This is NOT a post bashing microfinance. AT ALL. In fact, I’m spending most of my Christmas money (thanks, Great-Grandpa George, for the $50 every year!) on KIVA loans to women entrepreneurs in Latin America. I believe very strongly that there is ample evidence of how supporting women entrepreneurs, especially in group settings where there is also support for education, connection to markets, collective bargaining for supplies, and other assistance, not only makes a difference in their individual lives but transforms the trajectories of entire generations.
As fate would have it, one of my students chose Banker to the Poor, Muhammad Yunus’ book about the evolution of the Grameen Bank model for microfinance for the poor, so I read it last fall at the same time that some controversy was erupting around Kiva and other microfinance organizations’ tactics to appeal for donations. For the most part, I think that those criticisms are unfortunate; they center around the idea that Kiva pitches to donors that their contribution/loan will benefit a specific, featured individual, when really the loans are disbursed according to a larger giving strategy (the same thing that disillusions some who contribute to those child ‘sponsorship’ programs). I guess I understand the disappointment on the part of the donors, kind of, but I also understand where Kiva’s coming from–a need to balance donors’ motivations, which are overwhelmingly based on a perceived personal connection to those in need, with a giving strategy that will maximize impact. Personally, the impact that the organizations to which I give have on the problems I care about matters far more than how ‘efficiently’ or ‘directly’ they invest my money. I give, ultimately, not because I expect it to make such a difference in my life, but because I want to solve problems.
And microlending does that. The best microlending organizations have created a new paradigm for poverty eradication and have, in the process, taught us a lot about the importance of rethinking, believing in those we serve, investing in women, and dreaming big even while starting very small. Grameen, in particular, has shown that people in poverty already have skills that they can use to improve their lives (how’s that for strengths perspective?)–they skip the financial management and skills training classes that many anti-poverty programs have long clung to.
They have vigorously opposed any efforts to dilute their mission by offering services to nonpoor individuals, showing instead that they can make their operations sustainable without bringing in those who start with more advantages. Social workers could learn a lot from this; as Yunus says at one point in his book, anytime we bring in those who aren’t poor to programs that were intended for those who are, the poor will be crowded out. Social work organizations, I believe, must avoid this kind of mission drift wherever it threatens.
They’ve integrated the personal and political; one of my favorite things about the Grameen story is about how it has transformed the electoral participation of the poor in Bangadesh–Grameen borrowers have been elected to office in surprising numbers and have also changed the conversation during elections there.
And they’ve worked their way through liberal (“you’re giving opium to the poor, so that they won’t revolt”), conservative (“lending to women destroys traditional family dynamics”), and more pragmatic (“they’ll never pay you back”–this is my favorite, “they’ll pay back more than in traditional aid programs, which is not at all!”) critiques to make a real difference in extreme poverty among people in much of the world.
So, then, why the ‘caution’ as the post title suggests? Well, it’s just that, we who want to change the world often get desperate. We’re desperate for anything that will work, anything that shows promise of being better than what we’ve tried and failed, anything that might be the silver bullet that has eluded us for so long. And that quest for the magic solution can lead us to blindly pursue worthy interventions that are then misapplied, oversold, and, in fact, used as excuses to dismantle some of the other, perhaps less popular, investments that have long served those in need.
I believe that microlending has become such a fad, and some of the data in Half the Sky and another book I read last fall, The Blue Sweater, prompted me to do some research that confirms that fear. We know that microfinance doesn’t work as well in Africa as in other parts of the world–the markets aren’t as well developed, health crises (particularly rampant HIV/AIDS) increase delinquencies, the high interest rates can become untenable when businesses are less profitable. Not everyone is an entrepreneur; I, for example, would make a pretty horrible businesswoman, I know. Microfinance can’t undo all of the underlying inequalities–the lack of infrastructure that, itself, is a major barrier to business; lack of educational opportunities (although microfinance can help individual families take better advantage of the opportunities that exist); and those same health disparities. And it’s not a panacea for gender oppression, either; access to credit absolutely increases a woman’s standing in her family and her community, but women are almost always still disadvantaged in the marketplace and at home, expected to run the business and take care of children and the house. And, finally and perhaps most seriously, microfinance contributes to the commodification of social goods, the idea that the marketplace can, in fact, solve all that ails us (although, if you read Yunus’ work, he’s clear that he does not see the world, or economics, this way). This can lead to a further erosion of the role of government in the provision of social goods, and to placing a price on anything of social value.
The lesson for me, as I both make a KIVA loan and shudder a little bit at every announcement of a new microloan program somewhere else, is not only that we need to always preserve some healthy skepticism for that which is hailed as “the next new thing.” Even more fundamentally, it’s that we need to absorb what is perhaps the most valuable lesson of the microfinance movement (a term, by the way, that more accurately encapsulates the idea that people in poverty need savings devices as well as loans)–that we must listen to and respect and always begin with those we intend to help. If we do that, they’ll tell us that loans won’t solve everything, that they need other kinds of help too, but that lending programs can play a role in the dreams that some of them have for their lives. And they’ll show us how else we can work together. And we’ll be making policy and building programs not based on what’s hot, but on what’s right, for those who deserve the fish today, and the fishing rod for tomorrow, and the clean river with managed fish habitat for generations to come.