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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 »

Over at “social enterprise” website NextBillion, Jemima Sy of the World Bank’s Water and Sanitation Program posted an interesting article debunking “Five Myths About the Business of Sanitation“. While I hardly disagree on some of the debunkings – for instance, it is true that poor people don’t see much value in minor upgrades, and instead want to go the whole nine yards when they pay for water and sanitation – the overriding conclusion that water and sanitation can and should be more of a business just ruffled my feathers. As a response, here are my Five Myths of the World Bank’s Approach to Water and Sanitation:

1. “Water and sanitation are untapped business opportunities.” Myth. Most of the privatisation efforts under Structural Adjustment went badly. Networks usually weren’t expanded, many companies didn’t even manage to make a profit. Water and sanitation work badly as businesses.

2. “Water and sanitation are private problems.” Myth. Clean water and environments are actually a public good. They have large public benefits which households cannot privately capture, and therefore are best tackled through public interventions. Read the rest of this entry »

The Book

Governance across borders: transnational fields and transversal themes. Leonhard Dobusch, Philip Mader and Sigrid Quack (eds.), 2013, epubli publishers.
December 2018
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