Last week at the International Studies Association Conference in Toronto, Marie Langevin (Ottawa) and I hosted a panel bringing together Northern and Southern perspectives on what may be termed poverty finance*. These perspectives surprisingly only rarely speak to each other, and our panel demonstrated how important and fruitful such a conversation is. Phil Cerny chaired the panel “Fringe Finance and Financial Inclusion”, and Rob Aitken (Alberta) – one of the few exceptional researchers whose work spans both the worlds of Northern and Southern poverty finance – acted as discussant of the papers.
Marion Fourcade (Berkeley) presented a paper which should have been work in progress, but had rapidly been published (congratulations) in Accounting, Organizations and Society. The paper (with Kieran Healy, Duke) argues that the mechanisms of differentiation built into private markets increasingly play a powerful, if not perhaps even central, role in determining individuals’ life chances – and, thereby, stratifying societies. With their various technologies of scoring, differential pricing, reward and punishment, liberalised credit markets in the USA and Britain are the epitome of how markets work to “include” people while simultaneously producing powerful within-market distinctions. This splitting and categorising of members of society according to the terms on which they can be rendered useful for capital accumulation is the essence of what Fourcade and Healy call “classification situations” in the market – a concept which becomes clearest, I believe, when read as “class-ification“.
Marcus Taylor (Queen’s) spoke about his paper for the Journal of Agrarian Change which explains the Indian microfinance crisis of 2010 in terms of the deeper “political ecology of debt” in Andhra Pradesh. His account is remarkable in dispelling both the self-serving story that the Indian microfinance industry fell prey to an overzealous state, and the generic account of a “typical” financial cycle of boom and bust. Rather, as microcredit entered it intertwined with and built on manifold existing relations of debt. In this sense, Taylor argued in his talk, understanding microfinance’s advance simply as a process of financialisation could generate the false impression of credit being a new phenomenon for poor people, thus reinforcing discourses of “financial inclusion”. To understand why peasants in Andhra absorbed so many loans, Taylor argues, we need to understand the deterioration of their chances of survival as farmers, particularly hinging on their difficulties of accessing water, shaped by pre-existing debt structures. With its sharp eye for local context, Taylor’s work holds powerful lessons for the study of credit markets everywhere.
Johnna Montgomerie (Goldsmiths) presented work in progress from her new project on technologies of “debt resilience” in the UK. The age of austerity has brought us to a “politics of indebtedness” where different actors take positions on the legitimacy of certain debts; but while providers of debt advice and organisers of debt resistance can agree on the problems, the solutions are less clear. Montgomerie’s presentation hinted at an emerging tension between advocates of reform and resistance. What struck me most was how difficult it is for indebted people to articulate their grievances, let alone join forces. While creditors are organised and share information to actively divide and stratify debtors (as Fourcade’s paper showed), debt remains invisible in everyday social life. So how can common experiences be shared and, some semblance of solidarity be forged? This problematic of course equally extends to microfinance debts in poor countries.
Marie Langevin (Ottawa) showcased findings from her ongoing research in Peru, showing how the doxa of development and of finance blend together in “financial inclusion”. Peru, the largest microfinance market in Latin America, experienced a series of takeovers of microfinance institutions (MFIs) by mainstream banks so that, as Langevin says: “Microfinance now plays in the big kids’ playground”. Illustrating with the case of Banco de Credito del Peru (BCP) taking over the MFI Edyficar in 2009, Langevin shows how mainstream financial actors now clearly recognise the value of microfinance institutions’ technical know-how as an asset for capturing revenues at the financial fringe. However, the resulting “inclusion” is by no means wholesale, but instead a stratified process (see Fourcade) whereby BCP has sought to encourage savings but simultaneously opted to keep small loan operations at Edyficar. This differentiation is reminiscent of how commercial and investment banks have made inroads into fringe financial activities in the North, like subprime and payday lending, seeking to capture these profits while simultaneously keeping the “dirtier” business of poverty finance at arm’s length.
I presented a working paper proposing microfinance as a case for studying how financial systems operate. Microfinance may appear as an eccentric appendage of global finance, while in fact it illustrates some of finance’s core mechanisms very clearly. Financial systems have expanded their frontiers to generate and capture new value streams in recent decades (as all papers in the panel illustrated and problematised in different ways). At a closer look, the value extraction by microfinance is hardly negligible: on 100 billion US$ loans in 2012, MFIs extracted at least 21.6 US$ billion in surplus value from borrowers. This is possible through the specific power relations deployed in the microfinance system which produce a financial governmentality to build the sector’s famed repayment discipline; while – as Rob Aitken rightly pointed out – these power structures can be disrupted and may decay over time and space, overall they do hold surprisingly well.
Rob Aitken highlighted in his discussion just how strongly the 5 papers spoke to each other so that, with hindsight, it seems less unjustified and more plainly mystifying that research on microfinance/financial inclusion has usually ghettoised itself in the development field, while critical social studies of finance in the North largely remain oblivious of the parallel processes in the South (exceptions like Soederberg’s “spaces of debtfare” notwithstanding). Fringe finance and financial inclusion are evidently part of the same emerging transnational financial systmatic, and appear to be blending into a coherent politics of poverty finance which certainly deserves a more coherent research enterprise.
*Katharine Rankin uses this term in an excellent (and very topical!) article.