I will first state the case against Microfinance and refute it with incontrovertible arguments drawn from mathematical economics. (My arguments are supplied in bold italics)
First a must read link to Milford Bateman- scourge of Microfinance and David to Grameen Bank's Goliath, Nobel laureate Muhammad Yunus- all but explicitly labeling the activities of the Vikram Akulas (That's DrAkula to you, remember he has a Phd from Chicago) of the World as an example of 'control fraud'- like what happened to the S&Ls back in the Eighties.
It is blistering stuff- and a wake up call. Or it would be, if you hadn't me on hand to prove 1) Bateman has a penis 2) Bateman has a White penis. This proves he is wrong.
Bateman had earlier focused on denouncing the way Microfinance had been touted as a remedy in the post-war Yugoslavia or other places where the retreat of the State had left a vacuum in which neo-Liberal ideology could run amok. Crucially, Bateman focuses on the manner in which Microfinance crowds out productive investment in the small to medium sector.
Bateman isn't scared of going up against the big boys- not even Yunus is immune to his scathing attack. This is a link to another blog, by Rajan Alexander, which doesn't so much take a hatchet to Yunus and Akula and Vijay Mahajan as feed them into the wood chipper.
Here is a quote from an article by the Committee to abolish Third World debt- (Prof.Patrick Bond)
Consider this outlandish claim, made by Yunus as he got started in the late 1970s: "Poverty will be eradicated in a generation. Our children will have to go to a `poverty museum’ to see what all the fuss was about."
According to Milford Bateman, a senior research fellow at the Overseas Development Institute (ODI) in London, who is one of the world’s experts on Grameen and microcredit, the reason this rhetoric resonated with international donors during the era of neoliberal globalisation, was that "they love the non-state, self-help, fiscally responsible and individual entrepreneurship angles".
Grameen’s origins are sourced to a discussion Yunus had with Sufiya Begum, a young mother who, he recalled, "was making a stool made of bamboo. She gets five taka from a business person to buy the bamboo and sells to him for five and a half taka, earning half a taka as her income for the day. She will never own five taka herself and her life will always be steeped into poverty. How about giving her a credit for five taka that she uses to buy the bamboo, sell her product in free market, earn a better profit and slowly pay back the loan?" Describing Begum and the first 42 borrowers in Jobra village in Bangladesh, Yunus waxed eloquent: "Even those who seemingly have no conceptual thought, no ability to think of yesterday or tomorrow, are in fact quite intelligent and expert at the art of survival. Credit is the key that unlocks their humanity."
But what is the current situation in Jobra? Says Bateman, "It’s still trapped in deep poverty, and now debt. And what is the response from Grameen Bank? All research in the village is now banned!" As for Begum, says Bateman, "she actually died in abject poverty in 1998 after all her many tiny income-generating projects came to nothing". The reason, Bateman argues, is simple: "It turns out that as more and more ‘poverty-push’ micro-enterprises were crowded into the same local economic space, the returns on each micro-enterprise began to fall dramatically. Starting a new trading business or a basket-making operation or driving a rickshaw required few skills and only a tiny amount of capital, but such a project generated very little income indeed because everyone else was pretty much already doing exactly the same things in order to survive."
Contrary to the carefully cultivated media image, Yunus is not contributing to peace or social justice. In fact, he is an extreme neoliberal ideologue. To quote his philosophy, as expressed in his 1998 autobiography, Banker to the Poor, "I believe that `government’, as we know it today, should pull out of most things except for law enforcement and justice, national defense and foreign policy, and let the private sector, a `Grameenized private sector’, a social-consciousness-driven private sector, take over their other functions." At the time as he wrote those words, governments across the world, especially in the United States, were pulling back from regulating financial markets. In 1999, for example, Larry Summers (then US Treasury secretary and now President Barack Obama’s overall economics tsar) set the stage for the crash of financial-market instruments known as derivatives, by refusing to regulate them as he had been advised.
The resulting financial crisis, peaking in 2008, should have changed Yunus’s tune. After all, the catalysing event in 2007 was the rising default rate on a rash of "subprime mortgage" loans given to low-income US borrowers. These are the equivalent of Grameen’s loans to very poor Bangladeshis, except that Yunus did not go so far as the US lenders in allowing them to be securitised with overvalued real estate.
Yunus has long argued that "credit is a fundamental human right", not just a privilege for those with access to bank accounts and formal employment. But reflect on this matter and you quickly realise how inappropriate it is to compare bank debt – a liability that can be crushing to so many who do not survive the rigours of neoliberal markets – with crucial political and civil liberties, health care, water, nutrition, education, environment, housing and the other rights guaranteed in the constitutions of countries around the world.
Impressive stuff you say? What if I were to prove to you that Patrick Bond has 1) a penis and 2) a White Man's penis? Clearly he's wrong.
My own vision for Microfinance is based on an integration of micro-credit targeted at very poor women with traditional wife-beating activities which should be properly monetized and brought into the market (Coase's theorem) under the rubric of loan uptake and recovery costs, thus enabling domestic violence to count towards the G.N.P. This can not only rapidly lift poor countries out of poverty, but the securitized globally traded assets thus created could be used to fund the bail-out. DrAkula's ex-wife already has her own Domestic Violence N.G.O. It should merge with her husbands operation so as to blaze a trail not just for Third World Countries but also the brave new Post-Obama U.S.A.ruled by Momma Grizzlies escaping the effects of Global Warming on Alaska.