Poverty Capital: Microfinance and the Making of Development , London : Routledge , 2010 . ISBN 978-0-415-87673-5 (paper), ISBN 978-0-415-87672-8 (cloth) .,
The New International Division of Debt
Support for “financial inclusion” has gained incredible political traction across the world over the past two decades. The formal end of the Cold War and the increasing liberalization of financial markets has seen places and populations re-scripted in relation to the perceived opportunities, or risks, they present to global capital flows. In tandem with this macro rollback of global financial regulation has been a rolling out of all sorts of newly financialized systems of social regulation. Governments have been pressured by bond-rating agencies to reign in budget deficits and remove barriers to the free circulation of capital in order to compete as viable markets for investment. A variety of new initiatives have also sought to enable populations that were previously “redlined” by mainstream financial institutions to access credit, savings and loan facilities, as well as more complex financial instruments. Simply saving the pennies for a rainy day is no longer sufficient in an emerging “mass investment society” (Harmes 2001).
I think it would be fair to say, though, that nothing has captured the popular imagination quite like microfinance, the subject of this original, engaging and beautifully written book. Ananya Roy explores the two main claims that have put microfinance at the very center of “millennial development”. One is that it is democratizing capital by enabling those who used to be considered “unbankable”—including the world's “bottom billion”—to take on loans that will ultimately lift them out of poverty. The other is that because microfinance has its origins in the global South—the former international “basketcase” that is Bangladesh, no less—it represents the democratization of development knowledge production. Indeed, as the Grameen Bank and its peers are inverting longstanding global power/knowledge geometries, online microfinance organizations such as California-based KIVA are also enabling a new generation of privileged global citizens, including many of the undergraduate students (or “millennials”) the author teaches at Berkeley, to take a more direct stake in the much-heralded mission to “make poverty history”. It seems development may no longer be the sole domain of a handful of so-called “experts”.
Rich in ethnographic detail, Roy's critique of these claims is erudite and incisive. She begins by tracing how, in spite of its relatively small capital investments in the burgeoning microfinance industry, the World Bank has established itself as its key “center of calculation”. In 1995 the Bank created the Consultative Group to Assist the Poorest (CGAP), which is responsible for collecting data, establishing benchmarks and disseminating “best practices” through various publications and workshops, usually held in global North cities such as Boulder and Turin. The main purpose of this work has been to accelerate outreach by developing and deepening ties between Wall Street and microfinance institutions and investment vehicles. However, as Roy notes, by emphasizing indicators such as default rates, portfolio size, and profit margins, the World Bank's “minimalist” approach works to diminish the broader social justice agenda initially associated with microcredit. It also ratchets up interest rates in the name of achieving “financial sustainability” and reintroduces the “redline” by pressing for the exclusion of those supposedly non-entrepreneurial subjects who might jeopardize microfinance institutions’ famously low default rates.
Roy positions this embrace of microfinance since the 1990s as part of a broader shift in purpose and ideology at the Bank. From its financing of dams and other infrastructure projects in the McNamara years, through the structural adjustment programs of the 1980s, the Bank has now reinvented itself as a supposedly bottom-up enabler of microinitiative. It is a narrative that I broadly agree with, though it may also downplay the Bank's longer history of acting as a conduit for the interests of private financial institutions. As Bret Benjamin (2007) has documented, the Bank has depended from its very outset on Wall Street as both a source of investment but also, more importantly, as providing the template for global lending practices and conditionalities. Michael Goldman also states that in contrast to the social welfarism of the Marshall Plan, the World Bank's approach to development was founded on tapping the bond markets by demonstrating “selectivity, caution, and Wall Street respectability” (2005:56–57). From this point of view, the embrace of microfinance might be less of a rupture in World Bank's practice than a restoration of its founding principles, however oxymoronic “Wall Street respectability” now appears.
The Bank has not had it all its own way when trying to shape the global microfinance agenda though. Whilst the Washington model has become dominant in Latin America, Roy also documents the continuing influence of those institutions and actors, particularly Muhammad Yunus and the Grameen Bank, who pioneered microcredit in the 1970s and 1980s and now represent an alternative “Bangladesh Consensus”. There is clearly a significant overlap in the development paradigms that underpin World Bank microfinance initiatives and those programs operated by the likes of BRAC, ASA and the Grameen in Bangladesh. Both tend to see poverty as a consequence of the absence of markets and capital, as opposed to unequal market-mediated interdependencies. Both also tend to reproduce a gendered discourse in which an essentialized “Third World Woman” is positioned as a natural entrepreneur and nurturer of family. In Yunus’ own words: “Poor women see further and are willing to work harder to lift themselves and their families out of poverty” (1999:72). Yet, whilst Roy engages with these problems, and admits in the introduction that she travelled to Bangladesh prepared to be “deeply cynical” about microfinance, she goes on to highlight some important contrasts with the World Bank approach. In particular, she suggests that the recently recalibrated “Grameen II” demonstrates a much deeper attention to issues of social welfare, long-term asset building and reflexive learning. In contrast to the Bank's minimalist approach, this is “microfinance multiplied”. Roy refers to it as a “hidden transcript” that underpins and in many ways contradicts the much more commonplace rhetoric about how microfinance creates competitive, individualistic “bootstrap capitalists”.
Perhaps the praise is partly a way to temper the broader critique and avoid alienating some sections of what will surely be a broad readership. I think this attention to the “hidden transcript” is important because it creates new theoretical and political openings. What different directions can microfinance be taken in? For example, Yunus, although a very vocal critic of Washington's efforts to fully commercialize microfinance, holds little optimism regarding the role of the state in development work, remarking in an interview with the author that there's simply “no point waiting for the state” (25). And it is certainly true that in many parts of the world the “public transcript” about the miracles of microfinance has been used to actively reduce already limited state support for basic services (see for example Rao 2008). However, this doesn't mean that different ways of linking microfinance with the state or social movements are not also possible. As James Ferguson (2010) has recently suggested, in order to avoid a politics centered on “the antis” we need to think about the polyvalent forms that a neoliberal “arts of government” can take and the progressive possibilities that might open up when schemes that are in some senses “neoliberal” can also be made to co-exist with other more welfare-state-like interventions. I think Roy's reflections on the Bangladeshi institutions prompt the reader to consider other ways in which microfinance programs are, or could be, “multiplied” and made to work within different “arts of government”?
It is in her analysis of microfinance programs in the Middle East that Roy most vividly shows how these different “circuits of poverty capital and truth” both collide and collude with one another. If microfinance was initially designed to address the plight of the poor rural woman, its expansion in this region has been fuelled partly by international anxieties about angry young Muslim men and the fear that they may become suicide bombers unless they can access capital (146). In Afghanistan, the frontiers of empire meet the frontiers of microfinance, which forms a significant part of reconstruction efforts following a military invasion that was also, in part, justified by a need to rid the country of terrorists and reconnect it to the forces of economic globalization. Yet in Lebanon, it is the supposed “terrorist organization”, Hezbollah, that runs the largest microfinance program, blending together Islamic values and neoliberal ethics in its construction of the “deserving poor”. Roy's analysis skillfully unravels these many contradictions to reveal the wider geographies of debt, trade and war in which microfinance is everywhere entangled.
There are, of course, limitations to the book. It is, as Roy notes in the introduction, not a book about the poor but about those who manage poverty. There is certainly no doubting the importance of this kind of work or the caliber of the research, but focusing on senior staffers at the World Bank, USAID and the Grameen Bank leaves open the question of how development programs and technologies are also reworked on the ground by non-elite populations. I say this because Roy does note, drawing also from other research, that the expansion of microfinance inevitably encounters all kinds of frictions “on the ground”. I would simply add to this, based on my own research on microfinance in India, that processes of financialization may also be deepened and accelerated by some of the middlemen [and in my fieldwork it almost always was men], as well as the more middle-class clients, involved in microfinance programs (Young 2010). To push this a little further, such ethnographic examples point to a shortcoming of the “circuit” metaphor. A circuit suggests to me that financial practices are either adopted or resisted (thereby “shorting the circuit”) as they move out from calculative centers. Yet this might obscure the possibility of some forms of financialization—including diversely gendered twists on entrepreneurship—“from below”. And perhaps we should think of some of these lower-level figures as “double agents” too, like the World Bank staffer Roy describes with the poster of Gramsci hanging in his office.
Ultimately, this is a excellent book that shows that for all their democratizing promise, microfinance and millennial development are also intimately linked to what Randy Martin (2007) terms the “new international division of debt”. Roy opens the book by describing a poster depicting the now familiar image of a smiling microentrepreneur. She leaves the reader with a compelling picture of the tangled, transnational web of financial flows into which the labor of “bottom billion” populations across the global South is now being fed. In the process she keeps returning to the critical questions concerning how knowledge about poverty is constructed, why certain policies and practices are globalized whilst others are not, and how strategies for poverty management are subject to continual experimentation and change in postcolonial settings.
Let me return then to the theme with which I began this review. The illusions of “financial inclusion” have been comprehensively exposed in the US by the recent “subprime crisis”. Intra-urban patterns of housing foreclosures clearly illustrate the continuation of financial abandonment and exploitation based on race, gender and class (Wyly et al 2009). In short, inclusion has not been taking place on the same terms for everyone and, as Kathie Newman (2009:314) suggests, many people have been left wondering “whether they have access to capital, or capital has access to them”. The current interest in expanding microfinance as an “alternative” model of financial services into poor inner-city communities in the USA—Yunus himself has described microfinance as “sub sub sub subprime lending”—surely makes the arguments in this book all the more timely and important.