception. But what is still unclear, for Colombi, is the exact place of solidarity economics with respect to the market and public policy.

[And here, let me plug again my own post: in his post, Colombi deplores the lack of "fleshing out" of solidarity economics... my own post provided specific projects that were already up and running with their own institutional structures.]

So, we know that market economy’s basic principle is profitability, that of public policy is… hell, who knows… actually, referring to French cultural policy since Malraux, Colombi posits it as excellence (as defined by expert groups who allocate funcing). In both cases, solidarity economists note the lack of public participation or expression of desires and values thereby locking artistic production in spheres of either elitism or conservatism, both stifling innovation. So, solidarity economics has an uphill battle not just against the market and its profit principle but also against the public economic sector.

In the art and cultural domains, as Colombi underlines, the conditions might be favorable to solidarity economics thanks to UNESCO agreements signed by nations on cultural diversity that public policies are expected to support. These UNESCO agreements refer to the equal dignity of all cultures and the idea of free choice when it comes to individual cultural participation. Therefore, cultural rights become a necessary part of cultural policy as long as they do not diminish others’ dignity (take that cultural relativists and supporters of FGM in the name of culture). From this perspective, then, both the market and public policy become tools to satisfy individual cultural rights rather than producers of cultural goods at the exclusion of people. But they are not the only and exclusive tools, there is a place here for solidarity economics to carve a space as well. Actually, it might be a more adapted tool to satisfy cultural rights.

But all in all, Colombi seems frustrated with what he has read of solidarity economics especially when it comes to the social construction of economic institutions and how solidarity economics can take its place compared to the market and public policy (again, I’d be curious to read what he thinks of the examples I have discussed in my own post). Beyond economic sociology, there is also the question of social movements: what of the mobilization of actors around common principles and projects? What modes of collective action(s) are necessary? Is there a need for a hot cause / cool mobilization? Which groups work are involved in this (beyond the usual suspect of the alter-globalization movement)? What identity production needs to emerge here?

For Colombi, solidarity economics still has a long way to go… heck, it probably needs some academic anchoring too, and I don’t see that happening.

Posted in Activism, Collective Behavior, Culture, Economy, Fair Trade, Microcredit, Politics, Public Policy, Social Institutions, Social Movements, Social Structure, Sociology | 1 Comment »

The Story of A Kiva Loan

January 11, 2009 by and tagged , , , , , , ,

I’m on my fourth Kiva loan, what are you waiting for?


A Fistful Of Dollars: The Story of a Kiva.org Loan from Kieran Ball on Vimeo .

Posted in Activism, Collective Behavior, Development, Economy, Global Imaginary, Globalization, Microcredit, Poverty | No Comments »

Book Review – Out Of Poverty

November 17, 2008 by and tagged , , , , , , ,

[It is my great pleasure to publish this first - and hopefully not last - post by a former student of mine, Dave E. (I don't know if he wants his whole identity revealed, I'll update with his full name if he wants). Dave is one of these students that makes teaching easy and makes teachers feel smart. I only hope he got what he needed out of my class and that the materials were stimulating enough for his brilliant intellect. Dave is also  a very compassionate individual, as evidenced by his involvement with the Interfaith Youth Core. This book review is entirely his, I only added links, some formatting and the video at the end.

Thanks for this, Dave.]

Out if Poverty I just recently read Paul Polak’s book entitled Out of Poverty. The basic realization that Polak and others have helped me come to is that humans have radically material needs. While I have reservations about using per capita income as a primary measure of development, an income of less than $1/ day is staggering and must not be treated like yet another neocolonial or materialistic paradigm or measure.

Polak is a successful entrepreneur and changemaker who comes from a strawberry farming background. His perspective is wonderfully refreshing and simple. Through his organization, International Development Enterprises (IDE), he claims to have effectively lifted 17 million people out of poverty. According to Polak, IDE was founded and operates on the basis of four very simple observations:

  1. The biggest reason people are poor is because they don’t have enough money.

  2. The vast majority of people living on $1 per day earn their living from one-acre farms.

  3. They can earn much more money by increasing productivity and finding ways to grow and sell high-value labor-intensive crops such as off-season fruits and vegetables.

  4. To do that, they need access to very cheap small-farm irrigation, good seeds, fertilizer, and markets where they can sell their crops at a profit.

So Polak has invented and marketed affordable, efficient, and effective tools like treadle pumps and drip irrigation systems that can be afforded by the world’s poorest farmers. Couple this technology with the global expansion of microfinance, a second green revolution could be in the cards. Polak doesn’t depend on donations or subsidies for his method of change. Instead, he is able achieve scale, sustainability, and a small profit by marketing low-profit tools to millions of small-acreage farmers around the world.

In Out of Poverty, Polak also identifies three great poverty eradication myths, which I found most informative:

1) We can donate people out of poverty

This is a direct critique of Jeff Sachs, head of the UN Millennium Development Goals, who argues that poor people are too poor to invest their own money to move out of poverty. Sachs calls for rich countries to make gifts to poor countries to essentially continue the enormously ineffective trend that has gone on for over 50 years. William Easterly, in The Elusive Quest for Growth, is right in that we have spent billions of dollars in foreign aid and private philanthropy and have very little to show for it. Both myself and Polak see the Sachs plan as merely a continuation of the past 50 years; big infrastructure, irrigation, and agriculture projects with big budgets that will be controlled by the governments of developing countries, the benefits of which will very rarely reach the poor rural farmers who really need it.

2) National economic growth will end poverty

India and China have both experienced incredibly impressive GDP growth over the years. However, 360 million people in India and over 200 million people in China continue to live on less than a dollar a day. Any scholar of India can notice a development of “two Indias,” one for those who reap the benefits of growth and those who continue to be entrenched in poverty. Yes, we need growth, but all too often that growth is aimed at urban industrial growth instead of empowering small-scale, dollar a day farmers to increase their production and profits.

3) Big business will end poverty

Polak sees very little reason to think that multinational corporations will seriously invest in lifting people out of poverty. Not because they are evil or selfish, but they are just not competent in designing affordable solutions for the poorest people in the world. According to Polak, roughly 90% of innovation and design efforts are focused on catering to the richest 10% of the world’s population. Corporations simply don’t have the competence in understanding, reaching, and selling to customers who live on a dollar a day. Until the target market they are designing and innovating for changes, we will not see a major breakthrough from corporations in solving poverty.

In sum, Polak bypasses donors, governments, and big business to directly empower the millions of people who need the most help. He sells small-acreage farmers unsubsidized and high-quality tools and resources by which they can generate enough income to send their kids to school, see a doctor, be properly nourished, and partake in community activities. He is a grassroots visionary in a world where the IMF, World Bank, and UN Millennium Development Goal initiatives continue to dominate.

Posted in Activism, Book Reviews, Development, Economy, Microcredit, Poverty, Social Inequalities, Social Stratification | 3 Comments »

Book Review – CauseWired

November 11, 2008 by and tagged , , , , , , , , , , , , , ,

Causewired Tom Watson‘s CauseWired is a book that left me interested, inspired and annoyed at the same time. I’ll start with what I liked about the book and then addressed the reservations I have with it. But let me say up front that I found it a very interesting read (Watson knows how to write… heh, he’s pal with Lance Mannion,  and they all have their cool clique at Newcritics, and so, what did I expect?).

Anyhoo, back to CauseWired. CauseWired is about what Watson considers to be an emerging powerful trend: the rise of the online social activist sector.

“This book also suggests strongly that what some refer to as online social activism and others call peer-to-peer philanthropy is quickly becoming a sector, bound together by a growing critical mass in usership and an expanding acceptance in the worlds of philanthropy, politics, activism, and marketing. Indeed, the brief period of creation of the past few years (perhaps dating to the beta launch of DonorsChoose in 2000) is giving way to the next evolutionary phase of growth, and the permanent mooring of several important financial models on our greater economy.” (xxi-xxii)

CauseWired refers to the unleashing of online social activism thanks to the technologies of Web2.0 and the availability of a variety of platforms such as DonorsChoose, Kiva, GlobalGiving, MicroGiving (and let me add the one of right sidebar here, Children International), or social networking sites such as Causes on Facebook or Change.org. There is no denying that these platforms and sites are attracting a lot of small donors to the point where Kiva regularly runs out of projects to fund and has to cap donations to $25. And for Watson, the meteoric rise and power of CauseWired is visible in the immense success of the Obama campaign and its use of Web2.0 technologies.

The central thesis of the book is this:

“Rapid advances in media and technology, in the ways people communicate, are changing how people support causes and how we respond to that underlying human impulse to help others, improve our communities and change the world.” (xxx)

Or more romantically,

“New technology and the human urge to communicate will create the basis for a golden age of activism and involvement, increasing the reach of philanthropy and improving the openness of politics, democratic government, and our major social institutions.” (19)

[As should be obvious, I am heavily into CauseWired... just take a look at the sidebars. And for those who read this blog, it's obvious that I am a big fan of microcredit and a donor ot Kiva, GlobalGiving and Children International. I subscribe to Causes on Facebook and am a member of Change.org and LinkedIn.]

In a big part of the book, Watson retraces the genealogy of Causewired through the social entrepreneurs (in a broad sense) that got moved to use Web2.0 technologies to promote progressive social change. That is on the supply side. On the demand side, you now have the “consumers” of both causes and technology: people who are not content with just writing checks to the Red Cross or any other large conventional charity organization but want a real connection to the end point of their donation, not just as a matter of making sure that the money goes where it is supposed to, but also to be able to “see” and be “connected” to those they support.

For Watson, these consumers of causes and technology (or, as Watson calls them after Alvin Toffler, “prosumers”) represent a generational shift:

“The generalization of a materially obsessed generation masks a vital and important movement – a subtle shift in priorities and aspirations that will have a huge impact on the future of philanthropy. At no point since the student movements of the 1960s have young people worn their cases so openly – but this time around, the Facebook Generation is not fighting the establishment. They own it. For today’s superwired, always-on, live-life-in-public young Americans, the causes you support define who you are. Societal aspirations have so permeated the “net-native” population that causes have become like musical tastes, style choices, and “blog bling.”" (16)

These net-natives create or absorb causes through their networks via a variety of portals such as Facebook or MySpace. However, what is also obvious is that putting a cause badge on one’s Facebook profile is not the same as funding or engaging in any type of activism. It is the lowest possible form of activism (just a few clicks) but what it does is to reveal something about one’s identity and build social capital. The badges one displays, or the widgets one puts on a blog sidebar, are one’s public identity. Identity does not necessarily translate into action.

And that is an issue that Watson addresses repeatedly throughout the book: a lot of online activism has had a limited impact in terms of fundraising or sometimes, actual change: Katrina victims are still homeless, people are still being killed in Darfur, etc. When it comes to the money, big foundations and organizations still rule the day.

But there is no question that Watson is fascinated by the net generation and its alleged idealism all the while recognizing that they might not “do” much, as in No One is Innocent’s song, Revolution.com… it’s not a coincidence that I posted the clip on the eve of Obama’s election. There is indeed a convergence between Obama’s campaign and the net generation, not all I find inspiring or idealistic, as much as Watson does. However, there is no denying that the campaign itself was very astute in the use of Web2.0 technology in promoting the Obama brand / cause (which I think is what it is).

That being said, I found the book most inspiring when Watson goes through the different tools created and the experiences of social entrepreneurs and their projects. It certainly gave a me a lot of food for thoughts and ideas as to how I could promote a social entrepreneurship online structure at my college to promote alongside the new global / environmental / peace / leadership studies programs we are creating. And I certainly plan on making a lot of people read the book for that purpose.

Now, to the critical side of things. Some of the problems I had were with Watson’s depiction of the net generation, the general characteristics of this new philanthropy. Let’s see if I can articulate them.

Watson’s description of the net-natives (and, from experience, I tend to think we overestimate technological prowess) ignore something that I consider major: social class. Those young people who are in college, have access to the hardware to enjoy all the fruits of Web2.0 technology are privileged young people, which is why they have the luxury to create and build their social identities through the various portals. They have access and time as well as resources. Not everyone in that generation has that ability. Which is why I find general description of that generational shift profoundly annoying. What is described as the net generation is the upper middle to upper classes. The non-wired are disappeared. I do not blame Watson for focusing on the privileged, I fault him for not even mentioning that this is the demographics he’s talking about, not a generation. Those he discusses are indeed invested in causes because they are materially provided for and secure.

And while we’re on the topic of social classes, there are two other categories of people lying in the shadows of the CauseWired: those who make the hardware the net natives use, and the disadvantaged they are supposed to help. In the book, these are either absent or simply objects. The only subjects are the CauseWired, the net natives, those who invest in causes to help these Others, less fortunate. These Others are objectified as props in the construction of one’s identity through the causes one supports and promotes in Facebook or MySpace.

But let’s focus on the net-natives again. If Watson’s descriptions are accurate (as I believe they are, minus again the certainty of their technological savvy), the net-natives are pure products of what Habermas calls the crisis of legitimacy. They do not believe in governmental power to solve problems (although, having just come out of eight years of Bush/Cheney, one cannot be faulted for believing that), but that skepticism extends to conventional charities as well.

Similarly, the net-natives are a product of liquid society and individualization. They seem skeptical of institutional structures and power and want to be philanthropists on their own terms, individually. And I mean individually in the sense of, as Watson puts it, peer-to-peer activism, one person helping another, or one individual helping a project. This is philanthropy and activism in the age of global consumption (in all fairness, Watson does address that aspect): one funds a Kiva project in the same way one orders a pizza online, deciding on the criteria which will make the recipient worthy of the donor’s $25. It looks like th freedom to choose from the donor’s point of view, but what of the recipient? I guess we never know except for the messages of gratitude left on websites.

As I read the book, that other side of this was constantly on my mind especially considering the fact that for all the revolutionary nature of all this (and again, I believe it is), there is not necessarily much to show for all this online social activism. But, we have to acknowledge that this is a nascent movement and we’ll have to see how it survives the next few years.

And then, there’s Obama. I have to confess that I was not in the mood to read about Obama. I’ve had my fill. Again, there is no question that he was the candidate of the net generation and his campaign took advantage of web2.0 technologies better than any others. But here again, let’s not forget the other side of things: the massive support from the mainstream media and major financial donors as well as the major progressive blogs. And let’s not forget the massive leveraging of rank misogyny, sexism and ageism from the net generation. Let’s count that as part of his success as well. If anything, the web2.0 technologies facilitated the spread of the most disgusting misogynystic memes along with a very superficial promotion of policy. Obama was first and foremost a brand, enthusiastically, but also superficially embraced by the net natives. That is part of the story as well. Identity over action and policy.

But again, this has more to do with my own fed-up current state with regard to Obama because the case study of his campaign definitely belongs in the book.

So, yes, these are what I consider major issues with the book and its subject. But as I mentioned above, some sections were truly inspiring to me and I will recommend it to many people with whom I work.

Posted in Book Reviews, Global Imaginary, Globalization, Human Rights, Identity, Media, Microcredit, Networks, Politics, Social Capital, Social Interaction, Social Movements, Social Privilege, Technology | 2 Comments »

The Girl Effect

September 30, 2008 by and tagged , , , , , , , , , ,

Via Davidson at Corrente:

See also the website. A simple way to put what a lot of people in development have been shouting for years.

Posted in Development, Economy, Education, Gender, Global Imaginary, Human Rights, Microcredit, Patriarchy, Population, Poverty, Sexism | No Comments »

Microlending – Good for the Poor, Good for the Planet

July 24, 2008 by and tagged , , , , , , , , , , ,

So says the Worldwatch Institute :

"The number of "microborrowers" worldwide-people participating in the rapidly growing field of microfinance-increased by 17 percent in 2006, benefiting both communities and the environment, according to the latest Vital Signs Update released by the Worldwatch Institute.

"By helping individuals and villages replace firewood, oil, and kerosene with solar, wind, hydro, and biofuels, microfinance institutions help to improve the local environment while expanding access to electricity, boiled water, and refrigeration, dramatically improving the quality of life of the poor," said Worldwatch Senior Researcher and Update author Gary Gardner."

But the report also indicates one potential danger related to the success of microlending: its folding into the market and being turned into profitable investment by hedge or pension funds.

"The sudden and significant success of microfinance is increasing pressure on many microfinance institutions to become more commercially oriented in their operations. Some analysts fear that this shift may cause microfinance institutions to raise interest rates or distribute profits to shareholders rather than reinvesting them in microfinance activities, hindering their original mission of poverty reduction. Proponents of private investment counter that commercializing microfinance is needed to attract the large sums of capital that will allow the practice to spread rapidly."

This is something that Grameen Bank founder Muhammad Yunus (considered the founding father of microlending) strong disapproves of, as he prefers to promote a social business model. This trend was illustrated by a very interesting issue of Now on PBS on for-profit Mexican microlender Compartamos, Who’s Making Money from Microcredit?

MSC But this is reason for caution, not giving up. There is still enormous potential for expansion for microlending, which is why the Microcredit Summit Campaign has launched a new campaign:

  • 175 million of the world’s poorest families, especially the women of those families, are receiving credit for self-employment and other financial and business services by the end of 2015.
  • 100 million families rise above the US$1 a day threshold by 2015.

And as is often mentioned, women are the prime beneficiaries of microcredit. It is not a panacea. Microcredit will not solve the global poverty problem but it is one small- (or not so small) scale solution that can have short-term impact.

I also love how the success of microcredit shows that the poor are not poor for lack of skills and that they do not need us to teach them how to conduct business. Provided with the opportunity to do so, with a small load, they can take care of themselves and run their businesses successfully, without economic prescription from the Chicago Boys, or the IMF.

The best example of this is Kiva (disclaimer: I am a Kiva lender, as the button at the top of the page shows… I would encourage everyone to click on it and become a lender for a little as $25).

Posted in Development, Economy, Gender, Globalization, Human Rights, Labor, Microcredit, Patriarchy, Poverty, Sexism, Social Inequalities, Social Stratification, Structural Violence | No Comments »

Debt Suicides in India

May 6, 2008 by and tagged , , , , ,

Via the BBC, the latest side effects of the food price crisis:

“India’s agriculture minister has rejected calls for additional debt cancellation for millions of farmers. In February, the government agreed a $15bn scheme to write off the debts of millions of small farmers – those with less than two hectares of land. But there have been demands from opposition and some governing coalition parties to extend the loan waiver to farmers who own more land. Farm activists say debts have been driving many farmers to suicide.

At least 10,000 debt-ridden farmers have committed suicide in India each year over the last decade – and activists say hundreds more have done so in recent months, despite the aid package. Rejecting the demand, the federal agriculture minister, Sharad Pawar, said the government was not in a position to take on new responsibilities. Drought, a fall in crop prices and an increase in the cost of cultivation are cited as reasons for the farmers’ plight. Many farmers have been forced to take out loans to buy necessary supplies, but these have left them heavily in debt. Some turn to moneylenders, who charge much higher rates of interest than banks.”

It is not a new issue, just one made worse by the current crisis. I have blogged enough on microcredit to underline how much access to credit is central to survival in many poor areas. Without access to legitimate credit, poor peasants in Asia have no other option than to use moneylenders who charge them usury interest rates. One of the major persistent forms of slavery in India is debt bondage, which can be passed from generation to generation.

Posted in Development, Economy, Education, Microcredit, Poverty, Slavery, Structural Violence | No Comments »

Muhammad Yunus – Credit as Slavery

May 4, 2008 by and tagged , , , , , , , ,

Who better to interview than Muhammad Yunus on the current crisis of the global financial system? That’s what Le Monde did.

How does he explain the credit crisis? For him, this crisis is not a bug, it’s a feature of the normal functioning of the global financial and banking system. The very principles of credit – the guarantees that are demanded, the bonus based on risk funded on the backs of the least solvent people – have revealed that this system does not know how to lend to the poor. And it’s the banks’ fault. They loaned a lot of money, all the while making false promises with great offers, teaser rates, and a guarantee to be able to reimburse over long periods of time. In reality, the poor were put under extreme pressure to reimburse since this is where large profits come from. This is the logic of the financial system. Which is, of course, the opposite of what Grameen Bank does.

The only logic of this system is the maximization of profits. There is no other logic here. That’s what led to subprimes and hedge funds. In this sense, according to Yunus, this system is blind to anything else. He is stricken by the focus on the enormous sums of money lost by banks and the little focus on how low-income people were duped by maladapted offers from the banks and whose homes are repossessed or simply abandoned, if only to blame them for their greed or irresponsibility whereas bank losses are explained in structural terms.

For Yunus, the system that is collapsing today is one based on a faulty economic principle: loans cannot be granted without collateral, especially to poor people. This is a principle that has the strength of dogma. With Grameen Bank, he has proven that this is not true. This principle prevents half of the world’s population from participating into the global economic system, and not just in the Global South, but in the US and Europe as well. Traditional banks, as the saying goes, only loan to the rich. But for Yunus, what’s the point of such banks if they do not contribute to creating value or helping people getting out of poverty through their own labor? This is a major blind spot in the current system: banks and financial institutions do not understand the importance of independent economic activities as well as households as productive units. The informal sector, as it is called, must be recognized as legitimate productive activity, as a source of employment, and should be encouraged through credit.

However, orthodox economic literature ignores it. Only salaried employment in busisnesses is considered. Therefore, economic prescriptions are based on enterprises employing people, or resulting in unemployment if they do not. That is the current logic of capitalism. It seems absurd, to Yunus, to limit economic activity to this narrow definition. Why should the poor of the Global South wait for large corporations to hire them? Why not let them create their own employment through access to credit? This is this narrow conception of employment and denying credit to the alternative that is a form of slavery, for Yunus. For him, the overworked, salaried American, employed by large companies, is slave to the rigidities and instabilities of the system.

This is where Yunus sees the real danger of current economic structures: a unidimensional man (Herbert Marcuse, anyone?). Salaried life should be one option among many other opportunities. The denial of such possibilities, especially in the Global South, clearly is described by Yunus as a form of alienation (in the Marxian sense).

The other major blind spot of the current financial system is its sexism. Grameen’s focus on women is well-known by now. The reason for it is that women are more productive and more solvent than men and this gendered economic productivity generates greater communal benefits. Men spend on themselves. Women spend on their families and communities. There is greater general welfare achieved by women rather than men. And this aspect, for Yunus, holds true everywhere in the world.

But overall, Yunus argues that we are seeing the collapse of a faulty financial system and that it is time for something different: social capitalism.

Posted in Development, Economy, Microcredit, Poverty, Social Inequalities, social marginality, Social Privilege, Social Stratification, Structural Violence | No Comments »

Why Hillary Should Be President – Untold Stories

March 28, 2008 by and tagged , , ,

This is the first in a (hopefully) collaborative series: WHSBP (title and series idea courtesy of Lambert Strether of Corrente, my second blogging residence, and a nice one too!) to counterbalance the Other Series (WWTSBQ). This series outlines issues on which Hillary Clinton was ahead of the curve, starting with microcredit. I have posted consistently on microcredit (here, here and here) but it is one obvious issue where HRC got it before everyone else.

This is actually one of the things that surprised me when I read Muhammad Yunus’s book, Banker to the Poor.

“It was not until the mid-1980s that people in the United States began showing real interest in applying Grameen principles to their own poverty problems. I supposed it all began in 1985, when Bill Clinton, then governor of Arkansas, was looking for ways to create new economic opportunities for the low-income people in his state. Hillary Rodham Clinton’s college roommate, Jan Percy, had just returned from working in Bangladesh with an American organization and was at the South Shore Bank in Chicago. She introduced the Clintons to Ron Grzywinski and Mary Houghton, Chicago-area bankers who had done much to convince the Ford Foundation to support Grameen.” (176)

So, the four of them Bill and Hillary Clinton, Ron Grzywinski and Mary Houghton started meeting, according to Yunus, to design the plans for a bank that would provide microloans to the poor in Arkansas. The Clintons also invited Yunus and as he writes

“As I spoke, both the governor and his wife were drawn into my story. After half an hour, Mrs Clinton declared, “We want it. Can we have it in Arkansas?” (…) Hillary Rodham Clinton’s support for the Grameen idea has never diminished. She visited us in Bangladesh in April 1995 and she has visited microcredit programs on three different continents. She also co-chaired the Microcredit Summit in 1997.” (176)

Yunus then goes on to describe the details of putting together what is now the Southern Good Faith Fund, developed in partnership with South Shore Bank (check out their website if you are interested in socially responsible investments).

However, this is the Clintons we are talking about, so, there was no chance they would be taken seriously by the cool kids. As Yunus describes,

“During a 1992 interview with the editors of Rolling Stone magazine, [Bill] Clinton spoke particularly fondly of Grameen. In a separate article, two of the editors ridiculed him for being too ready to promote micro-credit in the United States. I was disappointed, but an American Friend explained that Rolling Stone’s reaction was hardly surprising. He argued that Grameen was a ‘Third World technology transfer’ and that the American elite might not be ready for it. Given the reluctance of Americans to adopt successful policies from countries as close to them as Canada, Germany or England, it would prove very difficult for Clinton to convince his fellow Americans to follow a Bengali model.”

And that is one lesson we have all already learned: the cool kids in the media and the Village elders hated the Clintons already for coming from Arkansas and mess up “their” place and pollute it with foreign ideas like universal health care and economic opportunities for the poor (and please, spare me the failure of health care reform and and “ending welfare as we know it”; in the first case the Clintons had to deal with the same disgusting media campaign HRC has to face now and in the second case, Clinton had to deal with the Gingrich Congress – a Congress that actually flexed its idiotic muscle against the President, what a concept).

Now one with a brain would suggest that micro-credit is THE ultimate solution to solving global poverty, but it is one tool that can be used to do so alongside other policies. Yunus himself never stated that his idea is the panacea. He is much too smart for that. However, this is what I care about when I think of experience in a presidential candidate. I want someone who is intellectual smart and curious (even if the cool kids, the Village elders and now the Big Boyz Bloggerz think it’s soooo 90s). I want someone with a clear pulse on our global world and has the wherewithal to get in touch with the right people to get things done in a decisive fashion.

Let’s not be distracted by stupid snipers stories. This is not what matters (“but SHE LIED!!!!” Fuck that). Let’s look at what really matters: she caught on the idea when it was new, in the mid-1980s and no one was really paying attention. She committed to it and still promotes it. Muhammad Yunus constantly mentions her.

That’s why, I think, Hillary should be President. Let’s tell the untold stories.

Posted in Economy, Microcredit, Politics | No Comments »

Book Review – Creating a World Without Poverty

March 25, 2008 by and tagged , , , , , , , , , , , ,

YunusMuhammad Yunus’s latest book, Creating a World Without Poverty is meant to inspire and trigger a new social movement: the social business movement.

Muhammad Yunus is of course the founder of Grameen Bank and the founding father of microcredit. Over the years since its creation, Grameen has grown to include a whole family of companies dedicated to provide services to the poor while empowering them. In 2006, Muhammad Yunus and Grameen Bank were both awarded the Nobel Peace Prize. With this latest book, Yunus explores his ideas as to how we can take it further and make poverty history to be studied in “poverty museums.”

Yunus is not a lefty radical. He is a big promoter of globalization in many domains (culture, economics, politics). He believes in the potential of free trade to benefit the poorest on earth. He believes in the power of capitalism to generate wealth. But he’s no globalist. He is not naive as Thomas Friedman annoyingly is. Yunus lives in the real world. He know what is going on:

“Unfettered markets in their current forms are not meant to solve social problems and instead may actually exacerbate poverty, disease, pollution, corruption, crime and inequality. (…) Globalization, as a general business principle, can bring more benefits to the poor than any alternative. But without proper oversight and guidelines, globalization has the potential to be highly destructive.” (5)

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Posted in Book Reviews, Development, Economy, Education, Environment, Free Trade, Gender, Globalization, Health, Health Care, Human Rights, Labor, Microcredit, Poverty, Sexism, Social Exclusion, Social Inequalities, social marginality, Social Stratification, Sustainability, Technology | 1 Comment »

Modern Slavery in Bangladesh

March 15, 2008 by and tagged , , , , , ,

Free The Slaves

“This is the story of the 21st century’s trade in slave-children. My journey into their underworld took place where its alleys and brothels are most dense – Asia, where the United Nations calculates 1 million children are being traded every day. It took me to places I did not think existed, today, now. To a dungeon in the lawless Bangladeshi borderlands where children are padlocked and prison-barred in transit to Indian brothels; to an iron whore-house where grown women have spent their entire lives being raped; to a clinic that treat syphilitic 11-year-olds.”

So begins Johann Hari’s investigation for the Independent published at the occasion of the end of the Comic Relief campaign: Sport Relief. How does it come to this?

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Posted in Development, Economy, Education, Human Rights, Labor, Microcredit, Poverty, Slavery | 1 Comment »

Kiva.org: The Online Microcredit Lending Revolution

December 19, 2007 by and tagged , , ,

As someone interested in issues of global poverty, development and aid, I am of two minds when it comes to microcredit: the lending of small amounts of money, mostly to women, in the poorest countries in the world, in order for these women to start a small business and become self-sufficient. As is now well-known, microcredit was initiated by economist Muhammad Yunus of Bangladesh, through what is not the multimillion dollar Grameen Bank. Yunus’s efforts were rewarded by a Nobel Prize for Peace.

Since then, microcredit schemes have expanded and many program now exist in various peripheral countries, some for-profit, non-for-profit. One such organization is Kiva, an online microlending organization made famous by Bill Clinton in his latest book on giving. As this report from the Integrated Regional Information Network (IRIN) states:

Kiva offers investment options that appear to revolutionise the interface between giver and receiver, lender and client. According to Jonathan Morduch, co-author of The Economics of Microfinance, “Kiva and the micro-finance world are set up not just as a better way to fight banking but also an important way to rethink traditional modes of giving and global social justice.” (…) Kiva.org was co-founded in 2005 by Matt and Jessica Flannery as the “world’s first and only online micro-lending opportunity”, teaming up with international organisations working in low-income communities. It lists 61 partners in 37 countries that are responsible for deciding which borrowers will be posted on the website. The loans are disbursed to the partners – local MFIs – for ultimate disbursement to the borrowers.

While browsing through the site, a potential lender sees brief descriptions of the borrowers, making it easier to create a connection with one or more entrepreneurs. By using the internet, Kiva claims to have reduced costs.

It appears that many “ordinary” people are choosing this route, perhaps over more traditional methods of donating money. As of 13 November 2007, Kiva.org had raised $14 million from 142,000 people to fund 20,769 loans – and the count changes daily. That represents a sizeable amount of cash from a large number of people who, more likely than not, did not previously know about micro-finance or MFIs.”

Of course, microlending is not without its critics for both side of the political and economic spectrum. The major objections to microlending?

  • Higher than average interest rates
  • Private microlending becomes a convenient substitute for public policy
  • Slim evidence of effectiveness
  • The issue of whether or not loans do reach the poorest of the poor and whether these loans really stimulate self-sufficiency
  • The neglect of the macro-economic and social causes of poverty in favor of micro-solutions

From the evidence we have, it seems that microlending can be profitable but the jury is still out as to whether it does alleviate poverty sustainably and over the long term. However, most of the objections listed above tend to assume that microlending should be the panacea, the perfect remedy to absolute poverty. It is not and I don’t think Yunus ever pretended that he had found the perfect solution. It is possible that governments in poor and highly-indebted countries might use any form of foreign aid as a way to avoid poverty-reduction policies. But at the same time, we know that the rules of lending tie their hands in many ways.

So, no, microcredit is not the silver bullet. Unfortunately, there is no one solution to solving absolute poverty problems. That requires a multifaceted approach. Microlending is one tool in the toolbox, it’s not the only one.

In the meantime, Kiva is an organization well-worth checking out and supporting. With loans as small as $25, what do we have to lose?

Posted in Development, Microcredit, Poverty | No Comments »