In the past decade “microcredit” and “microfinance” have taken the world by storm. Particularly since the Nobel Prize was granted to Muhammed Yunus, founder of the Grameen Bank, they have blossomed into a global financial industry. These “micro” lenders now offer small loans to very poor people in all over the planet. At first, this was marketed as a scheme to help lift poor women out of poverty by helping them start microbusinesses and afford necessary items. Quickly, though, the practice took a turn toward loan-sharking, and we’re now beginning to see some truly ugly results emerge.

Parts of rural India have seen waves of suicides linked to these loans. Both community activist groups and leaked internal memos of SKS (“Self Help Society”, the largest microcredit firm in the country) support this. Not only were these lenders harassed, threatened and publicly shamed, but they were often told “only death” could release them from their loans. Other documents from inside SKS show the company transformed when it “went public”, receiving billions in investments and expanding rapidly with little care for proper training of new loan officers. For a while the government and courts stepped in, even going so far as to arrest loan officers, though pressure from the company eventually forced them to back down.

In Egypt, on the other hand, microcredit groups took a different approach – they involved the police. Though microfinance groups began much like in India – promising to reduce poverty, they quickly took a similar turn toward loan-shark banking. Because those they lent to had no collateral, institutions required a deposit cheque which could cash in the event of a late payment – when said cheque bounced, it became a “crime”. As they began to use (corrupt) police to collect debts and punish those who were late for payments (“even for a day”), this evolved into a racket and the police became its enforcers. Frequent, brutal sexualized violence against women and young people became the norm. These tensions, of course, played a large role in provoking Egypt’s revolution last year, and go a long way to explaining why Tahrir Square protesters and others were so hostile to the police.

The Microcredit “movement” sought to re-brand capitalist ideas as some sort of grassroots, Third World anti-poverty struggle. In practice, it turned out like any other banking scheme. These institutions quickly became less like charities and more like payday-loan outlets – a vast and under-regulated network of banking start-ups every bit as corrupt as those at the head of the industry. Rather than lifting people out of poverty, it begun a new phase in the economic and ideological colonization of the Third World. Through institutions like the SKS, international finance can now lend directly to the poorest people on the planet. No longer is it enough to sink the nations as a whole into inescapable debts, but now these institutions seek to establish themselves in every remote village. In this new world, no poor woman, anywhere, should be without the option of getting into debt.

Like all colonialist attitudes, there’s a lot of ugly implicit assumptions here. We’re assured that poor women in African and Asian villages are struggling because they’re not enough like us. It’s assumed that our system works, and that our success has nothing to do with Third World poverty. Left unmentioned is the debt crisis which has gripped these nations for decades, or the long and brutal history of conquest and colonization which came before it. Instead, like always, we’re left with racist mythologies about why these nations are inherently warlike, despotic and poor.

It would be both dishonest and self-serving to pretend that the actions of incomparably rich foreigners in desperately poor communities only ever bring positive outcomes and effects. There’s privilege implicit in every word we speak and every step we take in a place like that. Our dollars are worth truckloads of theirs, we have easy access to media with international reach, and we can be assured that if we go missing or turn up dead, somebody outside the village will care. Even when we simply sit in Canada and invest a few dollars or make a few ill-conceived public statements on foreign policy, those small acts on our part can easily hold more influence than entire communities. Whether we come as investors, missionaries, or aid/development workers, we must always be wary of using poor and vulnerable communities as our playgrounds.

Those of us in countries like Canada can’t pretend we don’t know how capitalism operates. We had to know this would happen. We see it every day,especially in our own poor communities. Even under the strongest watchdogs with a very comprehensive safety net, lending like this generates tiny wealthy elites, large impoverished under-classes and rigid, uncaring bureaucracies to enforce them. Why would we think the result would be any different effect in regions with rampant corruption and no safety nets? Are we so enamoured with the ideals of capitalism that we’re now willing to consider them an act of charity? And what does it say that these ideas have gone so unchallenged (publicly) thus far?

Sorry guys, but investment isn’t charity, no matter how small the scale.

Advertisements