When more than 3 billion people live on less than 2.5$/day, and the world’s population continues to grow, we can expect that the poverty will increase, especially when economies start to cool down. The demand for money as a life-sustainer will continue to grow, and this will further increase not only the already extreme inequalities between rich and poor, but also the way power is immorally excercised in order to extract more wealth. But if a poor person desperately needs money in order to survive, this can already be used by a wealthy individual seeking to get high interest rates on a potential microcredit. This effectively puts the loan-taker in a dependency relationship (see this older post).
“Richest people give small loans” may sound amusing at first, but there may still be a high dose of truth in it. Securing many income sources can be conveniently tied to the number of people available. Then, a loan-giver doesn’t need to work as hard, when countless other hungry people, living below their existence minimum already work for him. I’m still surprised of how entrepreneurial this is seen in many parts of the world today. But there is a big difference in the cases where people are forced into a relationship they can’t escape from, hence giving away their resources for free and when they have the freedom to go to exactly the same person to expend them as they see fit. The first is a sign of dependency as a means for extraction, the second is freedom of choice.
The other day I heard of a woman who took 1000 euro credit and has now to repay 6000 euro back. This example is a bit extreme, but it highlights how through a loan one can be enslaved for life. Through the constant pressure to give back, we are no longer capable of making independent decisions and we become the playing field of someone else. Often the interest of this person or bank isn’t to lift us out of poverty, but to maximize their own profit, so they can give even more credits. The way this happens is by (unadmittedly) holding the liar’s mask, trying to convince people that it’s in their best interest. To those that have nothing this seems as the light at the end of the tunnel.
The idea that microcredits can help the poorest people in the world seems to be very humane at first. When something good is happening in the world, we may not be willing to question it at all. We know that giving microcredits to the poor in Bangladesh was a success story, so we think that it must work in other countries as well. There is no way for the majority of us to know what the small loan takers must go through in order to repay their debt. Making these cases public is still very rare, perhaps not in the best interest of the loan-giver. But this alone is enough to question the already established practices. If many people in India and elsewhere can commit suicides as a consequence of taking microcredits, then we should at least ask ourselves what they were exposed to. And we should be even more suspicious when we read that by tightening the governmental regulations on the limits of the interest rates, most loan-givers tend to leave. Microcredit, even if it sounds good and promising, may give a license to third parties to exploit poor people beyond the acceptable.
I came across this great article, which contains some interesting research on the usefulness of microcredits. It is worth reading entirely together with the original research paper. At the end, the author concludes that microcredit facilitates the building of a big network for disciplining people around the world. This is probably no news for those who want to keep the status quo and their income sources stable. But we should be at least sensible for how others in our close circle may try to discipline us, after they have been disciplined themselves by someone else. The article concludes with an appeal to have a wider discussion on the usefulness of microcredits. But it shows why capitalizing on the poorest people, taking everything they have, is so wrong. Instead of giving them credits, we should probably be talking about giving them a better education.
Not only microcredits, but all forms of microcrediting need to be reevaluated. In a sense, crowdsourcing is also a form of microcrediting (you may disagree here). Someone gives you small amounts of money in order to realize an idea they want a portion of. Both sides can choose at each step whether they want to continue the relationship. If an idea is hard to realize with the money raised, then it becomes much harder to realize it without them. In other words, our work becomes directly dependent on the money we receive, which will distort its quality (to fit foreign criteria) and make it less personal. This is another trend I try to stay away from.