Kruse Kronicle

Microfinance: An Economic Development Failure?

—

by

mwkruse
in , , ,

Social Edge: Microfinance: An Economic Development Failure?

Microfinance doesn’t clear land mines, save rain forests or stop global warming.

… Today, many armchair economic development experts, trained economists and sideline pundits have started to wonder why microfinance is not the next Industrial Revolution.
 
Since I usually agree with myself, I quote here from my speech to a domestic micro-enterprise conference: “Microfinance is about more than money. None of us in this room would accept living in a community with bad schools, little healthcare, no electricity, and filthy water – but with a great bank. Economic justice means the poor must have the power to speak up, speak out and speak for themselves.”
 
For a seriously impoverished woman, empowerment is pretty simple. A little bling and, all of sudden, she is empowered to feed her kids, stand up to an abusive partner, thatch a roof or pay a medical bill. Ask any woman what financial independence means.
 
The hoi polloi of funders, metric mavens, think tanks and policy wonks need to explain microfinance as quantifiable economic development because that is THEIR obsession with spread sheets and snazzy graphics. At the one-dollar-a-day subsistence level, microfinance is about giving a woman a choice and a chance, no more and no less. …

Comments

One response to “Microfinance: An Economic Development Failure?”

  1. Hunter Farrell Avatar
    Hunter Farrell

    Yes, but…!
    Well-planned microfinance interventions can help “empower” the poor IF:
    (1) They rely on *providing skills* like basic bookkeeping, microeconomics, how to set prices, inventory control, product development, etc. (otherwise, the intervention propels them into greater debt, as they are “empowered” to invest in an unprofitable product);
    (2) They are *coordinated* with the efforts of local/national governments and other NGOs, otherwise, many poor participants wind up using microfunds from NGO B to pay their loan from NGO A– in some Global South metropolitan areas, NGOs compete for poor clients so they can get the most capital pumped through their programs (the more they loan, the greater the percentage they can use for their own programs); and,
    (3) They are paired with strategically focused efforts to address the *justice* issues that often contribute to the conditions of poverty in the first place (many/most microfinance efforts make no long-term impact on the poor because the small progress made is quickly wiped away by corrupt officials, burdensome governmental regulations and unfair competition/practices by larger corporations).
    IF you attend to the issues of skill development, coordination with other groups, and the underlying issues of justice, THEN microfinance can supply the missing link to the complex chain of microeconomic development. This is standard microeconomic development theory– I would also add a faith component: I have seen many poor and oppressed people “empowered” to become oppressors if a Christ-centered spirituality is not part of the holistic development.
    Partners for Just Trade, a project begun by the Presbyterian Hunger Program and Giddings-Lovejoy Presbytery, has developed a solid track record in connecting the various links in the chain to help several hundred poor Peruvian artisans increase their income 300-400% in sustainable ways. Check them out: http://www.partnersforjusttrade.org/

    Reply

Leave a Reply

Discover more from Kruse Kronicle

Subscribe now to keep reading and get access to the full archive.

Continue reading