I do not know if anyone was paying attention to the development debates of the late nineties and new millennium. The mainstream went whole hog on the idea of development from below via entrepreneurializing peasantries and urban slum-dwellers.
Indeed so illuminated by the idea of petty capitalism the Nobel committee gave one of its real Noble prizes, the Peace Prize for 2006, to Prof. Muhammad Yunus & Grameen Bank.
Of course in good time capitalistas with a social conscience, like George Soros, would get behind the idea and start financing large micro-credit investment houses. Of course capitalism being what is and regulations being what they are in India it appears the whole thing is turning into a giant Ponzi scheme which is fleecing the poorest of the poor.
But here is the twist, in India politicians and state officials are not suffering from ideological capture as they are elsewhere and have told their public to stop paying their loans. The New York Times reports that in one state over 90% of people have stopped servicing their micro-loans.
Here is what I take to be money quote from the NYT on globalized micro-finance:
“The money lender lives in the community,” he said. “At least you can burn down his house. With these companies, it is loot and scoot.”
Indeed, some of the anger appears to have been fuelled by the recent initial public offering of shares by SKS Microfinance, India’s largest for-profit microlender, backed by famous investors like George Soros and Vinod Khosla, a co-founder of Sun Microsystems.
Notice that the “he” in the above quote is a senior public official with the State government. Burning down the house of the money lender as a form of implicit social regulation. What a novel idea.
We had advanced warned that it would be a free fall for SKS:
Micro-Finance to Face Slow Painful Death. SKS Share to enter Free Fall. Sell, Sell, Sell! 7/11/10
Read more: http://devconsultgroup.blogspot.com/2010/11/micro-finance-to-face-slow-painful.html
SKS Micro-Finance drifting into a firm Bear Grip 14/11/10
Read more: http://devconsultgroup.blogspot.com/2010/11/sks-
Ha ha, you should start a comedy show, you are on fire with your jokes these days! Nice.
Wow good site Rajan. I will throw up a link to your blog in the main post and put you on the blog-roll.
It’s a filthy shame how people have foregone sound fiscal policy and thus ruined lives when it comes to microfinancing. Originally a form of charity which used the local free market to create microbourgeoisie, to lift women and families out of poverty with bikes and chickens, it has become synonymous with payday lending, unsecured credit cards, and rent-to-own TVs. But I guess that’s what happens when a moral education is replaced by an anything-goes mentality: people become willing to ruin others’ lives for a little extra cash.
America’s financial collapse has been due to progressive ideology outpacing sound reason; home loans for the undereducated in poverty sounded like a great idea to ACORN, Freddie, and Fannie. Let’s hope the Indians learn our lesson and don’t build good credit on top of bad like we did.
Me thinks an Austrian lurks here. It was the free market in micro-credit which turned into a disaster and then had to be regulated by government officials. That you can effortlessly mix up India and the US suggests you have pre-narrative in search of evidence but refuse to actually test your narrative against facts. So like many today you are simply making up facts to fit your narrative.
Some good critical books on microfinance:
“Why Doesn’t Microfinance Work? The Destructive Rise of Local Neoliberalism” by Milford Bateman
“What’s Wrong with Microfinance?” eds. Tom Dichter and Malcolm Harper
“Microfinance: Perils and Prospects” ed. Jude L. Fernando
As for BlueNight’s enchantment with microentrepreneurship as the route out of poverty, I would suggest he read Mike Davis’s “Planet of Slums”, which demolishes the miniaturized supply side arguments of “self help” enthusiasts like De Soto and Yunus. Or just look at the stats on small business survival rates in Canada and then transpose that to the even less inviting economic context of the Global South (think deflationary IMF medicine, etc.).