Micro Finance: False Prophets and Promises
Microfinance (MF) is a type of financial service that provides small loans, savings accounts, insurance, and other financial products to individuals and small businesses that typically lack access to traditional banking services. It was first popularized in the 1980s, with bold claims like the transformation of the economies of the Global South. Its proponents claimed that the ‘inclusion’ of these economies and low-income populations into the capitalist market through financial tools would help them engage in income-generating activities, improve their livelihoods and eventually eradicate world poverty. Microfi/nance ultimately evolved into Fintech or Financial technology, which uses digital platforms to provide financial services to the global poor. Fintech includes Blockchain, Crypto, Digital Payments, Regtech etc. Prominent names would include Easypaisa, Robinhood, Paypal and Sadapay. MF and fintech were heralded as significant developments that would help democratize and make accessible financial services that were previously only available to a select few.
False Prophet: Muhammad Yunus
Muhammad Yunus, owner of Grameen Bank and the new face for ‘Humane Capitalism’ was the leading proponent of Microfinance. Almost instantaneously, he became the messiah, who would lead Bangladesh out of poverty. This he said, would be done by making capitalism ‘inclusive’ for the poor and increasing ‘financial inclusion’. He said that the more people can participate in capitalist markets, the more prosperity they will witness. The underlying assumption here was that ‘capitalism works’ and the only reason global south countries were underdeveloped and impoverished was because these areas did not have access to Capitalism and its financial tools.
In his book he writes
“If you spend enough time among the poor, you’ll find out that their poverty results from the fact that they cannot retain the fruit of their labour, for the simple reason that they have no control over capital. The poor work for someone else who owns the capital”
According to Younis the solution to class exploitation therefore was to become a capitalist. There was no need of a revolution or even nationalisation, this could be done through further privatization of social services by introducing social enterprises and MF programs. Three cheers for Capitalism. He went on to receive a noble prize in 2006. However shortly after, the bubble burst as microfinance failed to bring any significant change in poverty levels.
Grameen Bank
Lets begin with Younis own ‘Social Enterprise’ Grameen Bank. GB was created in partnership with Citibank India and was supposed to offer micro credit for the under privileged segments of society. This was not a profit motivated but philanthropist venture. Under this philanthropist project Grameen bank sold everything from Yogurt to Mobile phones (for profit) and partnered with a multi billion corporation, Danone, it also received aid from USAID, Rockefeller Foundation and World Bank to name a few. His philanthropy project made him and many corporation CEOs into rich men but somehow failed to enrich those it had set out to ‘empower’. In January of 2007 Yunus was invited to head a caretaker government by the military establishment and marked his entry into politics. In 2011 Yunus was removed as chairman of Grameen bank on charges of Embezzlement.
Humane Capitalism and Social Business
In his book Future of Capitalism Younis advocated for humane capitalism and social enterprises. A social enterprise would donate part of their profits to the poor and/or they would work on social issues that need to be addressed for e.g a social business which designs and markets health insurance or education policy or even recycling. All issues that can be addressed through public services of the state. Yet Younis said that the state has failed to provide these services, so ‘good hearted investors’ should invest their money into this. Yunus acknowledges that such companies will compete with each other to provide the best services but the competition will not be of exploiting workers (how else will costs be cut) but a competition of pride and service! A noble thought but how will companies with contradictory objectives, profit and altruism, be managed? He doesnt say. Instead of giving a percentage to charity, companies could just pay living wages and not contribute to creating more poverty, but that does not sound exciting to humane capitalism advocates. Calling profit motivated, exploitative investors ‘social entrepreneurs’ is the trendy thing to do. No need to ask any difficult questions like why does poverty exist in the first place? Or question the development models that give birth to and then rely on the perpetuation of such inequality and exploitation. The unsustainable dream of infinite growth? Redistribution of wealth? Nor does he mention even in passing the bloody history of colonization, hundreds of years of plunder that ravaged these lands (45 trillion pounds were extracted from India in less than a 100 years), the famine in Bangladesh during WW2, nor WB policies or IMF programs which keep the entire nation debt trapped and underdeveloped. Instead Yunus offers a band aid, ‘ micro loaning our way out of systemic poverty’.
Historical Context: Post USSR Privatisation
After the breakup of the soviet union, widespread privatization efforts were made to open up previously state-controlled sectors in the developing world to private investors. To lay the ground works for future privatisation, liberalisation policies were introduced and profit centred development projects were pushed via the World Bank. Through interventions of IMF structural Adjustment Programs, public sector subsidies to small farmers and educational institutes were drastically cut. In Bangladeshs case the Structural Adjustment Programs in the 80s cut subsidies to small farmers which made it impossible for many small landowners to farm and sustain their lives, to fill this void Microfinance organizations were pushed in with full force. In a region which had suffered a terrible famine only a few years ago this was nothing less than barbaric. In the 1990s Microfinance gained full steam as the IMF, WB and International Aid Organisations (think Gates Foudnation, Rockefeller, USAID) joined hands to vigorously promote microfinance in the developing world. This was done not with any goodwill but to create a complete western monopoly over the microfinance business and further weaken the social welfare state, all cleverly disguised as poverty alleviation. In reality Microfinance and Humane Capitalism was an attempt to whitewash the disastrous failure of capitalism in Bangladesh and the rest of the developing world. To recover from the devastation of privatization, which had made basic necessities inaccessible for the vast majority, further privatization was pushed, all so the markets remained open for exploitation and extraction. In the few instances when governments resisted these attempts for eg India, extreme pressure was exerted, and a narrative was created against the government, for being anti-people; nothing was allowed to undermine foreign investors’ “right” to access global markets, not the autonomy of those nations, nor the welfare of their people. So men like Muhammad Yunis came in handy, as brand ambassadors for this new innovation in exploitation.
MicroFinance: How it worked
Microfinance worked by expanding financial markets for imperialist investors by incorporating the poor as clients, this it did under the the label of Financial Inclusion. It created exorbitant profits for western investors while pushing people deeper into destitution. Microfinance expanded capitalist markets by the financialization of everyday life, transforming even mundane activities into opportunities for profit for shareholders. Microfinance worked just not for ordinary people.
Milford Bateman an economist said
“Once private fintech corporations conquer a critical customer base and become oligopolists, or even monopolists, which is the goal of those scalable data-driven business models, the situation radically changes. The poor are no longer the beneficiaries of a particular financial innovation but increasingly its hapless victims.”
Repayment
MF organizations charged high interest rates 20–50% and demanded immediate repayment. Even during times of disaster or tragedy, these banks pressurized borrowers to keep up with repayments, as was seen in the case of Cyclone Sid, where borrowers were asked to make payments only a week after the cyclone had struck. In Pakistan Muhammad Masood a 42 year old man committed suicide after loan sharks threatened his wife. Masood had initially borrowed 13000 through an online app, to pay his rent, however he found himself unable to pay back the loan, the accumulated interest on which had escalated the amount to 700,000.
Microfinance banks acted similarly to IMF, granting aid in the form of repayable loans during emergencies and disasters, which have often been induced by capitalism itself and then profiting off of disasters in the name of ‘goodwill’ and ‘social enterprise’. Most borrowers were unable to generate additional income from the loans they took on and had to liquidate existing assets to pay off their loans, oftentimes selling precious land, cattle and in the extreme cases, their daughters into prostitution to satisfy the lending sharks.
Financialisation and Consumerism
The small amounts provided by microloans typically supported only “survivalist” entrepreneurial activities, which had little to no lasting positive impact on the broader community’s well-being. They were also often used to satisfy consumption needs rather than investment microenterprises. Microfinance campaigns were often maliciously followed by intensive advertisement campaigns for consumer goods in the localities often by the same monopolies that owned and controlled the microfinance company, and so in a rather criminal way the use of microfinance loans was directed towards increasing consumerism and imports into the global south. Consumer goods were introduced into small towns and villages that had no need for them or were unable to afford them earlier. Many found themself in debt over purchases like mobile phones.
Dreams and Mirages
For every microenterprise that succeeded 1000 failed. Yet that one success was often turned into a full-blown PR campaign for capitalism; the entrepreneur was invited to programs held by these banks and given awards for ‘Women Empowerment’ or ‘Entrepreneurship’. This propaganda lured in more unassuming borrowers. It created the illusion that the dream of financial independence and freedom was only a micro loan away, that individuals were responsible for the success or failure of their lives, hence completely disregarding the systemic inequalities and power imbalances inherent in the system which allow some to succeed and not others.
Sustaining Poverty
Many individuals took on loans to help them survive till their next paycheck, this enabled the microfinance banks to deduct the loan repayment directly from the borrower’s next paycheck. This insulated the microcredit institutions from the risk of default as they could directly access a proportion of thee borrowers wages to repay the microloan — sometimes up to 50 percent! So in addition to the exploitation of his/her surplus labor, they invented another ‘financial tool’ to profit off of the working class’s destitution, microfinance enabled the worker to stay at his terrible job and continue being exploited for an unlivable wage, then forced him to take on a loan just to survive, then charged him additional interest. Hence enslaving him completely. Financialization and microfinance addressed the contradiction stemming from the decreasing share of income received by labor: they facilitate the consumption needs of low-income individuals through consumer debt, while simultaneously permitting the continuation of low wages. Yet ‘humane and social’ western investors in those banks continued to receive hefty dividends at the expense of the workers wages that too in the name of ‘poverty alleviation’
Data Monopolies
Another way these Microfinance banks and fintechs make profit is by leveraging these technologies to capture vast amounts of data and become data monopolies, which is then sold off to other corporations who spend billions on R&D to study consumer psychology, cultures and angles for advertising certain products. This data is then used to further curate advertisements and policies for these populations. As we saw in the Cambridge Analytica scandal, this data is also sold to political parties and organisations who manipulate it to push their campaign ads and manipulate election results.
Anti-poverty programs: Tax cuts for the rich
Many of these for-profit Micro Credit Banks operate as NGOs that claim to be working on women’s empowerment or anti poverty programs. These organisations are often supported by international non profit foundations, e.g Gates Foundation and Give Directly. Give directly received massive tax cuts as it allowed users to send charity to third world countries, however it charged up to 5–20% of that money as fees. Gates Foundation also sent charity through its own fintech and charged fees on it in addition to the tax cuts it got for its business ventures.
Humane Capitalism?
The fact that extremely predatory lending schemes are disguised as ‘Anti Poverty Programs’ which make billions for billionaires and get them major tax concessions, makes one reel in disgust. Microfinance is perhaps the best example of the extreme gluttonous and predatory nature of Capitalism and posits a challenge to the advocates of Humane Capitalism, can such a system ever be humane? A system that not only creates poverty, inequality, destituion but also perpetuates it, enables it and then profits off of the perpetuation and the destituion itself. The marvel of capitalism is that after creating poverty, capitalist markets have actually innovated to profit off of it. From their non profit foundations, anti poverty programs, financial inclusion, noble prizes, entrepreneurship awards and publicity stunts for the one micro finance enterprise that some how makes it, it is all a fabulously collaborated shit show, where every tool serves the repatriation of wealth and maximisation of profit for the imperialist core and nothing else. The capitalist monopoly spares nothing.
Brazil: Case for Publicly owned Fintech
The only scenario in which microfinance can genuinely benefit the working class is when it is publicly and locally owned, eliminating the profit motive. A prime example of this was in Brazil. Governed by President Lula da Silva’s Workers’ Party (PT), Maricá is more receptive to pro-poor initiatives that address poverty rather than initiatives that predominantly benefit the wealthy. Additionally, Maricá benefits from significant royalties from Brazil’s offshore oil and gas industry, which are allocated to municipalities affected by these activities. The municipality’s community bank, Banco Mumbuca, utilizes a fintech platform to administer a conditional basic income in the local currency, mumbuca. This system circumvents traditional financial intermediaries like Visa, Mastercard, and PayPal, and supports the community by ensuring that recipients receive the full amount due to them without fees. By encouraging local payments through mobile phones, Maricá saves municipal funds, which are then reinvested in local enterprise development. This model contrasts sharply with profit-driven fintech platforms, as Maricá’s approach prioritizes public benefit and local development over maximizing investor profits.
Conclusion
The promise of microfinance and fintech to alleviate global poverty and democratize financial services has often been overshadowed by their inherent flaws and contradictions. While initially touted as transformative tools for economic inclusion, these programs frequently end up deepening existing inequalities rather than resolving them. The commercialization and privatization of microfinance, driven by profit motives, have led to exploitative practices and the perpetuation of poverty. The case of Maricá in Brazil highlights a rare but compelling alternative: a publicly and locally owned model that prioritizes community well-being over investor profit. This approach can offer a more equitable and effective solution.
However, within capitalism, there are limits even to that, as we are taken back to the fundamental question of why poverty exists in the first place or why charity is needed. Humane Capitalism is nothing but a sad and pathetic PR campaign for the real face of capitalism, which is ugly and monstrous, which drinks the blood of laborers, feeds on the childhoods of child laborers, the dignity of women, and the broken hearts of lovers. It is the monster that destroys our rivers, forests, and mountains and forces our loved ones to move thousands of miles away. It preys on our hopes and dreams and sends us false prophets who show us false dreams. These prophets it pays generously, enticing us to change sides; some do, others spend their lives chasing the mirage. This monster does not need a new mask but to be stabbed, poisoned and eliminated. We see through all false prophets and promises and refuse to be fooled by them. We demand a world of love and peace; we demand nothing less than a socialist revolution.
