Alleviating poverty or reinforcing inequality? Interpreting micro‐finance in practice, with illustrations from rural China

Abstract

Academic and political discussions about micro-finance have been found lacking in predictive power, because they are based on orthodox economic theory, which does not properly comprehend the social components of credit. I take a better approach, utilizing credit theory--specifically, Ingham's explication of how the nature of money as credit leads to social inequality. I also expound the perspective that morality is not separate from considerations borrowers make in micro-finance programmes on the micro level. I draw upon illustrations from my fieldwork in rural China, where a group-lending micro-finance programme was administered as part of a larger government-initiated effort across the country.

Microfinance and Loan Officers’ Work Experiences: Perspectives from Zambia

“…Loan officers are an important part of the 'people side of the equation ' (Ross and Denzer, 2011) in microfinance and key to explaining the disparity between expectations of microfinance and its lived reality (Yang Hsu, 2014). They have a decisive impact on an institution's outreach as well as being crucial for establishing and maintaining the relationship between borrowers and microfinance institutions.…”

Neoliberal Governmentality, Public Microfinance and Poverty in Bangladesh: Who are the Actual Beneficiaries?

“…Different methodologies are applied to assess its impact from highly advanced econometrics models, randomized control trial and quasi-experiment to comparatively few qualitative studies. The results are contested: some studies found positive impact (Augsburg et al 2015;Banerjee, Karlan, and Zinman 2015;Chemin 2008;Crépon et al 2014;Fenton, Paavola, and Tallontire 2017;Hartarska and Nadolnyak 2007;Hashemi, Schuler and Riley, 1996;Khandker 2005;Mazumder and Lu 2015;Pitt, Khandker, and Cartwright 2006;Weber and Ahmad 2014) whereas others found either negative or mixed impact (Angelucci, Karlan, and Zinman 2015;Hsu 2014;Morduch and Roodman 2009). Moreover, the quantitative method is criticized for advanced analysis with poor data (Chambers 1993;Hulme 2000, 86).…”

1. Introduction

“…Other research has revealed the ways in which microcredit can create destructive debt cycles, trapping borrowers and creating subprime-type crises, threatening local and even national economies (Bateman, 2017;Guérin, Labie, & Servet, 2015;Mader, 2018). Ultimately, the rapid growth of this critical literature highlights fissures at the core of microcredit developmentalism, demonstrating that the expansion of microentrepreneurial activity is not a panacea and can often be inherently harmful to local social cohesion, economic activity, and livelihoods; that the idea of a 'win-win' where the rich make profit off the poor while simultaneously helping them is absurd; that financial inclusion through digital technologies can result in exploitative outcomes; and that the promotion of small and medium enterprises (SMEs) is more conducive to supporting local development, particularly SMEs that are cooperative in nature (Bateman, 2007(Bateman, , 2010(Bateman, , 2012(Bateman, , 2013Bateman & Chang, 2012;Brigg, 2006;Hsu, 2014;Karnani, 2007;Loubere, 2017b;Montgomery, 1996;Weber, 2004Weber, , 2006.…”