Abstract
The prefaces of these two books indicate that they were completed within six months of each other: Roy’s book on June 29, 2009 and Bateman’s in January 2010. Both are essentially considering the same historical moment, well into the major world economic downturn which dates from at least 2008, depending on where one draws the line of demarcation. If you were to ask me which of these two books you should read to understand the microfinance mania, I would immediately direct you to the work of Bateman. Bateman’s title announces clearly the task he has set for himself. He follows through on that promise convincingly and unambiguously.
Bateman initially sketches out his shifting perception of microcredit from enthusiasm for the earliest experiences where the goal was clearly poverty reduction to disdain both for the extreme hyping of Grameen-style microcredit and for the now “new wave” microfinance loan-pushing masquerading as poverty policy. He is emphatic that the emphasis on microfinance, particularly in its commercialized variant, has actually been both a poverty trap and an anti-development policy “that ultimately destroys the potential for sustainable local economic and social development, and so also for sustainable poverty reduction” (5).
In chapter 2 Bateman provides a summary of the rise of Grameen-style lending and its displacement by neoliberal “new wave” microfinance. He then demonstrates in the following chapter that the claims made on behalf of each type of lending can be shown to be false. Each myth about Grameen-style lending – seven in all – is examined meticulously and systematically demolished. These are the basic myths which he discusses: microfinance supports income-generating activities, microfinance “empowers” the poor, microfinance impact assessments “prove” that microfinance works, microfinance is what the poor “want” and “need,” microfinance availability is increased by formal property titles, microfinance helps the very poorest, and microfinance empowers women. On this last myth he observes “in general – it is markets which are being empowered here, not women” (49). He then moves to a similar demonstration with regard to the myths behind the “new wave” microfinance model, among which is the myth that high interest rates are not a problem for the poor. It is clear that even before “new wave” microfinance arrived, the impact of microcredit was being exaggerated. Repayment rates were reported, but not the poverty alleviation dimension. Inconvenient truths about microcredit were “airbrushed” out of the portraits.
Bateman points out that microfinance is associated with deindustrialization as the higher interest rates charged on small loans tend to crowd out lending to small and medium enterprises (SMEs). While both authors deal ever so briefly with the Bolivian microcredit experience, Bateman decries that SMEs in Bolivia, for example, were steadily replaced by a “microfinance-induced bazaar economy” (119). Roy, on the other hand, refers (apparently with favor) to Bolivia’s “frontier of commercialized microfinance . . . famed BancoSol” (216).
Bateman offers more than a trenchant critique. In his penultimate chapter he describes concrete alternatives which are clearly focused on meeting the needs of the poor and/or fostering investment and which are not concerned with the rate of return of banking institutions. If there is a need for immediate cash for individuals or families most at risk, he recommends not microcredit, but rather either some form of conditional cash transfer or support provided by a local credit union. He goes on to highlight distinctive institutional initiatives in the Basque region of Spain, Northern Italy, Japan, South Korea, Taiwan, China, Kerala, Venezuela, and Vietnam.
In 1976 Susan George counseled her readers “to study the rich and powerful, not the poor and powerless.” Ananya Roy announces at the outset of Poverty Capital that she has chosen to study “those who manage poverty, that is the poverty experts who produce knowledge about poverty and who set the agenda of poverty alleviation” (ix). She provides us with a detailed account of how locally created microcredit initiatives have been belittled and progressively eclipsed by a global network of financial institutions which are more concerned with “financial self sufficiency” (FSS) than the poverty of those left behind. She describes the ways in which the role of the World Bank in establishing standards, measures, and means is absolutely central. Roy speaks of the “Washington Consensus on Poverty” and asks “can there be a consensus on development if it is not generated by Washington DC?” (46).
Roy introduces a series of phrases which must be deciphered in order to fully understand her exposition. Among them are poverty capital (essential to knowing what is meant by the book’s title), Washington Consensus on Poverty, millennial development, millennial generation, double agents. Millennial development is said to be a “‘kinder and gentler’ process . . . concerned with human development . . .” (7).
Roy’s chapters are each printed in two different fonts. Each starts and concludes with a reflection in a sans serif typeface. In between is a fuller discussion of the issues in a font with serifs. Frankly, I found these starting and ending sections to be more readable, more insightful, and less labored. I counsel you to read first of all the beginning and ending sections of each chapter before tackling the central parts. Of particular note is her account at the start of chapter 2 of a training conference which she attended near Atlanta, Georgia on Christian microfinance. The “deep anxiety about debt” of the evangelicals led them to reject commercialization and financial sustainability as being at odds with their calling to avoid doing harm (43).
On the final page of the book, Roy recapitulates her discussion as follows: “today microfinance is an asset class, a circuit of accumulation, speculation, and profit. It is poverty capital” (221). While these are her words, they do not capture her struggle to describe a process in motion. On the cover of Roy’s book is a reproduction of Wassily Kandinsky’s Small Worlds IV. This is said to be a guiding principle for her approach: to chronicle the intense and furious struggle of complex vectors of movement, of colliding and colluding worlds (4-5). Her vision is of the democratization of capital: “of the bottom billion gaining access to instruments of capitalism. . .” (221). Recommendations may have been offered by Roy along the way, but none is clear in her concluding two sentences:
This is not the story of counter-geographies of resistance or native rebellions from “below.” Instead it is the story of a “folding together,” of complicities that are also subversions, of dissent in the creases and folds of the composition that is poverty capital. (221)
Bateman’s conclusion, in contrast, is clear and crisp:
Through the auspices of proactive state and non-state community-based institutions, local finance can become instead a powerful tool that can really help build and underpin sustainable local economic and social development, and so bring about sustainable poverty reduction. (212)
Roy is concerned with the creation of development knowledge or rather the creation of development. She focuses on “double agents” who are uneasy with a singular focus on financial targets. These double agents, while beholden to their employers, visualize other paths of actions, priorities, and modalities. She relates conversations that she had with such “agents” at a long list of institutions, including CGAP (the Consultative Group to Assist the Poor), the World Bank, and investment banks. She sees the potential of double agents to disrupt the relations of power and the reality of development, even by extending what is measured to include various social indicators.
Roy talks about a double bottom line (economic and social), whereas talk of a triple bottom line (economic, social, and environmental) has been a common element in discussions of corporate social responsibility for at least one decade. When it comes to microfinance ostensibly targeted on the poor, even a concern about the social would seem to be a giant step. Suffice it to say that environmental issues are not addressed in either of these books.
For Bateman, “new wave” microfinance is a developmental dead end as far as the majority of borrowers is concerned. It is not a solution to poverty. For Roy a reconceived “poverty capital” is the wave of the future. Roy’s vision of double agents successfully achieving benevolent finance for the bottom billion may reflect that she has spoken to too many people who are moonstruck by their conviction of advantages of microfinance for the poor. Whatever the poverty reduction rhetoric associated with both microfinance and the millennium development goals may be, there is certainly still not even a firm undertaking to meet the half-century-old (and grossly inadequate) 0.7 percent ODA target, much less to even discuss serious progressive income redistribution either within countries or on a global scale. Rhetoric should not be mistaken for commitment; nor should strategic concessions by the powerful necessarily be misconstrued as constituting anything more than cosmetic change.
Are both authors too optimistic? To return to the dictum of Susan George: Roy has studied the poverty experts, not “the rich and powerful.” Whatever reservations the experts may express, they are part of what Thorstein Veblen called “the kept classes.” The continued highly privileged treatment accorded to the world’s major financial institutions as the current global crisis widens suggests that the many well-meaning, thoughtful double agents may well be crying in the wilderness. As for the existing alternatives to conventional microfinance, Bateman tells us of the external (and externally-funded) pressures that continue to be exerted on the Vietnamese government to abandon subsidized lending by its highly successful state-driven microfinance institutions.
Should you read both books? Yes. These volumes complement each other. They tell essentially the same story in different voices and styles. Bateman gives us a linear text; Roy provides us a somewhat nonlinear account, crammed both with detail and abstractions. One illustration of the non-overlap of these two books which deal critically with the same theme is that although both have 20 pages of bibliographic entries there are only 25 items that appear as sources common to both. The two authors bring differing field experiences and differing professional training to their writing. Roy’s expertise is in regional and urban planning, while Bateman has specialized in local economic development policy. Roy reports on fissures in the hegemonic reality of “new wave” microfinance and holds out the hope that the present edifice can be altered to incorporate a true concern for the bottom billions. Bateman, who can be thought of as someone who has traversed Roy’s double agent phase, clearly spells out thriving alternative institutional arrangements. These appeal both to our sense of justice and to our current concern for resilience which arguably is better served by institutional diversity.