12 January 2012

When poverty-producers propose poverty-alleviation

There is a month dedicated to ‘saving’ when all banks run ad campaigns urging people to save money.  Banks need savings because banks need to sell all kinds of loan products.  A nation needs savings because a nation has to invest money in various spheres in order to create jobs, generate income etc.  People need to save money because people are fragile and frequently find themselves in cash-strapped situations.  We are told that it is good to save for a rainy day, but no one tells us that we are in a year-long monsoon when it comes to financial needs. 

Financial institutions will tell you that saving is good for you and they are not incorrect.  On the other hand this ‘it-is-for-your-own-good’ business is just that: business!  For examples, banks that have ‘discovered’ just the other day a thing called ‘microfinance’ are going around telling the poor that they are in this business purely out of altruistic reasons and specifically to help them out of poverty are basically tapping a huge reservoir of customers they had hitherto neglected.  So, ironically, even as the banking sector indulges in activities that generate poverty, we also see a concerted effort to do business with the poor.  Not for love. For profit. 

There is a lot of irony when institutions that are dedicated to profit-making and promoting profit-making in ways that necessarily impoverish people and perpetuate cycles of poverty suddenly want to ‘alleviate poverty’ through microfinance.  It would be understandable if Banks, like most other corporate entities, think of ‘microfinance’ as just another CSR (Corporate Social Responsibility) project, nothing more than a little feel-good, guilt-alleviating exercise.  What we are seeing today is however not something of that kind, not an add-on, a frill, a for-a-prize, image-building operation.  This is business ladies and gentlemen.

Microfinance is, as long-time practitioners would tell you, not coterminous with development. Resolving credit problems (i.e. access to sufficient amounts with minimal hassle, at the right time and at terms that are reasonable) is most certainly an important element in any initiative that seeks to enhance capacities of those sections of a population that truly require ‘development’.  Necessary, then, but certainly not sufficient. 

The problem with the dominant articulation of the microfinance discourse is that the above it the underlying logic.  The problem is articulated in purely financial terms. This is convenient.  Microfinance advocates from the corporate sector would not dare touch other related issues because it is not in their immediate interest and because delving into these would show them up for who they really are: business entities, doing business, seeking-profit and articulating the entire exercise as a humanitarian operation born in the depths of their bleeding hearts. 

If banks were really serious about poverty alleviation they would put a full stop to financing enterprises that create poverty.  Banks cannot be expected to be charitable outfits and we should not fool ourselves into believing that they would abandon their core operational thrust out of some professed love for all of humanity. 

Microfinance is not ‘new’ to most parts of the world. The world has known about thrift and credit for centuries.  A close reading of the Buddha’s thoughts on social engagement and his advocacy for the lay person and the household would show that thrift was a core element of his doctrine.  He advocated that a portion of one’s income should be saved and an equal portion invested.  He recommended that a third part should be used for consumption and the fourth gifted. 

In Sri Lanka, the household culture is replete with many clearly identified thrift-measures which are still practiced in all parts of the country and find considerable reference in folk literature.  Formal micro financing institutions have a history that goes back to the year 1906. 

Like most terms in the development dictionary, microfinance was appropriated, re-defined and re-marketed to the practitioners. The watershed event was the first Microcredit Summit in February 1997 in Washington DC, where there were some some 3000 people from 137 countries in attendance.  Thirteen years later, the ‘blueprint’ for all initiatives is downloadable from the CGAP (Consultative Group to Assist the Poor) website.  CGAP is ‘addressed’ at the World Bank and focuses on financial services.  No prizes for guessing the agenda of the lords of poverty (generation). Yes, the within-brackets part of it is erased in the literature. 

Today, ‘microfinance’ as it is used has been extracted from the social, cultural and political soil in which it was born.  Today, shed of frill and conference-glitter, microfinance is essentially a matter of exploring the exploitation potential of hitherto neglected sections of the market.  Today, corporate entities have suddenly realized that they could make a killing by extracting little amounts from a large population.   This is why the microfinance literature and the best-practices archives are thin on sustainability and largely silent on the parallel processes of exploitation and impoverishment.  The moment such things are brought into the discourse, the legitimacy of the vast majority of corporate entities engaged in microfinance is brought into question.  This they cannot risk. 

Impoverishment is an inevitable product of profit-seeking enterprises.  Microfinance is a win-win situation for microfinance corporate players. It is like a factory spewing pollutants in a canal and then volunteering to clean up the particular waterway. For a price!

The next time someone utters that word it would be good, I believe, to ask about what other business that person engages in and talk about the consequences of such activities, including poverty generation. 

This year has been dedicated to microfinance.  Maybe it would be good if it is also dedicated to the telling of home truths about microfinance.



beautiful sunshine said...
This comment has been removed by the author.
Biso Menike said...

this is an interesting article i like to suggest that it is good if you write a series of articles regarding one particular subject like your series of articles written ... sorry i can not remember the tile but let me give you a hint .. you wrote these articles using examples from 'Dasa raaja dharma' .......

fayaz said...


This is a very good article and i appreciate your understanding of banking very much.

If you want poverty alleviation try to study the islamic laws on inheritance which FEW FEW muslims practise !

If you want banking proper without the usurious methods of western banking , try Islamic banking... ( not the stuff that's being touted heavily in colombo for sure !)

But then the success of the above , ie ethical banking and social justice depend on the strength of a muslims Iman or faith which we guys really have very little of.. to be sure.

Walter Rajaratne said...

A man who popularised poverty alleviation under the slogan "Janasaviya" started his life in a shanty in Keselwatte and taught Sri Lankans whose poverty that could be alleviated when you look at his son giving away millions to the poor in his electorate when in distress.

The man who took over the mantle of Poverty alleviation after the demise of Keselwatte bloke with a mild change to the slogan as ""Samurdi"" did wonders with billions erased from the Alliviation books and now back in business in a new role that is laying the foundation to take the children of this county back to Stone Age. So, long live Poverty alleviation.