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Microfinance and Its Discontents – A Mini-Review

Posted by Ashirul Amin

I finally got my hands on Lamia Karim’s Microfinance and Its Discontents: Women in Debt in Bangladesh, and it made for a great read. If you are interested in this field, you should check it out. I thoroughly enjoyed the narrative and appreciated her attention to detail in terms of laying out the context necessary to follow in her anthropologist’s footsteps, so to speak.

I think the biggest contribution this book makes to the field is providing another counter to the PR-ridden “microcredit is the silver bullet to poverty” storyline that has done as much harm to industry by setting up unrealistic expectations of what microfinance in general, and microcredit in particular, can and does do. For better or worse, anecdotes continue to play a strong role in shaping the perception of the utility of microcredit in the absence of rigorous quantitative proof either way, partly because pretty much every recent RCT has found no evidence of statistically-significant impact (as opposed to evidence of no statistically-significant impact …).

Check out Chapter 4 for the 7 narratives provided. 3 of them end up doing well, 4 of them – not so much. The complexity of each person’s life and the financial intermediation they have to undertake in the presence of other instruments amply illustrates the fallacy of relying on a linear narrative that draws a causal connection between providing credit and increased income.

Chapter 1 and Chapter 5 are nice contributions to discussions about the genesis of the NGO scene in Bangladesh, especially when it comes to those providing microcredit. There used to be four – Grameen, BRAC, ASA and Proshika. And then the fourth kinda went way overboard with what it was trying to do, and then there were three. Proshika’s story of demise is interesting in itself, but is also an example of the dangers of confronting interest groups within existing social hierarchies head on, as opposed to working with them as most others try to. Reading these chapters makes one appreciate the institutionalized impediments to development the microfinance industry had to overcome.

One should keep in mind a couple of things while reading this book though. The lion’s share of her work was done in 1997/98. So when the publisher says this book “offers a timely and sobering perspective on the practical, and possibly detrimental, realities for poor women inducted into microfinance operations” on the back cover, I’m not so sure about the “timely” bit. This is not to say that a lot of the societal dynamics are still not relevant today, but microfinance as an industry has come a long, long way in 15 years, as has the critical awareness of civil society and the media to developmental initiatives. It is virtually impossible to imagine that “house breaking,” for example, is sanctioned or possible on an industrial scale today.

There is also this sense of exploitation of women borrowers on an industrial scale, although this book’s various reviews are probably guiltier of overhyping this than the book itself. It is couched in a neoliberal narrative – one that has found particular traction amongst critics of microfinance. In so far as “neoliberal” denotes “more markets, less state,” microfinance is guilty of that charge. Unfortunately, Lamia Karim assigns predominantly negative characteristics to those who are successful in this “neoliberal” enterprise – they lived by the principles of “competition and rationality,” and “while NGOs construct female borrowers as entrepreneurs, the emergent neoliberal subjectivity that I encountered was that of the petty female moneylender. The female moneylender embodied all the competitive aspects of the neoliberal subject.” (p.p. 199-200)

She makes a similar case on how “introduction into private life has led to loss of social solidarity,” where “introducing loans into private life, NGOs have begun to weaken the kin-based bond of identification and family solidarity.” (p.g. 200). I think it’s fair to say that most practitioners would be very confused with the first statement, and point out that most processes of upward economic mobility has the effect of reducing family size and relationships becoming more nuclear. I won’t go through all the other things that I found similarly odd, but the chapter Conclusion is littered with them.

In summary, put a tinfoil hat on for the last chapter if you must, but the book is good – check it out.