Philip Mader

The Political Economy of Microfinance: Financializing Poverty

This book helps to understand the enigmatic microfinance sector by tracing its evolution and asking how it works as a financial system. Our present capitalism is a financialized capitalism, and microfinance is its response to poverty. Microfinance has broad-ranging effects, reaching hundreds of millions of people and generating substantial revenues. Although systemic flaws have become obvious, most strikingly with the 2010 Indian crisis that was marked by overindebtedness, suicides and violence, the industrys expansion continues unabated. As Philip Mader argues, microfinance heralds less the end of poverty than new, more financialized forms of poverty. While microfinance promises to empower, it generates discipline and extracts substantial resources from the poor, producing new crises and new forms of dispossession.

Financialisation through Microfinance: Civil Society and Market-Building in India

Abstract Microfinance does not reduce poverty, but it does successfully construct economic relations between owners of capital and borrowers of capital, allowing surpluses to accumulate through finance. It does so by drawing on the agency of financialised civil society actors who facilitate financialisation by working around the state to build new markets in finance and other goods. This article understands financialisation as the expansion of the frontier of financial accumulation. Microfinance is shown to achieve this expansion by establishing credit-based linkages between owners and borrowers of capital, allowing surplus accumulation to take place via the credit relation. Underlying this material relationship, there is also a level at which financialisation motivates and pressures civil society actors to bring microfinance to the poor. By becoming financialised agents themselves, civil society organisations act as conduits for an expansion of financial markets and the construction of new market relations for other goods. A case study of microfinance for water and sanitation in India shows in detail how this construction of markets via civil society works in practice, highlighting the pressures and opportunities presented by microfinance as a vehicle for building markets.

Attempting the Production of Public Goods Through Microfinance: The Case of Water and Sanitation

This article critically evaluates attempts to create public goods via microfinance loans in reference to the specific example of water and sanitation. The microfinancing of water and sanitation is a private business model which requires households to privately recognise, internalise and capitalise the bene-fits from improved water and sanitation. But household water and sanitation, being closely linked to underlying common pool resources, and being merit goods, have strong public goods characteristics and therefore depend on collective solutions. Two cases, from Vietnam and India, are presented and evaluated. Despite their dissimilar settings and designs, evidence is found that both projects encountered similar and comparable problems at the collective level which individual microfinance loans could not address. The problems encountered warn against an emergent micro-privatisation of water and sanitation through microfinance. JEL Classification: O16, O18, Q25, Z18

The Financialization of Poverty

Given this book’s claim that microfinance financializes poverty, a deeper discussion of “poverty” is necessary. The conception of poverty that is employed here draws on Simmel’s The Poor, which analysed the relationship between poor people and society at large to argue that, in any given society, who is “poor” and who isn’t depends less on any specific deprivation than on whether someone is (or should be) the subject of dedicated institutions that help and control them. Simmel observed how societies organized different forms of poor assistance which could be premised either on poor people holding intrinsic rights to receive assistance or on the rich having obligations to provide it. Being poor or being propertied, Simmel (1965: 126) explained, is part of “the role that each concrete individual member of society performs”. The poor are “poor” most fundamentally in this organic relationship with the wealthy, Simmel held, which put them “approximately in the situation of the stranger to the group who finds himself, so to speak, outside the group in which he resides” (Simmel 1965: 124–125). Even among the materially wealthy classes, Simmel observed, there were people who were not poor in terms of an incapacity to meet fundamental needs but in terms of deprivation relative to the expectations of their class.

Mikrofinanz zwischen "finanzieller Inklusion" und Finanzialisierung

Die heutige Entwicklungshilfe hegt hohe Erwartungen an kleine Kredite, um Menschen aus der Armut zu befreien und soziale Transformationen anzustosen. So stellte 2009 der deutsche Entwicklungsminister Dirk Niebel fur seine erste Amtsrede den Grunder der Grameen Bank, Muhammad Yunus, an seine Seite und bezeichnete die Mikrofinanz als „unverzichtbares Instrument erfolgreicher Entwicklungspolitik“ – „ein urliberales Instrument der Hilfe zur Selbsthilfe“ (BMZ 2009). Zwar tauschte sich Niebel, was den Erfolg betrifft, aber seine Darstellung der Mikrofinanz als „urliberales Instrument“ traf ins Schwarze: Die Mikro finanzierung basiert auf der liberalen Idee, alle menschlichen Bedurfnisse dank des Gewinntriebs frei handelnder Akteure im Markt befriedigen zu konnen.

EXPLAINING AND QUANTIFIYING THE EXTRACTIVE SUCCESS OF FINANCIAL SYSTEMS: MICROFINANCE AND THE FINANCIALISATION OF POVERTY

Abstract Microfinance serves as a key case for studying the effects of financial systems. As a development intervention deeply intertwined with processes of financialisation, we study the expansion and workings of microfinance on three dimensions. First, microfinance’s appeal is built on positive mobilising narratives which present poverty as a problem of finance, and portray it as superior solution relative to charity or other redistributive alternatives. Second, microfinance as a financial system exerts a governmentality which works through technologies of the selffor disciplinary individuals to uphold regularity in capital flows. Third, in this way microfinance makes possible the extraction of surplus value from its poor borrowers, who may not have much choice, at a considerable scale. We conclude that these three dimensions help to explain the ways in which financial systems overall operate and expand.