Co-optation, Cooperation or Competition? Microfinance and the new left in Bolivia, Ecuador and Nicaragua

Abstract

The last decade has been marked by the resurgence of leftist political movements across Latin America. The rise of the 'New Left' masks the ambivalent relationships these movements have with broader society, and their struggle to find an alternative to the prevailing development model. Across the continent, the microfinance sector, filling the void left by failed public banks, has grown significantly under an increasingly commercial form. Analysis of Nicaragua, Ecuador and Bolivia reveals that the new governments share a common distrust of microfinance. Yet, in the absence of viable alternatives for financial service provision, governments and microfinance stakeholders are forced to coexist. The environment in which they do so varies greatly, depending on local political and institutional factors. Some common trends can nevertheless be discerned. Paradoxically, the sector seems to be polarized into two competing approaches which reinforce the most commercially-oriented institutions on the one hand, and the most subsidized ones on the other, gradually eliminating the economically viable microfinance institutions which have tried to strike a balance between social objectives and the market.

Institutional Support and Sustainability of Microcredit Programmes in Developing Countries: The Case of Venezuela

“…After that time, this aid disappeared, raising the question as to what extent subsequent development of the rural credit unions will be affected by this loss of support. This initial momentum in support and accompaniment during the implementation of the microcredit programme, followed by a subsequent withdrawal, is quite typical, especially in the context of developing countries with unstable political and institutional structures (BéDéCarrats et al, 2012).…”

“…Coinciding with Chávez' accession to power, it was initially promoted through the Foundation for Training and Applied Research in Agrarian Reform ( Fundación de Capacitación e Innovación para Apoyar la Revolución Agraria , CIARA). But the project, which initially received institutional support, and which created 155 small rural credit unions to be self‐managed by the farmers, gave rise to specific misunderstandings amongst local project managers because of different points of view and attempts at ‘clientelist' control by the government (BéDéCarrats et al ., ). Because of disagreements in the management of the project, the government abandoned it in 2007, after which time, this rural development initiative has only received support from its partners and administrators.…”

“…In the specific case of some Latin American countries where the left came to power at the end of the last century, the situation with regard to microcredit institutions is ambivalent. On the one hand, these governments espouse more just and equitable economic growth, thus strengthening these institutions, but on the other hand, they wish to bolster a ‘clientelist' network that will allow them to remain in power, so they therefore try to control them (BéDéCarrats, Bastiaensen, & Doligez, ).…”

Post/neo/liberalism in relational perspective

“…The apparent victories of indigenous movements likewise are limited (Escobar, 2010;Hale, 2011;Puig, 2010a). Even recognizing path dependence (Molyneux, 2008) and distinct modes of governance (de la Torre, 2013), similar problems occur across wide-ranging contexts, including the persistence of clientelism and undemocratic processes of decision making (Bebbington & Bebbington, 2011;B ed ecarrats, Bastiaensen, & Doligez, 2012;Escobar, 2010;Radcliffe, 2012;Sieder, 2002a), uneven land distribution (Bebbington & Bebbington, 2011;Enríquez, 2013), and patriarchy (Friedman, 2009;Sieder, 2002a) and post-colonial racial hierarchies (Sieder, 2002a;Yashar, 2005). The social sectors that were meant to be protected often have been the first to be hurt (Panizza, 2009).…”

The relationship between the performance and legal form of microfinance institutions

“…This may be making NGOs and cooperatives adopt more commercial practices that, allied with the advantage of operating with financial benefits and without any of the legal constraints of profit-orientated financial institutions, would result in greater financial performance. The profitability of these institutions is a warning sign if we consider that some MFIs are accused of practicing high interest rates and credit and collection policies that verge on being abusive, which in the case of socially-orientated MFIs could be mitigated by reducing profits so that they do not diverge from their social mission (Bédécarrats, Bastiaensen, & Doligez, 2012;Serrano-Cinca & Gutiérrez-Nieto, 2014). In this context, it could be questioned whether expansion through retaining surplus earnings is the best solution when assimilation or merger with other financial institutions is also an option.…”