I’ve blogged enthusiastically about Nobel Laureate, Muhammad Yunus, and his microcredit movement through Grameen Bank. Recently, I read a critique of microcredit here.

This post raised interesting points about microcredit. These points are important to learn about, but I found myself frustrated while reading the post. It’s so easy to criticize programs that have some negative side effects, even though in sum those programs have been largely positive. When Muhammad Yunus, an economics professor in his native Bangladesh, found economic theory useless to the starving people around him during Bangladesh’s terrible famine, he sought a systemic solution that would help people escape horrendous poverty. His Grameen Bank has lifted many thousands out of poverty by providing small loans to people who are grouped in a cohort and who are responsible for the repayments of all the members of that cohort.

I was not surprised to read about the potential problems of such an approach. Community provides support, but as this critiquing post argues, it also creates a shadow side of cooptation, shame, cruelty, and social ostracism if a member cannot repay her loans. I’m glad to have my eyes opened to this awful outcome for many women.

But the author of the post writes, “The institution of microcredit has thus forged social relations based on shared debt, undermining previous ones based on shared labor and trust.” I wondered whether there really was such a positive previous relationship based on shared labor and trust. When Mr. Yunus first handed out his small loans, he enabled people to make enough money to avoid starvation and to slowly lift themselves out of pervasive, relentless, ongoing poverty. I can’t help but think that if their social relations based on “shared labor and trust” were enough, they wouldn’t have been starving and wouldn’t have needed the loans.

The author then goes on to say, “These difficulties illustrate a failure that microcredit programs share with other top-down antipoverty strategies,” but I question whether microcredit is so very “top-down.” The whole purpose of microcredit is bottom-up, providing small loans so that people can pursue their own small businesses and lift themselves out of poverty. Programs such as welfare, welfare-to-work, government/taxpayer programs, etc., seem more “top-down” than microcredit, with its ability (sometimes misused I now see) to allow both individuals and small groups to forge their own futures.

Finally, the author states, “I do not doubt that individual microcredit workers mean well, and that people like Prof. Muhammad Yunus have good intentions. But microcredit has been turned into a panacea, the star of antipoverty programs around the world, to the exclusion of more responsive strategies.”

Interestingly, in Mr. Yunus’ most recent book, Creating a World without Poverty, he focuses on social businesses and investments without interest, rather than on microcredit. He himself says that microcredit is not the answer, or the panacea, but one approach among many to help end poverty.

Humans have faults, and most systems, no matter how good and positive, will have problems. It is not surprising that microcredit has its share, too. But to paint microcredit as inherently destructive and argue that it replaces healthier systems denies the good it has done and elevates other systems that have failed to end poverty themselves.

I can’t help but wonder what the author’s “more responsive strategies” to lift a billion people out of pervasive poverty are. I hope that she writes more about them and promotes them tirelessly. We need all the good ideas for systemic change out there!

~ Zoe

Image courtesy of heydee via Creative Commons.