Microcredit has been held up by proponents of neoliberal economic policy and international development organizations as the key to moving communities toward economic development through women’s participation in local economies. For example, the United Nations report on MicroFinance and Millenium Development Goals (2005) upheld microcredit as a way to cut in half the global population living in poverty by 2015. However, as successful as some microcredit projects have been, institutional, financial, and gendered constructs combine to severely undermine the efficacy of microcredit on a larger scale. The essay below uses selected feminist and economic critiques to detail the fallacy in the belief that microcredit is largely influential in furthering international development, alleviating poverty, or achieving gender equality in the global South. Further, this essay serves as a brief examination of the limits of microcredit to produce macro-level structural change without the adjustment of neoliberal economic policy and the evolution of patriarchal social structures.
Micro Credit and International Development
The promise of microcredit as a tool for international development is that it is supposed to work in concert with neoliberal economic strategies, making an option for even the poorest of the poor in a developing nation to lift themselves out of abject poverty by their own mettle, with a little help from small, low-interest lines of credit. Neoliberal economic policy dictates that the state or governing body reduce its “involvement in attempting to provide social and economic rights of citizens and ensuring conditions of profitability for large capital, especially finance” (Ghosh 2011 pg. 22). In their exploration of women and microcredit Visvanathan and Yoder quote Dichter’s (2007) assertion that within this neoliberal environment, “what is needed is most is capital (47). Similarly, the authors cite McMichael (2000) in his examination of the concept of “the prioritizing of individual self-employment and privatization rather than structural changes for the benefit of the population”( p.47). Within this model the private sector, not the government, takes the reins in poverty alleviation with the goal of creating more capital-earning goods on the global market, thereby raising a nation’s Gross Domestic Product.
In the push for microcredit, the idea is simple: the reduction of those experiencing poverty through access to lines of microcredit (Jobim 2012). Microcredit would stimulate local economies, and en masse, over time, contribute to the development of a village/region/nation. Additionally, the theory stands that microcredit can thrive among women as these loans are “expected to generate or support self-employment, and with that outcome empower woman as well as alleviate their experience of poverty” (Visvanathan & Yoder 2011 p. 47). In the minds of the most zealous of its proponents, the implied eventuality is that the capital generated by the transformative power of micro-lending along with neoliberal economic policy will contribute to the economic health of the community. It then follows that the region, and then eventually the country at large will raise its GNP and move the state into the realm of ‘developed country’ from the ground up. It is the ultimate in pull-yourself-up-by-the-bootstraps ideology because it works within the confines neoliberalism’s reduced state-sponsored infrastructure and ideally helps the poor, especially women, empower themselves out of experiencing abject poverty through an economically recognized contribution to a country’s GDP.
As a tool for international development, though, microcredit comes up woefully short of being the macro-solution its zealous supporters claim it to be. While this theory appears sound at first glance, the actuality of microcredit as a means to furthering a country’s development is considerably limited.
In developing regions mired in neoliberal economic policies that reduce state-sponsored social welfare programs and government-funded public sector institutions, women who engage in micro-lending programs are still at the mercy of their region’s structural inefficiencies. According to Visvanthan & Yoder (2011), “an underlying neoliberal philosophy has created a market-driven credit system in which indicators of success are quantified in terms of repayment rates, loan recovery and timelines, representing the bottom line for lenders” (p. 49). In fact, the lack of state participation and focus on privatization and repayment bottom-lines in the microlending process is one of its biggest developmental flaws as it leaves participants at the mercy of rigid bank repayment policies that do not align with the capabilities of borrowers, corrupt banking and state officials, and local moneylenders (Kalpana 2011). These pitfalls inhibit the ability of borrowers to repay loans and often sinks them further into debt, leaving them unable themselves out of the experience of poverty for an extended period of time. Thus, “the role of the state is especially important in microcredit because of its ability to mitigate unfair power relations between creditors and debtors” (Jobim 2012 p.2).
Rather than flourishing in neoliberal economic climate, microcredit instead flounders under the weight of a system that is designed to make a profit rather than create infrastructure dedicated to helping a nation’s poor. In summary, in his online essay entitled Microcredit, Macro Problems, Walden Bello (2016) writes,
Microcredit is a great tool as a survival strategy, but it is not the key to development, which involves not only massive capital-intensive, state-directed investments to build industries but also an assault on the structures of inequality such as concentrated land ownership that systematically deprive the poor of resources to escape poverty.
Because of this, its efficacy as a tool of international development is negligible as most borrowers fail to profit enough to contribute significantly to even their local economy.
Microcredit and Global Poverty Alleviation
In 2005, the United Nations declared the “International Year of Microcredit” Optimistic as this sounds, microcredit is a far cry from the development project catch-all it has been made out to be. While it is impossible to ignore many individual successes attributed to microcredit, as a tool for poverty alleviation microcredit falls woefully short of the goal. Privatized bank policies and a lending institutions’ lack of awareness or lack of consideration for how national structural roadblocks negatively affect borrowers diminishes the use of microcredit as a tool for poverty alleviation.
As one example, when a collective of women wants to take out a microloan, the financial health of each individual borrower affects the collective. “Individuals receive credit based upon the screening of their peers, their own and group members’ repayment, and savings accumulated” (Visvanathan & Yoder 2011 p.52). What’s more, the financial health of the individual woman’s family is called into questions, often necessitating the repayment of family member’s debts before a line of credit for the collective will be considered. As an example, Kalpana (2011) examines Indian Self Help Groups (SHGs), in which women borrowers have more control over their money than a traditional Microfinance Institution (MFI),
are shaped by the legacy of poor repayment…members, or more commonly their male relatives, were responsible for these delinquent loans. Banks would then threaten to stall loans to SHGs unless groups expelled individual members unable to repay overdue on individual-targeted loans…In three village studies, eight women under repayment pressure dropped out of the SHGs; only three were direct borrowers (p. 58).
The inability of a collective to move beyond the personal debts of individual borrowers or the family members of individual borrowers precludes microcredit from being an effective tool with which to alleviate poverty.
Second, the structure of microlending does not take into account a how community’s institutional and systemic deficiencies affect borrowers in a given region. Women end up robbing Peter to pay Paul, so to speak, using their borrowed money to instead provide for their families. Kapana (2011) notes that women in SHGs
seeking credit are vulnerable to the institutional imperatives of banks, the systemic corruption of the rural development administration and the policy mandates of a developmental state, which legitimizes women’s access to institutional credit, even as it imposes an enterprise-promotion agenda widely perceived as irrelevant to their life circumstances (p. 60).
An example this might be a women’s subsistence farm collective taking out a line of microcredit while their government uses eminent domain to take their land and sell it to a private mechanized agricultural project which plans on using the land as a mega-farm for the country’s exports. The microloan was issued and is regulated by an entity that has no real understanding of the realities of a group of women living within a subsistence model, in abject poverty. Now the collective has no way to stick to their rigorous payment schedule that is incongruent to their way of life.
In order for microcredit to be effective in alleviating global poverty, steps must be taken to avoid the pitfalls of privatization and neoliberalism mentioned above. “The conciliation between private and public interests is only as effective as its ability to maintain microcredit services to the poor; regulation must also be developed in pursuit of this goal” (Jobim 2011 p.16)
Rather than leaving micro-lending to private institutions, a solution might be at least a partial rollback of neoliberal economic policies in favor of more government regulation of micro-lending institutions. Currently, the piecemeal nature of microcredit borrower’s success makes it unlikely to be effective on an international scale, especially if there is no governmental infrastructure to support or regulate it and the borrowers. With state-sponsored macro-level structural programs devoted to social welfare, regulation of the banks issuing microcredit, and terms of loans adjusted to fit the needs of borrowers in a given state, I feel that the success of microcredit as a tool for alleviating poverty would increase.
Microcredit and Gender Equality
As a means of achieving gender equality, the efficacy of microcredit rests in a maddening state of ‘it’s complicated’. Women’s empowerment is held up as one of the main goals of the microlending concept. To quote K. Kalpana (2011), “the belief that access to financial services enhances a woman’s role in the household decision-making, increases her confidence level, improves her participation in wider social networks and fosters her engagement in political activity has conceptually linked women’s credit and female empowerment.” (p.55)
Similarly, Robin Isserless (2003) notes, “for women living in especially repressive environments, microcredit has allowed them to congregate with other women and has given them access to skills and training, basic literacy, and health and nutritional education. (38) And Kalpana (2011) describes one study’s finding of a growing awareness of a woman’s power outside the parameters of the household hierarchy. She writes: “in one study, a disgruntled husband informed the researcher that…SHGs had eroded women’s respect for their husbands, taught them to speak a ‘language of rights’ at home and spawned the idea that women have power too” (p. 61)
And yet, a significant gap exists between these anecdotes and the actual egalitarian gendered outcomes that have come from microcredit. On the one hand, microcredit does provide access to money and promotes self-sufficiency through economic stability. In ideal circumstances, a collective may achieve some alleviate from the experience of poverty and stimulate their local economy. However, societal and structural factors combine to complicate the idea of empowerment through microcredit.
To begin, the very nature of marketing strategy of microcredit portrays women as altruistic, morally superior, responsible providers are problematic because this spin doesn’t give women any actual agency. Instead, microcredit is promoted in the capitalist rhetoric of a woman as a ‘safe bet’ in terms of credit only because of her familial motives reduces the viable options of what women might do with financial independence and the alleviation of poverty. Under this reduced neoliberal definition of womanhood, women are instead relegated back into the singular, gendered realm of the proverbial kitchen. In her feminist critique of microcredit Robin Isserles (2003) notes that in relegating poor women to ‘good credit risks’ within the microcredit development project “women are idealized as mother, burdened with a new set of responsibilities because they are assumed to be more reliable and more caring. This essentialism can be dangerous and ultimately regressive, reinforcing gendered stereotypes and role expectations” (p.48). These added responsibilities can then be further exacerbated by the social pressure that is inherent in the collective microcredit model. After all, the collective is only as strong as its weakest member and in cultures where social standing is essential to mobility, the fear of failure can lead to a debt Given the current accepted essentialized rhetoric of women’s participation in microcredit development programs, I find it an unlikely tool for widespread gender equality.
Another example of the complicated nature of the ability of microcredit to facilitate gender equality is the intersection of the female microcredit collective and the patriarchal hierarchy found in many regions of the global South. “In patriarchal households, where wives defer to household males for financial decisions…it is questionable whether targeting women necessarily leads to goals of equality and empowerment when gender hierarchies are left unaddressed” (Visvanathan and Yoder 2011). So, if a woman takes part in a microcredit collective, but her husband spends her money on himself rather than as a means of investing in the development project, the woman in question has very little recourse to stop it, but is still beholden to the collective and the bank. In this situation a women in a microcredit collective is left vulnerable to both the patriarchal structure of her household and the peer pressure and social scorn she’ll receive from her collective if she cannot make her payments, often leading to a dependence upon local money lenders to close the gap, whose interest rates are steep. This can lead to a debt cycle from which already impoverished women cannot escape.
As evidenced above, microcredit is a double-edged sword. As a product of both the age of neoliberal policy and the fallout of structural adjustment programs, it has been designed within the framework of privatization and the problematic notion of self-sufficiency regardless of institutionalized inequities. If I have learned anything throughout my time in the Women’s & Gender Studies program it is that anything conceived out of a private, mega-institutionalized capitalist framework is going to serve to feel the machine of capitalism and fail to serve the most marginalized portions of the global population, namely women, those experiencing poverty, and the otherwise marginalized. That is not to say that microcredit has not improved the lives of many women. But if we are examining this particular development project on a global, macro-scale, I cannot extol its successes as tantamount to a global movement; there are simply too many intricacies that are overlooked by international development agencies, private entities, and the lending institutions themselves.
I view microcredit as something akin to putting a bandage on a broken leg. This measure may cover the wound and stop some of the bleeding, but the leg itself is still broken. So it is with microcredit; at its heart, it is dependent upon the capitalist marketplace and the whims of the private sector that is at work within neoliberal development policies. Without a massive reconfiguration of economic policy, as it relates to the global South, I doubt that microcredit will serve as an alleviation to poverty or as a means of furthering widespread development, and it certainly won’t provide some sort of global movement toward gender equality. Instead, it will remain a tool that largely helps only those who already have the means to help themselves while furthering the cycle of poverty for those who are the most marginalized.