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Update (8.1.2014): The court case against the Moroccan anti-microcredit activists is postponed again until 28 January 2014, because a new judge is being sent from the capital, Rabat.
Update (18.12.2013): The verdict was postponed yesterday until 6 January 2014, due to nine prosecution witnesses not showing up. A demonstration was held in front of the courthouse.
A woman and a man who led protests against microfinance institutions in Morocco are on trial. They risk of five years prison sentence without a chance of parole.
Amina Mourad and Benasser Ismaili, this communiqué (via ATTAC Morocco) reports, are leaders of the Association de Protection Populaire pour le Développement Social, an organisation of roughly 4,500 women who have been rallying against the policies, practices and interest rates of MFIs in Morocco since 2011. Four MFIs took Mourad and and Ismaili to court on counts of libel and threats. After the activists were found “not guilty” in the first instance, a new organisation backed by Planet Finance went into appeal, threatening them again with imprisonment. The verdict is expected on 17 December at the courthouse of the desert city Ouarzazate.
Morocco was the site of a microfinance crisis in 2008, caused by ever-larger loans to groups of borrowers, leading to 10 percent of clients not repaying (or not being able to repay) their loans by June 2009. The central bank estimated that 40 percent of borrowers had loans from more than one MFI just as the repayment crisis began (source). Even the always-positive ACCION Centre for Financial Inclusion admits that there is no effective client protection in Morocco: “Measures have been put in place to advance the adherence to the principles of client protection. While much has been achieved to date, there remains much more yet to be accomplished.”
The World Bank is a major backer of microfinance expansion in Morocco, hoping to show that microfinance markets can recover from the repayment crises they generate. The two largest MFIs in Morocco (Al Amana and FBPMC) earned a rate of profit of 45 and 28 percent, respectively, in the second quarter of this year (Mixmarket).
Jailing the protestors will certainly not improve the reputation of MFIs in Morocco, and may lead to violence. ATTAC have called upon the court to release the accused, asking for an international demonstration of solidarity via letters like this: Read the rest of this entry »
(*don’t know your customer)
Truth in advertising has never been very highly valued in the microfinance sector. Know-your-customer (KYC) sadly is also a much-espoused but rarely-heeded principle. The current promotional video for on-line lending platform Kiva shows that Kiva cares about neither.
This most widely known online microlending platform once claimed it facilitated person-to-person (P2P) microending. After the New York Times debunked that as a deceptive illusion in 2009, Kiva had to retract the claim, now fielding the (far clearer?) promise to “connect people through lending to alleviate poverty”. In fact, what Kiva does is merely lend your money for free to microfinance institutions (MFIs), which can then on-lend the money in whichever way they see fit, at interest rates somewhere between 20% and 100% APR. The joyful little cartoon video about “Pedro, a farmer who gets a loan through Kiva.org and transforms his business” doesn’t exactly make this clear.
But the main problem with Kiva’s video How Kiva Works is that the claimed impact of microloans is so absurd, it prompts serious questions about who at Kiva actually knows anything about what microfinance does. Let’s briefly look behind the cutesy imagery.
Alex Counts is the President and CEO of Grameen Foundation and a biographer of Muhammad Yunus, the Grameen Bank founder. Given his position in the large network of Grameen, he holds sway in the microfinance world and beyond. So when he publishes an attack on independent research on his blog, I take to represent a reasonably broad antiscience sentiment in the microfinance industry.
In his article, the head of Grameen Foundation laments the emergence of “a new generation of researchers” rising to “debunk the myth of microfinance being an effective tool to fight poverty” (I consider myself part of this generation, but I’m sure Counts doesn’t mean me). He writes about a “conflict” between researchers and practitioners, questions whether practitioners are to blame for not having brought researchers into the fold, says researchers have supported sensationalist reporting against microfinance, and claims they have not tried to contribute (enough) to poverty alleviation. Then he delves into an elogy for Tim Ogden, head of the Financial Access Initiative at NYU. The overall message – research results which don’t support microfinance should be disregarded; the title-giving Haiti cue is a bit of a red herring – is akin to a call to sticking one’s head in the sand when threatened.
The ostrich, unlike the microfinance CEO, is falsely believed to stick its head in the sand when it feels threatened.
Image: Bob Jagendorf/Wikimedia Commons CC BY-SA 3.0.
I’m writing this to respond to Counts’ piece and his core request “that we get beyond debates about “whether microfinance works” to more fruitful and action-oriented dialogues about “how it can work better”.” The following is my small defense of academia. Read the rest of this entry »
On October 2nd thirty years ago, Muhammad Yunus founded the Grameen Bank in Bangladesh, the world’s most famous microfinance institution, by the grace of a special ordinance from dictator Hussain Muhammad Ershad. The German radio station Westdeutscher Rundfunk decided to commemorate this event with a 15-minute piece which included an interview with yours truly and with the incredibly well grassroots-informed Andrea Rahaman of non-microfinance NGO MATI.
Though not every statement of mine was used in context – for instance my explanation of the high costs incurred by lending tiny sums and collecting them in weekly instalments, illustrating the inefficiency of microfinance-based poverty relief – I like how the piece directly contrasts Yunus’ pathos-ridden and impressionistic proclamations with Andrea’s and my own sober descriptions of the reality of microfinance in science and on the ground. Thanks to this technique, Andrea and I perhaps got as close to having a real debate with the Gandhi of finance as any regular mortal can; though others certainly have tried, like Tom Heinemann (view part 4 / 2:40 of the documentary, to see Yunus almost comically avoiding speaking to the journalist). Read the rest of this entry »
It’s good to see microfinance researchers seriously studying alternatives to microloans or other microfinancial services. Very poor people need assets and a helping hand more than a loan, so why not hand out a cow or some other income-generating assets, offer training, and provide basic healthcare? That’s what an 18-month “Ultra-Poor Programme” run by SKS Microfinance in India did. But the randomised impact evaluation performed by Jonathan Morduch of New York University, Shamika Ravi of the Indian School of Business and Jonathan Bauchet of Purdue University on this programme turned up a “null” result, similar to those of randomised studies of microfinance.
Perhaps it is surprising to see SKS Microfinance (India’s largest microlender before 2010, and now perhaps most notorious microlender) giving non-repayable one-off kickstarts to ultra-poor households. But the intention of the programme was not purely altruistic; it was to “graduate” households into microfinance, by giving them assets to start a business.
In the programme in Andhra Pradesh evaluated by Morduch/Ravi/Bauchet, people who got a free asset and training to become microentrepreneurs were found to be no better off later than those who didn’t. They also didn’t manage to reduce their debts or increase their savings any more than others. Why? The authors believe it is
explained in large part by substitution with other economic activities. […] During the study period, wages in agricultural labor were rising steadily in the region, so that households in the control group were able to improve their economic conditions in parallel with households in the treatment group. (35)
The opportunities outside the self-employment programme offered similarly improving incomes as the opportunities offered by the programme itself. To what conclusion should this lead us about the concept of entrepreneurial self-lift out of poverty? Overall, the take-home message from the authors is eminently logical:
Social and cultural engagements with water have become a rapidly expanding research area. A workshop at the University of York will take water’s various forms and the politics around them as an invitation for postgraduates to present diverse critical perspectives on water’s social meanings.
The keynote speaker is Kimberley Peters, Lecturer in Human Geography at Aberystwyth University, and the workshop concludes with a roundtable discussion led by Professor Graham Huggan of the School of English at the University of Leeds. Abstracts of 250 words for 20 minute papers should be sent by 13 September.
- Type: Postgrad conference call for papers.
- Deadline: 13 September 2013.
- Event date: 25 October2013.
- Location: University of York, UK.
(phil)
A colleague forwarded an excellent article by Peter Buffett (son of the “Oracle of Omaha” but also someone with his own list of impressive achievements) in the New York Times. Peter Buffett critiques what he calls the “Charitable-Industrial Complex”: a global feel-good industry in the business of alleviating guilt.
Ironic illustration from the op-ed
©2013 The New York Times Company
The failures of present day large, organised philanthropy, Buffett argues, extend beyond just naively transplanting unsuitable ideas (“philanthropic colonialism”) to new places. Particularly the business-infused variant of philanthropy feeds a desire for cheap “conscience laundering”, making the rich and powerful complacent about their own part in creating social problems. Analogously to medieval indulgences, the Charitable-Industrial Complex promises easy absolution from wrongs committed in the pursuit of profits:
As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to “give back.” It’s what I would call “conscience laundering” — feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity.
The Buffetts aren’t exactly known for mincing their words. Warren (the investor and father) is known for his television statement “there’s been class warfare going on for the last 20 years, and my class has won.” (See also: the Daily Show’s take.) “Derivatives are financial weapons of mass destruction” – also Warren B.
Last Friday, European Union (EU) Commissioner for Internal Market and Services Michel Barnier announced the decision to exclude water and sanitation services from a planned Directive on concessions (contracts with private companies over the provision of public services). Water will be exempt, not because the EU believes it was a mistake to include it in its plans for private provision, but because the citizenry misunderstood the EU’s intentions.
Shining example of market-based water supply (with unclear prospects in Europe)
(Source: Stougard. CC Attribution-Share Alike 3.0)
The announcement came against a backdrop of protests in several countries against the privatisation of water, and the first “European Citizens’ Initiative” to reach quorum. Nearly 1.5 million EU citizens signed the petition (still open) to exclude water and sanitation from internal market rules and ensure the universal right to water; though participation was massively skewed towards one country, Germany.
governancexborders.com 