Tanglad has an amazing post up on mircrocredit.
It’s easy to understand the appeal of microcredit. Poor women from the Global South use loans as small as $20 to start businesses and lift themselves from poverty. The creditors make a profit when the loans are repaid. Win-win.
What do they say about things that look too good to be true?
A whopping 90 to 99 percent of these loans are paid back with interest, another shining indicator of microcredit’s success. But there is an ugly side to ensuring repayment, where poor women are made to police one another and punish defaulters with collective acts of aggression.
In her study of Grameen Bank microcredit programs in rural Bangladesh,* Leila Karim finds that the focus on the 98 percent loan recovery rate hides how beneficiaries are co-opted into “a political economy of shame.”
Microcredit works by appropriating the only social capital poor women possess — their virtue and family honor. Among the Ifugao women in the northern Philippines,** microcredit beneficiaries are grouped into cohorts of five to fifteen members. They are given clear instructions: “You are all responsible for the loan and have to make sure that no one defaults.”
This lays the foundation of a very effective surveillance system, wherein poor women monitor other poor women. And the poorest women, the ones who need loans the most, are evicted from the group to minimize the risk of default.
Given the surprising lack of entrepreneurial or job skills training in microcredit schemes, it’s not unusual for a member to default on her loan. This is when things get even uglier, as the other women in the cohort are forced to extract payment.