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Grenfell Tower symbolises how social housing across Europe has suffered under austerity and the new financial calculus of many local governments (Image: ChiralJon, CC BY 2.0)

Guest post by Sebastian Möller

The crisis of housing in the UK became internationally apparent with the horrific Grenfell Tower fire in June 2017. British cities, London in particular, lack affordable homes, and the condition of the social housing stock in many local authorities at best leaves much to be desired, and at worst is hazardous for the health and life of residents. Grenfell is exemplary for the devastating state of social housing, reminiscent to some of the Victorian era, when Friedrich Engels wrote his impressive ethnography on the living conditions of workers in England. Read the rest of this entry »

The World Bank’s previously public data on microfinance and financial inclusion has recently been locked away behind a paywall. It’s hard to figure out why. However, it raises larger questions about the Bank’s strategies for microfinance and knowledge more broadly.

(This is a background piece to an article published on the IDS blog.)

Since the 1990s, the World Bank has sought to present itself as not only as a lender, but also a global “Knowledge Bank” that collects and provides knowledge as a global public good. It has garnered some praise, and perhaps more criticism, for ostensibly seeking to monopolise knowledge about development. In 2012, the Independent Evaluation Group concluded the objective of creating a global Knowledge Bank had not been achieved, criticising a lack of uptake of knowledge within the Bank and “intellectual silos”.

So how about intellectual vaults, with knowledge securely locked away? Turning public monopolies into private (or pseudo-private) monopolies; now that doesn’t sound like something the World Bank would be in favour of, does it? It’s precisely what happened with the World Bank’s microfinance data platform earlier this month.

The MIX (also known as “Microfinance Information Exchange”, or “Mixmarket.org”) was created by the World Bank’s in-house-but-arms-length microfinance governing body, CGAP, to improve the transparency of the microfinance industry. Since 2002, the MIX (whose connections to the World Bank are not made very clear, but its headquarters are across the street) has collected data about the global microfinance sector, packaged primarily to cater to investment decision-makers.

The MIX’s “.org” suffix denotes its claim to serve the greater good. The data were made available on-line.  Anyone with an interest in microfinance could access it: “a big win for open data in international development”.

Get the “public” data – for upwards of $486

Those days, it seems, are over. All the data which were previously available for downloading and (usually after some cleaning) analysing in a spreadsheet are now behind a paywall. What used to be a “global public good” is now priced at at least $486 a year – clearly too much for most students or researchers, let alone those from developing countries.

paywall

(Image: screenshot from themix.org)

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Cross-post: a (somewhat provocative) piece from the IDS Blog, addressing the increasing focus in many development programmes on bringing “youth” into labour markets, and some of the issues that are missed in the process.

Youth and young people are becoming a hot topic among development donors and actors. But who exactly do these “labels” apply to, and are they too broad for effective policies? Or do they create too narrow a focus which is blind to larger structural issues?

Varyingly, youth are identified as “at risk” – of unemployment, of marginalisation or abuses – or “as risk”, where they may engage in undesirable activities from crime to terrorism, armed violence or migration. However, there are also many calls to understand youth “as opportunity”, particularly in the context of Africa’s “youth bulge” and its promise of a vast demographic dividend.

A recent visit to the Dutch Royal Tropical Institute (KIT) and some great discussions with research colleagues there, brought some clarity into the interlinked promises and problems arising from development actors’ burgeoning interest in youth and work. Clearly, a better understanding of the specific vulnerabilities and needs of particular young subpopulations is useful, and related efforts should be welcomed.

But if applied wrongly, a simplistic focus on young people (or a narrow “youth lens”) may obscure more than it illuminates. The reasons include categories that are too unclear, heterogeneous needs and what a “youth” focus misses.

In the context of questions around young people’s labour market prospects, particularly in agriculture, which both IDS and KIT are working on, these are particularly salient.

Read more on the IDS blog.

(phil)

 

This coming Thursday, I’ll be a panelist on one of The Guardian’s online Live Q&A’s, a series of events which they’ve been running since 2013. The topic of this session is What are the barriers to financial inclusion in fragile states? and questions include: “How can more opportunities be created for people to save and borrow in volatile economies? What expertise can NGOs, the telecoms industry and policymakers offer around innovative ways to reach the most cut off communities? And how do we measure success in countries where conditions are volatile?”

The Q&A will run on Thursday 5 Nov. from 13:00 to 15:00, with a panel of invited experts who answer readers’ questions and comments online and discuss with each other; the whole panel should be confirmed by Wednesday. Of course, input and participation in the Q&A by the readers of this blog would be very welcome and should enrich the debate. As much as it may appear a niche topic, the session connects to questions about the exact role of financial services in development, the priority which donors give to financial development vis-a-vis alternative strategies for income-generation and social inclusion, and the microfinance experience of countries like Bosnia-Herzegovina.

(phil)

The Nobel Peace Prize awarded to Muhammad Yunus and the Grameen Bank in 2006 went practically unquestioned. But since then, particularly over the last years, a public pro-microfinance/anti-microfinance debate has taken a clear shape with well-known lines of argument running both-ways. Many studies have asked: “Does microfinance work?”. And some have more pointedly asked: “Why doesn’t microfinance work?“.

New questions are needed if new answers are to be generated. The Political Economy of Microfinance: Financializing Poverty offers both. Starting from the question “What does microfinance work at – and how?”, it offers new insights into which have particular significance in light of the continually unresolved issues around poverty impact. More than 35 years into the microfinance experiment, the fact is we still don’t know whether microfinance works at reducing poverty – and there are serious reasons to doubt that it does. What we do know (or can know), however, the book argues, is that microfinance works at financialising poverty.

The Political Economy of Microfinance Financialising Poverty

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The Conference FUTURE€$ – Prospective Money and Money’s Prospects, which I’m organising together with Axel Paul and Cornelius Moriz, will take place from 24-26 September 2015 at the University of Basel, Switzerland.

Futures posterIn February we circulated a Call for Papers that generated an overwhelming response in terms of cutting-edge submissions, from which we could select the very best and put together a set of panels on the nature of money, the Euro crisis, and new monetary technologies. This comes in addition to a stream of talks from leading scholars of money worldwide. A main highlight of the conference is the evening roundtable on Friday 25 September, which assembes four prominent panelists (Christoph Fleischmann, Keith Hart, Dimitris Sotiropoulos, and Rainer Voss) to reflect on the problematic role played by money in our present political-economic juncture.

The conference will bring together multidisciplinary and exploratory perspectives on the nature(s) and future(s) of money. With this list of speakers (from academia, practice, activism and media), it may well be the academic event of the year in its field:

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Excerpt from “The Political Economy of Microfinance: Financializing Poverty”, Chapter 2, A Genealogy of Microfinance. (see other excerpts here)

Microcredit allowed the well-institutionalized tool of credit programming to remain inside mainstream development policy, despite a diminished role for governments, and despite the fall from grace of subsidies. In reality, microcredit programming merely shifted the subsidies and state involvement one level “up”: no longer were loans to the poor subsidized and publicly supported; now the organizations which lent to the poor were subsidized and supported.


Historical growth of the microfinance industry

Sources: World Bank (2001); Maes/Reed (2012); MIX (2013) = Basic MIX MFI Data Set, as of 26 December 2013.

Reliable data on microfinance from before 2000 are very rare. In the mid-1990s the World Bank surveyed the sector and counted over 900 “institutions which offer microfinancial services” (around 735 of them being “proper” microfinance institutions), each serving at least 1,000 clients. The list included seven large banks and one NGO. The survey tallied around $5 billion in outstanding loans. However, the vast majority of MFIs were recently founded NGOs which placed little, if any, emphasis on savings and received over two-thirds of their funding from donors (see Figure below). This group was fast-growing. The World Bank (2001: 4) noted: “Much of the impetus for this growth comes from donor organizations and NGOs embracing microfinance as the latest tool in development and poverty reduction. Due to the increasing availability of donor funds, microfinance institutions have grown rapidly.”

Standardizing microfinance, financially

The World Bank’s decision to support microfinance primarily through its International Finance Corporation (IFC) arm, whose purpose is “financing private sector investment, mobilizing capital in the international financial markets, and providing advisory services” (IFC 2011), affected which type of organizational model would become dominant: MFIs that were willing and able to manage funds that were channelled from mainstream financial markets were favoured. Read the rest of this entry »

Excerpt from “The Political Economy of Microfinance: Financializing Poverty”, Chapter 6, At the Crossroads of Development and Finance. (see other excerpts here)

Re-evaluating microfinance

Although definitive policy prescriptions go beyond the scope and intent of this book – as a political economy of microfinance, not a policy appraisal – I hope that it may contribute to a reconsideration of microfinance… Putting the current state of impact evidence together with my analysis of microfinance as financializing poverty begs the question: If we have no proof that microfinance reduces poverty, but we do know that it extracts labour power from the poor, why should we continue with microfinance? And since the research presented here draws into question the hopes placed in, and the policy attention devoted to, microfinance as a developmental tool, what practical lessons can be drawn?

Enthusiasts believe that, in the case of the microfinancial industry, the interests of capital owners, financial intermediaries and the global poor can be aligned. That the poor see a share of their labour power extracted by a new financial industry might well be justifiable (in terms of social policy), if measurable, demonstrable benefits to the poor were to systematically arise.[1] But the fact that, on the one hand, systematic benefits for the poor are difficult if not impossible to demonstrate after more than three decades (in studies whose designs aimed to find these benefits, and whose frame of comparison was that of doing nothing at all), while on the other hand, microfinance does demonstrably impose systematic costs on the poor, makes the arguments put forward in its defence look increasingly questionable.

Furthermore, instead of purging them, the microfinancial industry has come with many of the trappings of “normal” finance: excesses, crises, bailouts, overindebtedness, fraud, sale on false premises, collusion, predatory lending, abusive practices, irrationality, speculation and greed. These aspects of the credit relation constructed by microfinance should also be considered in any overall appraisal.

One perfectly logical option for policy-makers would be to discontinue their direct and indirect support (including financial support, logistical support and conducive policy changes) for microfinance systems, until the day their beneficence can be proven. Another logical possibility would be to regulate the sector in such a way as to ensure that the interests of investors and MFIs cannot supersede those of their clients. Yet the sector remains deeply averse to such regulation with teeth – such as interest rate caps or loan usage restrictions – and will likely strongly resist it by employing arguments that emphasize poor people’s right to choose between different credit sources and modalities which would be curtailed by regulation.

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Excerpt from “The Political Economy of Microfinance: Financializing Poverty”, Chapter 2, A Genealogy of Microfinance.

Two basic types of story are commonly told about the origins of modern microfinance. One is the underhistoricized version, whereby Dr Muhammad Yunus (and/or a handful of other pioneers) “invented” or “discovered” it: “The modern microfinance movement began in Bangladesh in 1977, as an experiment by economics professor Muhammad Yunus … Over the next three decades, the model he established became widely accepted and replicated in other countries as a way to fight poverty. Microfinance spread around the world and earned Yunus a Nobel Prize in 2006” (Wharton Business School 2011). In this and similar tales, before the 1970s, microfinance has no meaningful history.

The overhistoricized version meanwhile draws parallels and connections with various prior credit systems and financial interventions, portraying microfinance as part of a long lineage of poverty-alleviation programmes through credit. For instance, “modern microfinance did not arise de novo thirty-five years ago. The ideas within it are ancient, and their modern embodiments descend directly from older successes” (Roodman 2012a: 38). Here, today’s microfinance sector is all history, and merely the temporary pinnacle of a long, quasinatural evolution.

Both stories are unsatisfactory, not least because they downplay (or ignore) the political-economic context of microfinance; they overlook the “visible hand” of the state in its emergence; they fail to show how microfinance arose out of particular historical circumstances (neither as sudden discovery nor as revival of ancient ideas); above all they are blind to the insecurities, uncertainties and contingencies which shaped today’s microfinance sector. Microfinance was neither a sudden and miraculous discovery nor a historical necessity.

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Excerpt from “The Political Economy of Microfinance: Financializing Poverty”, Chapter 3, The Financialization of Poverty. (see other excerpts here)

Microfinance … performs both financial intermediation and financial innovation … it intermediates across time and space by creating entitlement relationships that reach from now into the future and from capital providers to borrowers. It innovates in generating new financial technologies which bring fresh borrowers into connection with capital-providing actors who can pursue not only financial goals, such as rapid turnover and growth of capital via above-market interest rates, but even quasi-charitable ideals.

The microfinance industry has developed (and continues to develop) technical means for channelling substantial quanta of capital directly to people living without collateral or assets at the bottom of the global income scale, technologies including group lending, social collateral, standardization and computerization, ratings of MFIs, and securitization of loan portfolios. The growth and stability of global microlending, at between 17 and 78 per cent annually during 2002–2009, and 10 per cent on average since then, both demonstrates the resulting system’s efficacy and indicates that capital-owners expect it to be durable.

The Cost of Microfinance

Surplus extraction through microfinance, 1995–2012

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The Book

Governance across borders: transnational fields and transversal themes. Leonhard Dobusch, Philip Mader and Sigrid Quack (eds.), 2013, epubli publishers.
October 2017
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