14 October 2011

Banking for the Poor or Banking on the Poor?

There are people who still believe that the British built our roads and railways.  This is utter rubbish.  The labour was Sri Lankan.  The funds were obtained by taxing our people.  As for the roads and railways they were not designed to get Kusumawathi from Anuradhapura to Kataragama but to streamline resource and value extraction. 

This is how power imbalances play out.  The powerful are able to make the powerless inhabit a version of reality they (the powerless) have no say in authoring.  Bishop Desmond Tutu in his more progressive days, speaking on the colonial encounter in Africa and in particular the ‘priest’-accomplice of the sultans of destruction and resource extraction put it this way: ‘In the beginning we had the land and they had the book; they said ‘close your eyes, let us pray’ and when we opened our eyes, we had the book and they had the land.’ 

I have over the years found it safer to treat with suspicion those who wear benefactor-garb.  I am thinking here about a new buzz-term in the development discourse: microfinance.  It is not new, really.  ‘Banking with the Poor’ is a couple of decades old already, but it was buried in a heap of other buzz-words for years. 

Today microfinance is seen as the magic formula for poverty alleviation.  Sorry, it is SAID to be the magic formula for poverty alleviation.  The distinction is important and is indicative of my cynicism. 

Discussions on microfinance tend to be liberally laden with references to poverty alleviation and how it is important to rope the poor into formal banking systems.  It is the unsaid that makes the most interesting reading, though.

Those who talk about banking with the poor will not tell you that banks have always needed the poor.  First of all, money doesn’t fall from the sky.  Value has to be created.  Profits have to be EXTRACTED. It is called ‘exploitation’.  I don’t have to re-write Kark Marx’s Labour Theory of Value here. Someone gives and someone takes, to put it simply. There are TERMS of extraction and these can even be legal. 

Next we get to savings.  Who saves?  The poor!  The rich don’t save. They invest.  Take the People’s Bank, the Bank of Ceylon and the National Savings Bank.  They are made of poor people’s money. Salaries. Pensions. The little something put aside every month in numerous savings schemes.  Who gets the loans?  The rich! 

The rich have always banked ON the poor. They NEED the poor.  ‘Microfinance’ in its banking-only manifestation then is nothing else than the banks realizing that little drops of water can make big bucks at the end of the day.  The margins are obtained by volume.  They have figured out, these rich microfinance gurus dressed as do-gooding poor-lovers have, that the poor outnumber the rich by about 100 to 1 or more.  Any idiot with even an iota of business sense would see this as ‘potential’.  You can get the one rich guy to save 100 bucks or get the other 99 to save 10 bucks each.  That would make 990 rupees or an 890% difference.  It’s good business, ladies and gentlemen.  Now factor in the loans, the micro-credit and the profits from interest.  Astounding!

The problem with microfinance is that it is marketed as a delivering-all kind of tool. It is nothing of the kind.  Stripped of rhetoric and promise it remains just another banking product.  It has a sound-good feel to it, yes.  It is made to fatten CSR portfolios, yes.  At the end of the day, commercial bank are interested in profit and little else. 

Microfinance in its thrift-and-credit avatar was essentially a collective effort that was governed by cooperative principles.  Today, microfinance is a term that the ace defenders and approvers of shameless resource extraction and labour exploitation, the World Bank, has appropriated.  Today it is a concept that the World Bank has re-defined and is dishing out to each and every naïve and/or pernicious taker who does a google search, courtesy the CGAP (Consultative Group to Assist the Poor). CGAP is ‘addressed’ at the World Bank and focuses on financial services. 

The focus itself tells a story.  The assumption is that it is all about money.  Well, it is.  At least from the point of view of the banking outfits that micro-finance.  How about the poor, though? 

Where issues of comprehensive betterment of a given community are not addressed, when sustainability is not a concern, when culture is factored out, when national development frameworks are not referenced, when training and education so necessary for resource and potential identification are ignored, you don’t get poverty alleviation. You get PLAYED.  In your name.  That’s the beauty of banking on the poor.  You don’t say you need the poor, than you are literally banking on them, you say you are doing it with them.

To me, banking WITH the poor is like raping WITH the victim.  There is an element of ‘consent’ that gets scripted in.   You can say ‘We are doing it with you, brother,’ even as you do him in.

The British, they tell us, built our roads. Microfinance is a road, I think.  The poor are building it. With their money and labour.  Someone is using the road to take out cartloads of value away from the places that the poor inhabit. 

Roads are good though but only as long as those who build them decide what kind of road to build and from where to where and why.  Microfinance is not that kind of road, I am afraid; certainly not in its dominant articulation. 

It boils down to a simple matter: who owns the road.  Let’s think about it.  

Reactions:

6 comments:

Anonymous said...

taking up cudgels against micro finance ? well actually there are some success stories, however bigger picture may not be so rosy as microfinace guru s would want us to believe
That guy in Bangladesh who won Noble prize is also in hot water I believe (can't recall the name)

Malinda Seneviratne said...

No, not against 'microfinance', but particular articulations of the idea/practice. The Bangladeshi is Dr. Yoonus.

Malinda Seneviratne said...

No, not against 'microfinance', but particular articulations of the idea/practice. The Bangladeshi is Dr. Yoonus.

G. de Silva said...

Love your opening para and in particular "As for the roads and railways they were not designed to get Kusumawathi from Anuradhapura to Kataragama but to streamline resource and value extraction". How true.

Yet, unfortunately, there are so many Sri Lankans (especially, 'Colombians') who still believe that we owe so much to British for all the infrastructure we have today. When are our people going to leave behind this slavish mentality? I guess, re-education is a long process....

Uditha Devapriya said...

The ULTIMATE redistribution of income - from the POOR to the RICH.

Anonymous said...

No bank would give a loan without security. This is where microfinance comes into the picture. Without this opportunity, the poor do not have any chance of taking a loan to build a small business.

Of course there is an interest but it is much lower than normal loans. Everyone wants to earn money. Even the poor.

So I dont see the real picture in why you are criticising this loan.