The Bright Hope of Microcredit

Can a man make a difference in the world with just twenty-seven dollars?

Muhammad Yunus did.

In 1974, Professor Muhammad Yunus, a Bangladeshi economist from Chittagong University, led his students on a field trip to a poor village. They interviewed a woman who made bamboo stools, and learnt that she had to borrow the equivalent of 15p to buy raw bamboo for each stool made. After repaying the middleman, sometimes at rates as high as 10% a week, she was left with a penny profit margin. Had she been able to borrow at more advantageous rates, she would have been able to amass an economic cushion and raise herself above subsistence level.

Realizing that there must be something terribly wrong with the economics he was teaching, Yunus took matters into his own hands, and from his own pocket lent the equivalent of £17 [$27] to 42 basket-weavers. He found that it was possible with this tiny amount not only to help them survive, but also to create the spark of personal initiative and enterprise necessary to pull themselves out of poverty (“The Autobiography of Muhammad Yunus”, Grameen Bank).

From that small beginning grew the power of microcredit.

Microcredit is the extension of very small loans to the unemployed, to poor entrepreneurs and to others living in poverty who are not bankable. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimum qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of financial services to the very poor; apart from loans, it includes savings, microinsurance and other financial innovations (“microcredit,” Wikipedia).

Following that small success in loaning approximately twenty-seven dollars in loans to a group of impoverished women in Bangladesh, Yunus went on to found Grameen Bank, a bank which has loaned approximately 5.72 billion dollars in loans of an average of $100, of which 5.07 billion has been repaid. The loan recovery rate is over 98%—an astoundingly high rate for a bank. More importantly, millions of families have become economically self-sufficient through the efforts of the bank. Because of their success, numerous microcredit operations have risen up in other struggling areas of the globe.

For his efforts, Muhammad Yunus along with Grameen, has been awarded the 2006 Nobel Peace Prize.

With the award, Yunus has received a barrage of media attention. Among the most insightful news reports (some of which are older but have been reissued in the wake of the Nobel Peace Price) on Yunus and the microcredit phenomenon are:

I was fascinated by the story of Yunus and Grameen Bank when I first learned of their work through The New Heroes, a PBS miniseries documenting the work and successes of various social entrepreneurs. I was even more thrilled to learn of the Nobel Peace Prize a few days ago. Economic stability is crucial to social stability and true peace, and I’m glad that the Nobel Peace Prize committee recognized this and broadened its criteria in awarding its prize.

The story of Yunus and his pioneering use of microcredit fascinates me for a number of reasons. Some pundits have suggested that the performance of Grameen Bank indicates that we should take a second look at the value of traditional charity. Perhaps. But I believe it shows even more clearly the need to reexamine our belief in conventional economic models.

Grameen is not a charity. Like all banks, they are a business enterprise. However, they do not operate in the typical manner of a business enterprise. In conventional economic wisdom, self-interest is the reigning principle. Individuals and organizations are encouraged to pursue maximum profit; “Greed is good.” Traditional financial institutions therefore do not loan to those with no collateral. Seeking out the highest potential return,They loan to wealthy financial interests (ironically, the international banks focusing on that traditional market experience a much higher default rate than Grameen with its much “riskier” investments). In conventional economic theory, this is perfectly acceptable—even virtuous. As each entity seeks to maximize profit, all parties benefit. Everyone wins.

The reality is less attractive. Certainly the corporate interests reap the rewards of such a system. But we’ve seen little indication that “developing” nations are actually developing. Most find themselves further impoverished, with spiraling national debts and the gap between the rich and the poor increasing at breakneck speeds.

Yunus and other social entrepreneurs offer a better model. They endeavor to return the word “enlightened” to the phrase “enlightened self-interest.” Where traditional businesses seek profit, Yunus sought a means by which to aid his community. In doing so, he was able to establish a profitable business. How much better would our society be if most entrepreneurs followed that example? How much would we accomplish if all our businesses set about first and foremost to provide a service or product of genuine moral or ethical value to society, with profit being merely the a byproduct of their efforts?

Many mainstream economic apologists like to rightfully point out that the U.S. and international financial institutions like the World Bank pour a great deal of money, both loans and other, into developing nations. What they neglect to mention are the conditions typically attached, and where that capital is targeted. Much of the aid is very consciously intended to bind those nations to global markets and “free-trade” principles as established by the reigning corporate interests. The balance of power in such relationships is weighed heavily in favor of the global corporations. Traditional cultures are eviscerated by the ubiquitous commercial culture of globalization. Far from helping the populations of those nations become more independent, they create an institutionalized dependency. The livelihood of the communities becomes dependent on the interests of corporate decisionmakers with no stake in the success of the community, and the people are subject to the caprice of global markets. Labor in all nations find themselves in a race to the bottom as global capital runs around the globe like quicksilver to whomever can offer the most enticing market (bearing only a pretense of Adam Smith’s “natural advantage”) at any given moment.

While this globalization model is failing miserably to lift the masses out of poverty and into self-sufficiency, Grameen is finding remarkable success through helping the poor find a place in local markets. The money they borrow goes to purchasing a cow in order to sell milk in their neighborhood; or to purchase a barn of chickens, so that the family can harvest the eggs to sell at the local market; or to purchase a wireless telephone for the use of which the individual can charge their community a small fee. These people both serve their local community and patronize it. Their money is largely kept within that community. They are more truly independent.

Can we learn from their example? Obviously, purchasing a cow or some chickens is not a practical form of business in most Utah communities. But the principle of local entrepreneurship is still a valid one here in Utah. Creating an attractive economic environment for out-of-state businesses was a major part of Governor Huntsman’s economic policy agenda in his campaign, with such conventional suggestions as tax holidays and public funding of employee training. Why not instead foster local entrepreneurs, partnering with such organizations as Salt Lake City’s Vest Pocket Coalition?

In serving the poor in Bangladesh, Yunus focused on the segment of the population that has been the least empowered and the most economically vulnerable in virtually every culture throughout history. Women have always faced greater restrictions to their property and civic rights. Not only did Yunus’ concentration on women help to empower and protect this historically vulnerable segment of the population, but Yunus found that directing his efforts towards women produced far better results in terms of alleviating poverty in general.

Women are very cautious with the use of the money, but the men were impatient; they wanted to enjoy right away. They will entertain friends, they will go to the movies, they will do whatever they could to enjoy for themselves personally. But women didn’t look at it personally. Women looked at it for the children, for the family and the so on, and for future (Muhammad Yunus, “Banking on People,” The Newshour with Jim Lehrer).

I am a firm believer that government involvement is crucial to helping alleviate poverty. But despite the insistence of the conservative noise machine, neither I nor the vast majority of liberals believe that government action is sufficient. We understand that there must be concerted efforts from the private sector as well; that we must find ways to personally contribute to the effort. Yunus has provided a great model for action. The success of Grameen Bank provides proof that we do not need to accept global epidemics of poverty as unavoidable facts of life, and that corporatization and globalization are neither as effective nor as inexorable as their proponents would have us believe. If we use our human ingenuity and capacity for compassion, we can make a long-term difference in the world. There are better ways out there which can provide for a broad-based prosperity, in which all partners share in the responsibility and the blessings that come from such cooperation. I believe that such a vision is possible not only in foreign nations, but here in the U.S, and in Utah. And because terror and war thrive on social instability and despair, that is the best shot at winning the “war on terror” we will ever get.

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9 Responses to “The Bright Hope of Microcredit”

  1. Thom Says:

    An observation, and a plug.

    First, I don’t think we can overlook some of the innovations that Grameen made to help secure loans to risky prospects. Individuals who received the loans were clustered with other local borrows. No member of the cluster could take out another loan until ALL loans in the cluster were paid. (This is my understanding, anyway.) In essence, the financial collateral was replaced by social collateral. I think this is the added genius of Yunus, and it’s part of the secret to getting a 2% defaults rate. (I think there are other reasons, too, many of which could be borrowed by more traditional lenders.)

    Second, I heartily applaud the idea of local microcredit. In the meantime, consider becoming part of the international microcredit community, by making a small loan through an intermediary like Kiva .

  2. Thom Says:

    That should say http://www.kiva.org/ at the end of that post.

  3. Derek Staffanson Says:

    Thanks for the information on Kiva, Thom. It looks like a great institution to be involved with!

    I had considered addressing the differences in the loan repayment perspectives of Grameen Bank and conventional financial institutions, but chose to forego that discussion to help cut down on the length. But since you mentioned it…

    Local clusters and their social collateral are a part of the process of securing the loans, yes. However, that is only a part, and provides very much an incomplete picture of the process. I don’t want anyone to get the mistaken picture that Grameen is focused on the repayment and coerces that repayment by holding the community or local cluster hostage to the old loans.

    Where traditional financial institutions are most concerned with profit, and therefore loan repayment, Grameen Bank is primarily concerned with the success of their clients. They provide a support network, in addition to helping build a local support network through the clusters, to advise and assist the nascent entrepreneur. They help her identify the challenges she may be facing, and provide support in overcoming those challenges. They are perfectly willing to allow their clients to reschedule their loans. Grameen is proud of the fact that there is actually no provision in their contracts with their borrowers to enforce the contract by external intervention (ie, they don’t sue their borrowers for breach of contract). Nor does the total interest charged ever exceed the principal, regardless of how long the loan remains unpaid.

    Instead of focusing on what they are going to get out of it, Grameen is focused on the success of their partners. Despite this–or rather, I believe largely BECAUSE of this–Grameen Bank is able to remain profitable and to maintain recovery rates far higher than the mainstream financial organizations whose penultimate focus is profit.

    Sadly, I don’t think that traditional lenders COULD “borrow” (what a terrible pun, Thom!) those features. To do so would require so drastic a change in methodology and culture that those lenders would no longer BE “traditional” lenders.

  4. Frank Staheli Says:

    A friend of mine served an LDS mission in the Phillipines. He says that microcredit has brought in increase in lifestyle to a great many people that otherwise would not have it.

    A salute to Mr. Yunus.

  5. Jeremy Says:

    Thanks for posting on this story!

    Kudos to Mr. Yunus for creating an enterprise such as this where his ability to help continually increases the more he helps others. He definitely deserves his Nobel Prize.

    I agree with you on the drawbacks to the way America and other western governments usually try to help the developing world. We have screwed too many people over with our “aid”.

  6. retro Says:

    It’s a shame what happened to Bangladesh. I hope the world steps up and helps them.

  7. annilkhan Says:

    Burning question: Has micro credit done a lot?
    found a good article and book on micro credit and grameen
    bank: http://microcredit-book.blogspot.com/
    Contributors of this book are Doug Henwood, Patrick Bond, Bosse Kramsjo, Badruddin Umar, Susan F. Feiner and Durcilla K. Barker, Farooque Chowdhury, Robert Pollin, Gina Neff , Anu Mohammad, Omar Tareq Chowdhury.

    Here of the excellent article of this book:

    The metamorphosis of micro-credit debtor
    Farooque Chowdhury

    Micro-credit, the well-propagated mantra in the fight against poverty, is now expanding crossing the national boundaries as capital has done for centuries. Countries in the centre and in the periphery in the present world system are near-spellbound by this mantra. The actors include kings, queens, statesmen, bankers, charity foundation initiators, economists, development workers and the poor. Only the last one is at the receiving end.
    The metamorphosis of the micro credit debtor exposes the acts the capital plays in the act of micro credit and makes all its pious pronouncements hollow. The metamorphosis takes not only to the debtor, but also to other members of the debtor-household.
    The debtor of the micro credit turns owner of the tools or raw materials necessary for producing commodity as the debtor returns home from market after purchasing these with the credit money. But with the joy of ownership a poor debtor enjoys through this metamorphosis there comes a new burden, the burden an industrial proletariat does not have to bear: the burden and responsibility of maintaining, repairing and replacing the tools, equipments or parts of these and the costs that accompany it as the debtor is going to produce and going to be a producer of commodities. It is an extra burden. Usually the job is done not only by the debtor, but also by the other members of the debtor—household. That means time, necessary or surplus labour, depending upon a situation. The proud ownership carries another intricate calculation. An industry owner provides premise, shade, light, water, storage facilities, transport, etc. for producing a commodity and before hiring a wage slave the owner has to spend money for these ranging from construction, power and water connections, supervision, etc. which are calculated before the surplus value is appropriated. But in case of the micro credit debtor turned independent owner of tools of production all these burdens fall upon the debtor. It is the responsibility of the debtor turned owner to repair/replace/heal and to spend money for these. That means the debtor has to arrange the constant capital, and sometimes, the variable capital. The creditor does not always provide the money required for these purposes or the debtor has to set aside a portion of the credit money for these purposes. If the debtor sets aside a portion then the person has to extend extra time to the portion of labour that produces surplus. Moreover, the debtor turned owner has to construct/raise a shed for carrying on the production activity and spend money and labour power belonging to the debtor and the debtor’s household. Actually, the debtor, most of the time, uses own premise, rent for which is paid by the owner of the production unit, the debtor. Maintenance and repair is paid by the debtor, now turned into an independent producer. An industrialist has to pay rent for the premise, utilities and other facilities while they are within the premises producing commodity. But in case of the micro-credit all these are the debtor’s responsibility. The metamorphosis of the debtor to owner of tools, etc., to independent producer thus does nothing but increase the surplus labour time and squeeze necessary labour time so that the repayment of the loan can be made as per schedule.
    The debtor turned producer has to plan, search and work out comparative advantage, and procure and transport required raw materials for the commodity to be produced. The debtor, now acting as procurement manager of the household-based production unit, procures and carries or transports the raw materials for the commodity to be produced. Sometimes it is the spouse or sibling who performs the task, unpaid and unaccounted labour power put into the process. Is the equation in favour of the fellow who went to the banker for the poor to realise the fundamental right the banker propagates? Reality is that the shortened necessary labour time and the lengthened surplus labour time, obviously provide the answer. What about the level of appropriation? It is, certainly, not at the level Marx ‘calculated’. It is super-appropriation, never imagined by the mine owners of Rome, the colonial plunderers, the plantation owners, the slave owners in pre-slavery America, the multi-nationals operating in the countries on the periphery, not even the plundering-lumpen capitalists in a number of underdeveloped countries, but only by the multi-national micro credit capital. So, Michael Lipton and John Toye said in ‘Does Aid Work in India?’ : Rates of return on credit projects are particularly high in India; and Joe Remenyi said in ‘Where Credit is Due: Income Generating Programmes for the Poor in Developing Countries’: Credit – based income generating projects may be the most profitable way in which society can invest…Diminishing return has not set in this field…;…banking on and with the poor is a very good thing to do…. The typical successful CIGP …required an investment well below $1,000 per sustained wage – paying position created (one – tenth of the ratio in the formal sector)…[W]hen one is living at the margin of survival earning around $1 a day, an increase in earning capacity of 50 cents a day represents a substantial improvement in cash flow. These statements tell the truth.
    The metamorphosis of the debtor moves further as the fellow turns wage labourer. The micro credit finds a new commodity as, borrowing from Engels, the ‘source of new value,’ source of surplus ‘income’ with which the debtor will repay and ‘this commodity is labour-power’. The labour power is stored up in the bodies of the micro credit debtors and other members of the debtor-household who extend respective labour power to extend the surplus labour time so that the repayment could be made on schedule. As an independent producer the debtor has to fix the pace of production and that determines the debtor turned wage labourer’s pace and length of working hour. Even, the debtor wage labourer has to borrow labour power of others in the household, who are actually paid only by bare subsistence. To make the statement complete it is not the debtor only, but other members in the debt ridden household, along with the debtor, also, turn wage labourer, at least, part time. Does it not appear more intense than the conveyor belt or the Taylor system innovated by the industrialists to increase surplus value? Thus, the entire household turns into a household of wage labourers, full time or part time. Actually, the pace of work is determined by the time schedule of the repayment. Within the scheduled time for repayment the independent producer turned wage labourer, along with the co-workers in the household have to produce and sell that quantity or that number of commodity that can bring in at least the amount of money needed to repay the instalment of the debt. If seasonal variations, changes in market, health problems, other unseen troubles, non-availability of raw materials or transport, in short, major and minor forces, i.e. ‘acts of god and acts of reality’, coordination with the marketing day and the instalment day are taken into account then the pace of production of a debtor turned independent producer turned wage labourer can be imagined. The person has to forget 8-hour working day, rest, amusement and attending to family chores. It is only to produce surplus enough for repayment. Does it sound like the sweating system? Does an industrialist having a supervisor or a foreman appear fool? While an industrialist has to devise a mechanism, a supervisory system and keep a physical appearance in the work place the micro credit capital does not require all these. Its mere regimentation, mere providing credit at the doorsteps of the poor and its higher level of ‘consideration’ or attention regarding collection of part of the credit from the debtor’s home so that the poor fellow does not turn a defaulter that determine the pace of production. This is the condition of the micro credit wage labourer, obviously a bit different from an industrial wage labourer. An industrialist ‘purchases the use of one week’s labour of [a] worker’ if the worker is paid on weekly basis, but the micro creditor purchases the labour of the debtor for an entire year, if, assumed that the loan will be repaid within a year, or for the entire period until the loan is repaid. With the payment for necessary labour time, a specific amount of money paid for subsistence of a worker and members of the worker’s family, an industrialist ‘ensures the continuance of labour-power even after his [the worker’s] death’, but the micro-creditor ensures the simultaneous use of labour – power of the household members of the debtor along with that of the debtor. The labour, through persistent struggles, has won, in relative terms, a number of measures to safeguard own body and soul and the capital has to compromise for its own sake. But the micro credit debtor turned wage worker toils without coverage of any such measure. The micro credit capital that finances micro-production units at household level is smart enough to escape, till today, the struggle of the debtor turned wage worker, by pass all rules, even norms attained so far, and stay safe. There is no working hour; no weekly holiday; no law, rule, regulation governing working time, working condition, safety measures, child labour, female working hour, etc.; no inspectorate looking at the working condition. This makes life miserable for the micro credit debtor turned wage worker and for the members of the household including the minors who help create surplus value without any legal coverage.
    Now, only a few numbers quoted from Microfinance Statistics (vol.17, Dec., 2004), a publication of the Credit and Development Forum. These will help comprehend, at least partially, the width and length of the micro credit net and the surplus value it appropriates in a single country. In Bangladesh, in 2004, the number of active members in the 721 micro financing organisations (MFO), reporting to the CDF, was 16,622,047 and in 2000, it was 11,021,663 in 585 MFOs. In 2004 the number cumulative borrowers from 721 MFOs was 16,244,242 in a country of 140 million. It was 7,409,773 from 585 MFOs in 2000. There are many other MFOs that have not reported to the CDF, many others are operating in different guises and many other programmes and projects operating not as MFOs but carrying on micro credit business. From how many souls do a group of industrialists in a poor country appropriate surplus value? Are those always more than the number just cited? There are answers, obviously, to this question. It is expected that a reader will search the answers.
    The metamorphosis of the micro-credit debtor continues further as the person moves to market with the commodity produced. The debtor then turns to an independent trader competing with peer debtors turned independent traders in the market place and at the same time they together fall prey to the vagaries of market governed by the mighty market forces. While carrying the commodity to the market, sometimes, some other members of the household, shares the load. This labour is unpaid in terms of wage. If counted or paid, the amount comes from the surplus value already generated. If it is unpaid then the amount thus saved stays within the surplus value to be paid to the creditor waiting for the next instalment of repayment. As an independent trader the debtor turned independent producer turned wage worker has to bear all the responsibilities of a trader. But an industrial labourer does not have to take all these responsibilities. The wage slave in a factory just completes respective job and gets compelled to be appropriated of the surplus labour time. Market, supply, demand, transportation of commodity to market, storage, taxes and tolls, speculation, price, etc. are not part of a factory worker’s business. But as an independent trader the micro credit debtor has to bear these extra burdens which are not the creditor’s concern at all. The creditor has tactfully, through the modus operandi, has put it upon the poor debtor’s weak shoulder. There are commodities in the market that are produced in larger, mechanised production units, with higher productivity, which means a cheaper commodity, and, commodities that enjoy facilities created by the WTO. This situation puts the debtor into an unfavourable, uneven playing field, cuts down the debtor’s competitive edge and presses down price of the commodity produced in the household by semi-skilled and unskilled workers and produced with artisan method and tools. There is the packaging, marketing and advertising factor. The person has to reconcile with the situation and that means further tightening of belt. The micro-credit thus pushes the debtor to such a situation with extra burdens while it demands regular repayment of the credit.
    The data on the sectors or sub-sectors that use micro credit in Bangladesh show the sources of surplus value appropriated and who ‘offered’ the surplus labour to generate the surplus value. In 2004, according to the data published in the above mentioned CDF publication, of the 379 MFOs reporting to the CDF, 27.94 percent of cumulative disbursement was in the agricultural sector that included crops, livestock and fisheries sub-sectors while only petty trading sub-sector covered 40.61 percent. The percentage of food processing and cottage industries was 6.28 and of transport it was 2.20. In the years 2003, 2002, 2001 and 2000 the petty trading dominated. From where does trading, whatever its size is, produce the profit? A portion of it is surplus value generated by others in other places. What about the transport, the rickshaw van or the boat, and the cow fattening? The same answer. It is also the surplus value generated by and in different segments of the broader society that is appropriated by micro credit capital that gets in through the debtor’s hand. Other sectors and sub-sectors also provide similar explanation found in political economy. The above mentioned CDF publication provides a few more startling facts: ‘utilisation of loan by sector or sub-sector (as percentage of cumulative disbursement)’ in ‘social sectors’ in 2004 was 1.70 (health:0.44, education: 0.06 and housing:1.20); in 2003 it was 1.58 (0.45 for health, 0.04 for education and 1.09 for housing); in 2002 it was 1.41 (0.39, 0.05 and 0.97); in 2001 it was 1.76 (0.42, 0.11 and 1.23); and in 2000 it was 1.69 (0.37, 0.02 and 1.3). The ‘social sector’ meant by the cited publication was health, education and housing which are actually required for ensuring the debtor’s and the debtor household’s survival, keeping the body and soul of the household based producers or of the trader or of the transport operator together, ensuring that production or trading could be carried on or transport could be operated so that surplus value generation or taking share of surplus value generated by some other is ensured, so that the repayment that includes surplus value is ensured. If a debtor does not have a house or a shed the production unit will be inoperative or will face problems in the production activities; the raw materials, the tools, the fuel, the cow or goat or poultry, the commodity produced could not be stored in; the producer and others in the household joining in the production activities could not survive. So, the housing sub-sector was emphasized most while lending out money in the CDF defined ‘social sectors’. Of course, the façade was benevolence by the micro creditor. Then came health with the same arguments. A judicious choice of the appropriator! Material interest tops the list over human consideration. The extent of concern for health of debtor and debtor household is directly related and tied to the extent of concern of continuation of production, etc. activities. It was followed by education. The level of production and the level of transaction determine the extent of education required and the level of emphasis put into education. None can override this rule. The micro-creditor, also, faithfully follows this one and the life of debtor goes through this metamorphosis.
    Thus, the circuit of metamorphosis of micro-credit debtor moves on and ultimately it completes a full path: a poor, an appropriated person turns debtor, the debtor turns owner of tools of production., the owner turns household based independent producer, the independent producer turns wage worker, the worker turns independent trader, the trader stays entrapped into debt with worsened condition and bigger debt turning one to debt slave. In its circuit the micro credit debtor only produces surplus value or takes a portion of surplus value produced by some other debtor or some other person or persons in the society producing surplus value and transfers a portion of it to micro credit capital. The circuit is both, a closed and an open, signifying the contradiction. The closed circuit keeps the debtor in perpetual and worsening poverty; sometimes, borrowing from the micro-credit literature, graduating a percentage of the borrowers, but pushing down or entrapping others in increased number; and often, throwing back the graduated debtor to the den of poverty again; and in these cases, the mainstream economics finds the rationale in ‘shocks’, ‘setbacks’, etc., natural and social, as their terminology defines. But whatever happens in the lives of a certain percentage of the debtor that does not change the basic structure of the circuit in the broader social matrix, in the process of appropriation of surplus value. Ignoring the macro scenario and putting forth the micro, a few individual cases, putting forth the exceptions instead of the general rule does nothing but vulgarises the arguments itself pushed forward by the mainstream. The open circuit intensifies and accelerates the pauperisation process and thus creating pressure on the system that creates poverty, makes a person poor, and appropriates surplus value. The vulgar economics with ‘hollow eye and wrinkled brow’ (Shakespeare, Merchant of Venice) extending support to micro credit capital may construct a façade by resorting, again, to vulgar arguments. It may argue that a certain percent of micro credit debtors have improved their living condition with the aid of the panacea as a few days ago they used to mean the micro credit. But this does not nullify the fact of appropriation of surplus value from others in the broader society. Rather, it puts the evidence that surplus value has been appropriated from some other persons. There are many economists in the bandwagon of micro credit who cite cases of increased consumption by the micro credit debtors. But it should not be missed that consumptions are of two types: productive and individual; while the first one is to create products the other is turned into means of subsistence. So, data of debtors’ increased consumption, claims regularly made by the mainstream economics, carry no meaning other than better and ensured supply of surplus labour power which is expropriated. The fact should not be missed that the entire system rests on the appropriation of surplus value and micro credit is a part and, now is an institution of the system. It is sustained by the system and it helps sustain the system.
    The socialisation of micro-credit, with its profit profile, allures other capitals in banks and financing companies to join in. The capital engaged in micro-credit ties, quoting from Shakespeare, the ‘poor man’s cottages [to] princes palaces,’ organises and regulates debtors including members of the debtor-households, keeps them entrapped in the micro credit web, appropriates surplus labour power of them and others in the broader society. Moreover, it now regulates, based on its global power, the analytical process of a section of economists who overlook the process of appropriation of surplus value upon which the micro credit thrives, and try to ignore definitions of political economy and propagate vulgar ideas.

  8. Gnostic Says:

    It is very true that the micro-credit loan program is a new form of slavery, considering the huge interest rates (no wonder kings and queens have got involved). Even without the devastating interest rates it was not an attractive idea to me. I always thought it to be a good idea only for a short run. On the long run it contributes to a vicious competition, thus deepening the already unbearable misery in the world. If those Nobel Prize winners were interested to help, they would not loan but rather would just give that money to those poor. I agree, this is a lucrative business, rather than philanthropy.

  9. Sean Reynolds Says:

    Good

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