Neo-Liberalism Considering the Evolution of Microcredit Loans

Microcredit Loans  Very small loans provided to very poor people to subsidize home-based businesses  Basket-making, jewelry-making, quilt-making, etc.  Small, home-based farms?  Others?

Traditional Image of Microcredit Loans

Initial Goals of Microcredit Loans  Increased economy autonomy for women  “Empowerment”  Foster social connectivity and solidarity between poor women  Greater sense of well-being  Increased productivity  Alleviate Poverty in “Third World Countries”– Aid to “Development”  Increased social inclusion of women into formal economy.

Early Microcredit Structures  Created and managed by Non-Governmental Organizations (NGO’s)  Subsidized by private foundations and/or government grants.  Interest was used to create loan opportunities for other women, and to promote social responsibility (giving back).  Developed and implemented by small organizations that worked in specific local communities  Driven mostly by intangible benefits, not profit-making

Feminist Economic Development Model  ’s –Women’s Rights as Human Rights Paradigm  Access to credit was defined as a human right, that many women were denied due to patriarchal family structure  Established Women’s World Baking Networks  Increase of NGO’s offering Micro-credit Loans

Global Marketization (Globalization) of Microcredit Loans  Growth of organization dedicated only to Microfinancing all over the world.  Promoted microcredits as a “best-practice” to foundation and policy-makers.  Increased involvement of IGO (International Government Organizations like World Bank, U.S. Agency for International Development) promoting microfinance model to NGO’s.  Increase of NGO’s offering micro-credit using “best practice models” in different part of the world.

The Neoliberalization of Micro-credit Loans MMicrocredit Loans >>>>>Micro-financing Institutions (MFIs) GGrowth of MFI’s—found everywhere on the globe IIncreased government support and IGO support for MFI’s FFocuses on profit-making t hrough granting a very large number of very small loans SSuccess is defined by number of women’s reached not by decline in poverty SSuccess defined by repayment rates not by alleviating poverty

Neo-liberalism  Microcrediting is commodified, transformed into a product or service rather than a social project.  Increased focused on creating and “tapping into” new markets, not on alleviating inequality.  Government involvement is viewed as a hindrance— privatization is viewed as “cost-effective”  Policies created to ease entry for private banking institutions not to redistribute wealth in society.  New model of “Financial Services for the Poor”

Impact on NGO’s  NGO’s pressured to convert into commercial banks.  Now lending private money to make marginal profits  Governments and Foundations eager to fund microcredit lenders rather than actual non-profit organizations.  Funding profit making organization rather than social justice organizations.

Globalization  Global neo-liberalism characterized by:  Increasing concentration of wealth to a small number of elites  Growing global economic interdependence that supersedes the power/interests of individual states (de-territorialization)  Global dissemination of capitalism (both its economic model and underlying cultural values  World-wide global inequality  Compression of time/space through technological innovation— especially the movement and flow of information and credit.