Microfinance in the Global South

Microfinance promised an innovative alternative to development but became a tool of neoliberalism. Discuss.
Word Count: 2,500
Microfinance, the provision of small loans to very poor people for self-employment projects that generate income, allowing them to care for themselves and their families (Dalgic, 2007), has been widely advocated in the international development community as a powerful tool to reduce poverty and improve social inclusion (Jones and Dallimore, 2006). However, taking the formation of Muhammed Yunus’ Grameen Bank in 1976 as a starting point, the transition of microfinance from a ‘poverty approach’ to a ‘financial systems approach’ has led critics to posit microfinance as a tool for the advancement of the neoliberal doctrine of market fundamentalism. Exploring the temporal development of microfinance, in discourse, practice and outcome, this essay will seek to argue that the weakness of microfinance is by definition its role as a micro-level policy. In demonstrating how, in 1976, microfinance provided an innovative model and approach, this essay will argue microfinance remains firmly circumscribed within the wider macroeconomic policy agenda, whether that be Keynesian or Neoliberal economics. In doing so, neoliberalism can be seen as a tool for the advancement of the microfinance as much as microfinance is a tool for the advancement of neoliberalism. Furthermore, this essay seeks to critically analyse the assumption that as a tool of neoliberalism, microfinance can no longer fulfil its role as a development tool. Combining contemporary empirical studies from across the developing world with classical political economy critiques of capitalist production, this essay concludes that microfinance is the latest stage of micro-level policy within a macroeconomic framework of ‘hegemonic neoliberalism’ (Harvey, 2005), thus ensuring that only one form of development is guaranteed; that of markets. A trend that is expected to continue in Development’s

Bibliography: Abrahamsen, R. (2001) Disciplining democracy: development discourse and good governance, Africa, Zed, London. Adams, J. and F. Raymond, (2008) Did Yunus Deserve the Nobel Peace Prize: Microfinance or Macrofarce, Journal of Economic Issues 43(2). Armendáriz de Aghion, B., & Morduch, J. (2003). Microfinance beyond group lending, Economics of transition, 8(2), 401-420. Bateman, M., & Chang, H. J. (2012) Microfinance and the Illusion of Development: from Hubris to Nemesis in Thirty Years, World Economic Review. http://werdiscussion. worldeconomicsassociation. org/wp-content/uploads/Bateman-Chang-May-24-NH. pdf. Batemen, M. (2010) Why doesn‟t microfinance work? The destructive rise of local Neoliberalism, Zed. Béland, Daniel (2005) Ideas and Social Policy: An Institutionalist Perspective, Social Policy and Administration 39(1): 1–18. Campbell, G. (2010) Microfinancing the Developing World: how small loans empower local economies and catalyse neoliberalism 's endgame, Third World Quarterly, 31(7), 1081-1090. Chamhuri, S., & Quinones, B. (2000) Microfinance in Malaysia: Aiming at success, in Quinones, B and Remenyi, J. (eds) (2000) Microfinance and poverty alleviation: case studies from Asia and the Pacific, London: Pinter. Cockburn, A. (2006) A Nobel Peace Prize for Neoliberalism? The Myth of Microloans, Counterpunch. October 20/22 Collier, P Cortijo, M J and N Kabeer (2004) The Wider Social Impacts of Microfinance in Andhra Pradesh: A Case Study of SHARE Microfinance Ltd, draft paper, Imp-Act Programmes. Daley-Harris, S. (2007) Report of the Microcredit Summit Campain, Washington, DC: Microcredit Summit. Dalgic, U. K. (2007) International Expert Organizations and Policy Adoption The World Bank and Microfinance in the 1990s, Cultural Dynamics, 19(1), 5-38. De Ferranti, D., & Ody, A. J. (2009) Beyond Microfinance: Getting capital to small and medium enterprises to fuel faster development, Brookings Policy Brief Series, Brookings Institution, # 159. De Soto, H. (2001) Dead capital and the poor, Sais Review, 21(1), 13-44. Dowla, A., & Barua, D. (2006) The poor always pay back: The Grameen II story, Kumarian Press. Duvendack, M., and R, Palmer-Jones. (2011) High noon for microfinance impact evaluations: re-investigating the evidence from Bangladesh, (Working Paper 27, DEV Working Paper Series) The School of International Development, University of East Anglia, UK. Ferguson, J. (2009) The Uses of Neoliberalism, Antipode, 41, pp 166–184. Ferguson, N. (2007) The Ascent of Money: A Financial History of the World, London: Penguin. Harford, T. (2008) The battle for the soul of microfinance. Financial Times, 6. Harper, M., (2007) Some final thoughts, in: Dichter, T. and M. Harper( 2007) eds. What’s wrong with Microfinance? London: Practical Action Publishers. Harvey, D. (2001) Globalization and the “Spatial fix”, Geographische Revue, 2, 23-30. Harvey, D Hashemi, S., & Rosenberg, R. (2006). Graduating the poorest into microfinance: linking safety nets and financial services. Focus note, 34, 1-8. Hulmer, D., & Arun, T. (2009). Microfinance: A Reader (Vol. 69). Routledge. Isserles R (2003) The rhetoric of empowerment, the reality of ‘development as usual. Women’s Studies Quarterly 31(3/4): 38–57. Jones, G.A Karim, Lamia (2008) Demystifying Micro-Credit: The Grameen Bank, NGOs, and Neoliberalism in Bangladesh, Cultural Dynamics, Vol 20(1): 5-29. Karnani, A. 2007. Microfinance misses its mark, Stanford Social Innovation Review Summer Klas, G Lippitt, V. D. (2005). Capitalism, London: Routledge. Littlefield, E. (2008) Landscape of Microfinance Investment in 2008. Washington: CGAP. Marx, K., & Engels, F. (1967) The communist manifesto (1848). Trans. AJP Taylor. London: Penguin. McMichael, Philip (2004) Development and Social Change: A Global Perspective, 3rd edn. Thousand Oaks, CA: Pine Forge Press. MicroBanking Bulletin, 1998. In: Christen, R., MacDonald, J. Eds.., Economics Institute, Boulder, CO, July. MkNelly, B. & C. Dunford (1999) Impact for Credit with Education on Mothers and Their Young Children 's Nutrition; CRECER Credit with Education program in Bolivia. Freedom from Hunger No. 5, California. MkNelly, B. & Dunford, C. (1998) Impact of Credit with Education on Mothers and Their Young Children’s Nutrition: Lower Pra Rural Bank Credit with Education Program in Ghana, Freedom from Hunger Research Paper No. 4, Freedom from Hunger, California. Moyo, D. (2009) Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa, Farrar, Straus and Giroux: New York. Murdoch, J Pitt, M. and S. Khandker. (1998) The impact of group-based credit programs on poor households in Bangladesh: does the gender of participants matter?, Journal of Political Economy 106(5): 958-96. Prahalad, C. K. (2010). The fortune at the bottom of the pyramid: Eradicating poverty through profits. Wharton. Rankin, K. N. (2001) Governing development: neoliberalism, microcredit, and rational economic woman, Economy and Society, 30(1), 18-37. Rawe, J Robinson, M. S. (2001) The microfinance revolution: sustainable finance for the poor (Vol. 1). World Bank Publications. Ronen, P. (1999) Global Governance and Social Closure, or Who is to be governed in the era of Global Governance, in M. Hewitt and T. Sinclair (eds) Approaches to Global Governance Theory, Albany: SUNY Press. Roodman, D., & Morduch, J. (2009 The impact of microcredit on the poor in Bangladesh: Revisiting the evidence, Center for Global Development Working Paper, (174). Rosenberg, R. (2008) Review of UNDP Microfinance Portfolio. http://www.cgap.org/docs/UNDP_MFProjEvaluation.pdf Rosenberg, R Roy, A. (2010) Poverty Capital: microfinance and the making of development, London: Routledge. Rutherford, S. (1998) The Poor and Their Money, draft manuscript. Schmidt, Vivien A. (2000) Democracy and Discourse in an Integrating Europe and a Globalizing World, European Law Journal 6(3): 277–300. Schumpeter, J. 1987 (1942) Capitalism, Socialism, and Democracy, 6th edition, Unwin: London. Shiva, V Sinclair, H. (2012) Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor, San Francisco: Berrett-Koehler. Sinha, S., Samuel, J. and Quinones, B. (2000) Microfinance in India: Adjusting to Economic Liberalization, In Joe Remenyi and Benjamin Quinones Jr.. Microfinance and Poverty Alleviation: case studies from Asia and the Pacific, London: Pinter. Szeftel, M Weber, C. (2002) Women to women: dissident citizen diplomacy in Nicaragua. In: Naples N and Desai M (eds) Women’s Activism and Globalization: Linking Local Struggles and Transnational Politics, New York, NY: Routledge, 45–63. Williams, D and Young, T Women’s World Banking (2008) Womens’ World Banking Annual Report 2008, available at https://www.swwb.org/sites/default/files/pubs/en/2006_annual_report.pdf Yunus, M