Starting with the work of Hernando de Soto in the 1980s, the role of land tenure soon attracted the attention of the international development community as a neoliberal-oriented theory of change ...rooted in the possession and use of private individual land titles by the poor. One of the central mechanisms proposed by de Soto was a three-step process that involves the poor (1) “securing” their tenure with land titles, (2) using their newly acquired land titles as collateral to leverage large amounts of microcredit to be used to establish a functioning microenterprise, and then (3) escaping from their poverty due to the jobs and income associated with founding and running a microenterprise. This paper explores what I call de Soto’s “three steps to heaven” theory of change, a concept that was taken on board with gusto by leading Western governments and virtually all of the main international development institutions, particularly the World Bank. I argue that Cambodia provides the ideal setting for evaluating de Soto’s concept because, since around 2020, it has possessed the largest microcredit sector in the world (on a per capita basis), thanks largely to the obligatory use of land titles as the collateral required to obtain microcredit. While the first two of de Soto’s “three steps to heaven” have been realized, the evidence shows that the assumptions related to step three have proved to be extremely problematic: the ubiquity of microcredit that was achieved since the early 2010s via steps one and two has not, in general, improved the lives and communities of Cambodia’s poor through accelerated microenterprise development. It appears, instead, to have contributed to deeper poverty, insecurity, vulnerability and inequality. I conclude that de Soto’s “three steps to heaven” theory reflects a fundamental misunderstanding of the real institutional drivers of sustainable local economic development and poverty reduction.
Seduced and Betrayed Milford Bateman, Kate Maclean / Milford Bateman, Kate Maclean
2017
eBook
Microfinance began as the disbursement of tiny loans to the poor, which they could use to undertake informal income-generating activities. It went on to become one of the most popular international ...development policies of all time and a mainstay of local development and antipoverty programs across the Global South. The contributors to this multidisciplinary volume consider the origins, evolution, and outcomes of microfinance from a variety of perspectives and contend that it has been an unsuccessful approach to development. The contributors contend that over the last twenty years, microfinance policies have exacerbated poverty and exclusion, undermined gender empowerment, underpinned a massive growth in inequality, destroyed solidarity and trust in the community, and, overall, manifestly weakened those local economies of the Global South where it reached critical mass. They use qualitative anthropological, economic, and political-economic research to unpack the ideas and values that have allowed microfinance to "seduce" the world and blind so many to its corrosive effects.
One of the decisive but often overlooked factors in the creation of the East Asian ‘economic miracle’ was the part played by a variety of heterodox sub-national state, community and cooperatively ...owned and controlled financial systems, institutions and lending models. Beginning with Japan after 1945, local financial systems were (re)constructed across East Asia in a way that very efficiently operationalised key development policy goals through targeted local enterprise development. Yet in spite of marked success with this 'developmental' local financial model, from the 1980s onwards the international development community, led by the US government and the World Bank, began an effort to discredit and replace it with a new commercially-oriented private sector-led local financial model promoting mass individual entrepreneurship with the help of a for-profit microcredit sector. This article begins by briefly summarising why such ‘developmental’ local financial models were important to East Asia’s economic miracle before I turn to examining why, how and what happened when after 1980 the international development community quietly set out to undermine and destroy them. I conclude from this analysis that the international development community’s desire to begin to impose its own neoliberal ideology and narrow elite-driven enrichment goals in East Asia far outweighed the ongoing development successes registered by the ‘developmental’ local financial models that emerged after 1945.
* Uses empirical evidence and contributor fieldwork to get at the heart of debates on microfinance claims* Incorporates global perspective but focuses on Southeast Europe, a key arena for ...microfinance and microcredit programsDespite the popularity of microfinance, it is a field that remains remarkably under-theorized. Most evaluations carried out by international development agencies, academics, and independent researchers focus on tweaking what they see as an already beneficial system. Rarely are the very foundations of microfinance brought into question. Instead, their studies presuppose impact without evidence, ignore potentially important issues, and utilize faulty evaluation methodologies.Bateman and contributors provide critical perspectives on microfinance that reach beyond the desire for technical perfection held dear by almost all microfinance institutions. It charts actual economic and social impacts registered in Southeast Europe to date, both in the context of post-communist transition and post-conflict reconstruction. It examines key cross-cutting issues, providing a more holistic and comprehensive approach to microfinance. One of the few books available that provides a robust critique of microfinance, Confronting Microfinance is sure to fire up the debate on this popular poverty-fighting measure.
The end of apartheid in South Africa in the early 1990s did not see the envisaged end to the exploitation of the black South African population, but instead saw simply a shift from state-backed ...exploitation to market-driven exploitation. This trajectory is especially germane to the country's microcredit industry, which has spectacularly and wilfully enriched a narrow white male elite while simultaneously helping to fragment and destroy the local rural and urban economies of the black poor. As this article demonstrates, a major aspect of this one-sided enrichment process has involved 'control fraud', the process whereby the CEO and senior management of a financial institution use their seniority to defraud customers, shareholders, the government and the general public as they go about maximising their own private short-term financial gains. Already a problem elsewhere in the global South, South Africa has thus joined the growing list of countries that have seen control fraud in the microcredit sector undermine and block progress towards more productive, sustainable and equitable local economies.
Este artículo argumenta que el modelo de microfinanzas que llegó a América Latina en los años 1970 ha probado ser, al igual que en otros lados del mundo, una intervención de política pública casi ...totalmente destructiva. El argumento central es que el modelo de microfinanzas es responsable de consolidar e impulsar continuamente la adversa trayectoria anti-desarrollo de las economías latinoamericanas. Este modelo ha progresivamente ayudado a desindustrializar, infantilizar y informalizar las estructuras sociales y económicas. Hasta recientemente, el grado y naturaleza precisa de esta trayectoria “anti-desarrollo” ha sido ignorado por miedo de subvertir y deslegitimizar el modelo global de microfinanzas y, con ello, la filosofía política y económica dominante – el neoliberalismo – que esencialmente le dio vida. Políticas industriales e instituciones financieras locales efectivas - “pro-desarrollo”- se requieren urgentemente en América Latina para construir desde abajo economías realmente sostenibles y equitativas basadas en la solidaridad.
Financial technology, or simply 'fin-tech', is increasingly seen as one of the key tools to facilitate poverty reduction and local economic development. One article in particular by Tavneet Suri and ...William Jack published in the leading publication Science has played a hugely influential role in promoting the fin-tech model in the global South using the example of Kenya's iconic M-Pesa money transfer platform. The authors' central claim is that M-Pesa has been instrumental in facilitating a major episode of poverty reduction. Our analysis shows that their analysis and claims are extremely problematic.
The international donor community arrived in post-apartheid South Africa in the early 1990s to restructure the economy along neoliberal lines. One of the most important of the interventions it ...promoted was microcredit, which was widely seen as one of the principal self-help solutions to the exceptionally high levels of unemployment and poverty that prevailed in the Black South African community. In spite of an early 'boom-to-bust' episode in the early 2000s and worrying evidence it was actually further impoverishing far more Black South African's than it was actually helping escape from poverty and unemployment, the microcredit model did not lose its international support: if anything, this support was expanded as the international development community desperately sought to ensure the survival of the microcredit model and therefore also the centrality of self-help and individual entrepreneurship as the only way out of poverty for the poor. This article shows how and why the microcredit model was supported so strongly by the international development community and South African financial community in spite of its manifestly calamitous impact on Black South African community. Overall, I conclude, microcredit can be viewed as South Africa's own sub-prime-style disaster which, like the original US version, has mainly served to benefit a tiny financial elite working within and around the microcredit sector, whilst simultaneously destroying many of the most important pillars of the economy and society.
Microcredit emerged in the 1970s as a mechanism whereby virtually all poor individuals could supposedly escape their poverty through self‐help and individual entrepreneurship. Crucially, neoliberal ...policy‐makers found the microcredit concept ideologically compelling, and the international development community soon began to provide massive support to establish and expand the microfinance movement. Today, however, even long‐standing microfinance advocates now reluctantly accept that microcredit has actually had no positive impact upon poverty or ‘bottom‐up’ rural development. In fact, those rural communities most exposed to microcredit have been severely damaged in a number of ways, especially through sub‐prime‐style ‘boom‐to‐bust’ episodes. Largely because of its supreme ideological usefulness, the microfinance movement nonetheless still retains some support in the major neoliberal‐oriented international development institutions, pro‐globalization think‐tanks, and in a number of Western governments.
PDF
