The Exclusionary Power of Microfinance

Abstract

In recent years, international banks, investment agencies, and development institutions have created new markets for capital accumulation by rapidly expanding the commercial microfinance industry in the global South. In Cambodia, which has one of the largest microfinance industries in the world, the typical loan amount now exceeds the average annual household income and requires land-based collateral. Cambodian borrowers are increasingly over-indebted, compelling families to reduce their food consumption, take out new loans to service prior debts, migrate, and/or sell their land in distress. In this paper, we investigate this last effect of over-indebtedness, distress land sales. We argue that the exclusionary power of microfinance debt—constituted by collateralized legal contracts, discourses of moral responsibility, and public shame—is driving land dispossession among the country’s most vulnerable people. To make our argument, we draw on ethnographic fieldwork, supplemented by quantitative data from the Cambodia Socio-Economic Survey, MIX Market, and two industry-sponsored large-scale quantitative surveys of over-indebtedness. We trace the rise of the commercial microfinance industry, show how it has contributed to over-indebtedness, and consider how household debts can lead to distress land sales. These land sales have largely gone unacknowledged in the industry because they take place through informal channels rather than the court system. We conclude that microfinance-debt-induced land dispossession in Cambodia is a product of an overly commercialized international microfinance industry that now values profits over people.

“Now the Forest Is Over”: Transforming the Commons and Remaking Gender in Cambodia's Uplands

“…The reduced availability of wild food connected to forest enclosures facilitates dependence on credit from local grocery stores and micro-finance institutions (MFIs) as the commons no longer provide a reliable food security safety net and market bought food is expensive (Bateman, 2012;Green and Bylander, 2020). While there have not, as yet, been any large-scale studies on the gender dimensions of indebtedness and land loss in rural Cambodia, it has been observed that more than 70% of micro loans are provided to women and many of these are given for the purposes of buying food and medicines or for servicing repayments on earlier loans (Green and Bylander, 2020). Our interviewees discussed indebtedness arising from and leading to food insecurity and the heavy mental load involved in managing household finances in a context where multiple loan repayments must be navigated.…”

Duplicitous debtscapes: Unveiling social impact investment for microfinance

“…I have previously published about the relationship between microfinance and Cambodia's agrarian transformation. This research was based on long-term ethnographic research within a farming community and a local microfinance institution (Green 2019(Green , 2020a(Green , 2020bGreen and Bylander, 2021;Estes 2019, 2022). More recently, I have conducted interviews with national regulators, financial executives, investors, and civil society organizations involved with microfinance.…”

Financing agrarian change: Geographies of credit and debt in the global south

“…Another issue raised by farm mortgages relates to land dispossession. Political ecologists and development geographers, building on agrarian Marxist theories of rural differentiation, have argued that the rise of interlocked land and credit markets has driven new waves of dispossession in the global south (Casolo and Doshi, 2013; Green and Bylander, 2021; Hall, 2004; Hall et al, 2011; Li, 2014a; Taylor, 2011). According to this literature, debt is a mechanism of alienating land from rural producers once capitalist market imperatives and property relations have been established in the countryside.…”

“…They are also shaped by powers of legitimation and regulation. Similar to the morality of microfinance, debt-driven dispossession is frequently legitimized by shifting responsibility of default onto borrowers and coercing land sales through public shaming practices (Green and Bylander, 2021). Moreover, states have variously intervened in land markets to regulate debt-driven land sales in response to agrarian discontent and revolt (Hall et al, 2011).…”

“…Specifically, where property systems are not controlled by a national land registry, the regulation of mortgage default outside of the central state’s jurisdiction opens up opportunities for powerful state and private officials to exploit such situations. In these contexts, debt-driven dispossession is regulated less by law within a national court system, and more by relations of power exercised by local state and non-state actors (Green and Bylander, 2021; Hall et al, 2011). Building on this example, a variegated capitalism approach to debt-dispossession would understand the governance of agrarian finance as embedded in local institutional settings shaped by legal plurality, defined by the customary rules, extra-legal violence, and patron-clientelism that co-exist with codified law (Green, 2020b).…”