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<nettime> Microcredit, microresults

     [From _Left Business Observer_, edited by Doug Henwood, 
      <http://www.panix.com/~dhenwood/LBO_home.html>, author
      of _Wall Street: How It Works and For Whom_ (Verso, ISBN 
      0860916707 [paper], Chinese editon forthcoming!). LBO is 
      an excellent newsletter, available in print or by email. 
      Forwarded to nettime with permission. cheers, tb]

The following article appeared in Left Business Observer #74,
October 1996. It retains its copyright and may not be reprinted
or redistributed in any form - print, electronic, facsimile,
anything - without the permission of LBO.

Microcredit, microresults

by Gina Neff

Gina Neff is an economic journalist in New York City. Her piece
on foundations is on this site. So is her follow-up report on the
microcredit summit.

"If we can come up with a system which allows everybody access to
credit while ensuring excellent repayment - I can give you a
guarantee that poverty will not last long," proclaims Muhammad
Yunus, guru to market partisans seeking "new solutions" to
poverty. As founder of the widely acclaimed Grameen Bank, the
Bangladesh bank that lends to poor rural women, Yunus has found a
rapt audience in international development circles with his
approach to poverty - one that doesn't involve old-fashioned
ideas of expensive government programs, tiresome training, or
clunky infrastructure. Instead, Yunus, a Vanderbilt-educated
economist, is calling on the goodness of "social-consciousness- 
driven entrepreneurs" and pushing "home-based production by the 
self-employed masses." This translates as moving the responsibility 
for antipoverty programs to poor people themselves, using borrowed 
money - and not only in the Third World, but here in the U.S. as well.

In the Grameen model, "landless women in Bangladesh, the poorest
of the poor" are miraculously transformed into businesswomen -
with enterprises so small they are tagged with the prefix
"micro." Rather than job creation, education, or training, the
Yunus solution focuses on jump-starting self-employment,
providing the capital for poor women to use their innate
"survival skills" to pull themselves out of poverty. Instead of
collateral, these "microloans" are secured by the honor and
credit lines of a peer group: If one woman defaults, no one in
her lending circle will receive another loan. This model has
sparked a movement to dismantle development initiatives and
decentralize antipoverty programs with the ultimate privatization
of welfare - shoeless women lifting themselves up by their
bootstraps. According to the glowing press churned out of the
Grameen's Dhaka headquarters, which has been recirculated
uncritically in both the popular and professional press, it seems
to be working. After all, what other bank lending solely to poor
people can claim a 97% repayment rate, and a borrowing clientele
that is 94% female?

Poverty alleviation?

But while the press and the global network of localists rave
about the bank's lending to "landless" women, the miracle
dissolves on closer inspection. For example, Grameen rules insist
that its borrowers own their homes - not unlike the assumption
that shoeless women have bootstraps. Evidently Bangladeshi
homeless women don't count as the poorest of the poor. And
unfortunately, Grameen borrowers are staying poor. After 8 years
of borrowing, 55% of Grameen households still aren't able to meet
their basic nutritional needs - so many women are using their
loans to buy food rather than invest in business. That's a figure
that the press fails to mention. Ditto the World Bank, which in
its 1995 study of Grameen, focused mainly on the bank's financial
viability, determining if the program was breaking even or,
better yet, turning a profit. It's not; unfortunately, only
foreign grants are keeping it afloat.

Yunus himself lustily defends his vision of for-profit lending to
the poor. In his words, capitalism doesn't have to be the
"handmaiden of the rich"; even poor people can benefit from the
system if they are only given the chance to use their innate
business savvy. But even though part of his mission is to
graduate lenders into commercial banking, and the World Bank sees
lenders' graduation a sign of the program's viability, that's
just not happening. According to the World Bank report, "The
[Grameen] Bank may have a market niche because its borrowers are
dependent on the program, but over the long run this relationship
could render the Grameen Bank vulnerable. Unless borrowers'
graduation from low-level incomes to higher levels (if not from
the program entirely) is encouraged or achieved many members will
become permanently dependent on Grameen Bank credit and
services." The same study found that Grameen had no significant
impact on women's wages in rural villages, although it did boost
men's and children's wages. And with all the hype about Grameen's
being the largest microlending program in the world, one could
never guess that loans to women have remained a mere 5% of the
total amount lent in the Bangladeshi countryside since the 1980s.

Gendered credit

Proponents of Grameen-style microlending argue that even despite
their flaws these programs benefit and even "empower" women. But
in a study recently published in World Development, Anne Marie
Goetz and Rina Sen Gupta found that while women are getting the
loans from Grameen Bank and similar organizations, a "significant
portion" of those loans are directly invested by male relatives
(although women bear the liability for repayment), and in only
37% of the cases had women retained full or significant control
over the businesses that were in their names. In comparison, 22%
of those they surveyed didn't know how their husbands, sons,
fathers or brothers had used the loan and had not even been
involved in "their" enterprises. At Grameen, daughters of women
borrowers are not eligible for a loan because the bank has a
policy against making two loans to a family, even though a
borrower can take out additional loans for her son's business. So
much for the "empowerment" of women.

Instead of empowering women, it looks more like Grameen is using
them as collection agents. As a Bangladeshi government field
worker explained to Goetz and Gupta: "We are much better at
getting our loan money back now that we are using women as
middle-men [sic]." Even the western development literature is
guilty of painting women as the sole moral and financial
guardians of the family. Grameen's high repayment rate is
commonly explained by saying that men gamble the money away while
women are more responsible, trustworthy, and concerned about the
family. These explanations rarely note the pressure that poor,
illiterate women must feel from Grameen's highly educated,
primarily male staff, nor do they examine what leads men to
behave so irresponsibly, if this is indeed the case. Under the
banner of liberation, Grameen ironically reinforces women's
traditional roles; while capitalizing household activities, women
are kept out of waged work - which, whatever its limitations, can
offer women some degree of independence. As Goetz and Gupta put
it, using women as "conduits for credit for the family" keeps
women as the "policers of recalcitrant men," dubious progress in
gender relations.

Several outside studies of Grameen confirm that the control women
have over their microloans decreases over time - just the
opposite effect one would expect from programs meant to promote
women as entrepreneurs. Grameen encourages women to borrow for
livestock and agricultural purposes - in Bangladesh, traditional
women's work. Grameen's social interventions have less to do with
empowering women than with making them good repeat borrowers. At
every meeting women rather cultishly recite the "16 decisions"
that they must adhere to in order to be Grameen borrowers
including, "We shall reduce our expenses to a minimum" and "If we
learn that discipline is not respected . . . we go along to help
and restore order."

Grameen might be better at generating media attention, but their
services seem Spartan compared to those of the other microcredit
programs in southeast Asia. Grameen, believing women are able to
provide for themselves all other inputs necessary to be effective
entrepreneurs, provides only credit. On the other hand, India's
Self-Employed Women's Association, a union for poor women, offers
credit as one of a range of services, along with political
organizing, training, business skills, leadership skills,
mediation, lobbying and project assistance. The Bangladesh Rural
Action Committee provides education for the daughters of
borrowers as well as health services. But the Grameen model of
banking on the poor is strictly quantifiable - "repayment rates,"
"cost effectiveness" (i.e., how much it costs rich creditors and
donors) and "viability." Without the cumbersome delivery of the
other services that the poor need, Grameen gets to champion the
free-market system and all its goodness.

Yunus has announced that Grameen is working with the government
to replace the nationalized health care system with a sort of
poor person's HMO on a "cost recovery" basis. Of course, in the
experimental programs, Grameen borrowers were rewarded for
borrowing money with lower premiums for health coverage. This
fits with the World Bank's recommendation that Grameen develop
new markets and products for poor people. If adopted by the
Bangladeshi government, the Grameen-run HMOs would create a
two-tiered health care system - with families in hock to Grameen
getting cheaper care.

Grameen-style lending elsewhere in the Third World, promoted by
the World Bank, isn't scoring any great successes. In Zimbabwe,
Patrick Bond pointed out in an article in African Agenda, loans
to peasants had a default rate of 80%. Bond quoted Ugandan
economist Dani Nabudere as saying that the notion that the rural
poor need credit to improve their lives "has to be repudiated for
what it is - a big lie!" But the rhetorical appeal of self-help
obfuscates the failures of group lending to do anything for the
African poor.

Import model

Now U.S. disciples of Yunus are bringing the Grameen religion
here. In February the first Microcredit Summit will be held in
Washington, and everyone from Hillary Clinton (who has said of
microcredit that it "translates to hope for women who dream of
better lives. Its impact is gigantic.") to Republican Senator
Robert Bennett wants to hop aboard the microbus. The can-do
enthusiasm of targeting the poor meshes nicely with the shredding
of the social safety net, so the applicability in the U.S. of the
peer-lending model for small, informal businesses is never
questioned. Microcredit fits in nicely with prevailing U.S.
prejudices, since it relies on local, rather than national,
programs and individual, rather than collective, approaches.

But the notion that microlending could seriously reduce poverty
in the U.S. is ludicrous. Women's World Banking, a microcredit
coalition based in New York, highlights the success of
microlending in this country with stories of a newspaper
journalist turned doll maker, a low-income mother of four who
paints children's faces and murals, and a lower middle class
woman who opens a gourmet coffee shop. While there is nothing
wrong with what these women are doing, these activities are
highly dependent upon consumer trends and personal income levels
(will a cappuccino craze sweep South Central L.A.?) and would be
severely hurt by a downturn in the economy.

Beyond the vulnerablity of these new businesses is the issue of
how right they are - that is, is it right that programs are
encouraging women and the poor to take these kinds of low-paying,
albeit self-paid, jobs? Debra Franklin, President of Planned
Financial Concepts and a microlender-to-be, gushed about one
potential client's plan to buy cans from homeless people at
half-price. Behind the chic rhetoric of flexibility and
decentralization, there is an exploitative feel to many of these
programs. Yunis's vision of moving mass production out from under
one factory roof into home-based self-employment sounds
frighteningly like a return to 19th-century-style piecework. And
when there's no transformation of production, wordplay can do
miraculous work; for example, maids with microloans suddenly
become microentrepreneurs with their own "cleaning service."

In an article earlier this year in Inc. magazine, Timothy M.
Bates and Lisa J. Servon slammed the microcredit movement for
touting poverty relief as a viable goal. According to Bates and
Servon, at Working Capital, a group that targets "low-income
communities to rebuild local economies," only 16% of the
borrowers had personal incomes below $15,000 and almost half
earned $30,000 or more. As they put it, "running a small business
in this country requires an education and a dependable support
network as well" - something the inner-city poor don't have. Now
the phrase "income patching" is coming into vogue with program
officers, who see microenterprises providing working moms with an
few thousand dollars a year, but nowhere near enough to get by.
Where the main body of income will come from, especially in
post-welfare America, is anybody's guess.

Kathryn Keeley, executive director of the Calvert Foundation, the
nonprofit wing of the socially responsible banker, has called for
illumination of the "myths of Grameen" and of the
inappropriateness for U.S. inner cities of Grameen's illusory
model. An experienced microlender, Keeley has called on the
enthusiasts to reevaluate the damage that they are doing to
traditional poverty programs and has approached the organizing
group of the Microcredit Summit, RESULTS, an anti-hunger lobbying
group, to amend their pro-Grameen agenda. Such internationally
noted philanthropists as Citibank are financing the summit, with
its goal of placing 100 million of the world's poorest families,
particularly their women, in self-employment by 2005.

What the microrevolution has failed to address in its manifestos
for credit to be considered a human right is that more people in
the U.S. are having to work at more than one job to stay above
the poverty line. Rather than working to increase wages, the
microliberals are clamoring to cut job training for the poor
because that's what has allegedly worked in Bangladesh. Turning
peasant women into mini-capitalists is just furthering the reach
of finance capital and shifting the burden of risk to a class who
already bear the brunt of poverty without safety nets. And
playing cheerleader to dead-end consumerism and self-exploitation
strengthens the arguments of the slash-and-burn policy crowd as
they cut public programs and replace them with the rhetoric of
credit-fueled self-empowerment.

Since some individuals have been helped by microloans, their
individual cases form a powerful body of rhetoric that plays into
the myth of America itself - work hard and make it. Now the
microlenders promise the destitute they can "borrow our money and
be your own boss." Sounds like a late-night TV pitch for instant
wealth through no-money-down real estate - and just about as
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