You, as your article claims, had no idea that microcredit "would give rise to its own breed of loan sharks. But it has." You have identified the time period since "trouble with microcredit began" in 2005. Microcredit operators began turning into profit makers; empathy towards borrowers disappeared; microcredit debtors were harmed; etc. You have also identified the cause: "Commercialisation has been a terrible wrong turn for microfinance."Financial risks are transmitted to the poor;" "commercial microcredit institutions are subject to demands for ever increasing profits, which can only come in the form of higher interest rates charged to the poor." These observations are related to reality.
tive, and the poor are their prey.
Then, the consequence is there: pressing the poor for repayment. Threat, coercion, humiliation, selling of belongings, pulling down of tin roofs, desertion, suicides, are what the poor debtors go through when they get trapped in debt. Their vulnerable lives turn more vulnerable with no survival space.
A number of studies found this even before 2005. Richard Montgomery in his paper Disciplining, or Protecting the Poor? Avoiding the Social Costs of Peer Pressure in Solidarity Group Microcredit Schemes (1995), David Hulme and Paul Mosley in their Finance Against Poverty (vol. I, Routledge, London, New York, 1996), and Aminur Rahman in his study Women and Microcredit in Rural Bangladesh, Anthropological Study of the Rhetoric and Realities of Grameen Bank Lending (Westview Press, Colorado and Oxford) cited the harsh reality debtors face.
Interest rate is a burning problem microcredit debtors face. But it is not the only problem that they encounter. It is not the only factor that traps them in the debt cycle. The source of interest should be looked into before the rate of interest. The source leads one to appropriation of surplus labour.
The premise microcredit stands on is wrong. The poor are asked to be entrepreneurs although most of them do not have the traits that make an entrepreneur, and the environment and conditions are not always present to facilitate entrepreneurship. On the other hand, household-based isolated production/service micro-units are asked to compete with each other and with macro-competitors in a macro market. It is actually an indeterminate equation.
A society overwhelmed with poverty cannot buy its liberation from poverty through thousands of micro-enterprises. Poverty is not only an economic question. It is a political question also; and micro-enterprises do not have the capacity to resolve the political questions related to poverty. Moreover, an economy cannot lift itself through microcredit. Milford Bateman has discussed this in his Why Doesn't Microfinance Work? The destructive rise of local neoliberalism (Zed Books, London, New York, 2010).
Shall "steer microcredit back to course" provide the way out of poverty? Each type of capital has its own character, its trajectory. Loan capital shall not behave like manufacturing capital, usury capital's path of movement shall be different from that of industrial capital, and no one can stop capital looking for gambling from entering a casino. And, all of them have their respective destinies. Is it possible for the poor to find their survival space in company with capital that looks for profit? Utopia has long been left back by political economy.
