Microcredit: A miracle cure for poverty?
A woman jumped into a well with her two-year-old son because she couldn’t pay off her debt to the microcredit company. Another woman sold her daughter to a prostitution ring to pay off her debt. Hundreds of other women tried killing themselves to escape their debt as the impending debt payments stripped them of their livelihood. We often hear about the miraculous benefits of microcredit, but how often do we hear the downsides?
In Bangladesh, most microcredit companies give loans to women. The companies claim that they are empowering women in the rural areas. They conceptualize development as purely economicand claim that simply by giving loans, they can help women and their families out of poverty. And yet those same companies have zero knowledge about business. What exactly is empowering about getting trapped in debt?Certainly, the women may experience a temporary improvement in their situation due to microcredit, but long-term solutions to poverty require far more than a high-interest loan, especially as those loans are typically given with no advice on how to use it, or other support to both start and maintain a successful small business.It is also wrong to place the full burden of poverty alleviation on the poor themselves, while nothing is done to force the wealthy and powerful to stop exploiting the poor.
Poverty alleviation cannot happen on a large scale without addressing the many ways that people remain trapped in poverty. This includes various legal and illegal activities that deprive the poor of a livelihood, such as land grabs and other ways of cheating the poor of their land and their income. This includes mandating a minimum wage that will be sufficient to live on. Urban workers with formal education can earn vastly more than poor, rural women. Rokeya sold her kidneyfor 40,000 taka. She had three very low-paying jobs and she still couldn’t repay her loans. So finally when she sold her kidney, she was given one-third the price she was promised and was left with poor post-op treatment.
Microcredit programs also need to take into account the high rate of domestic violence in many of the areas where they operate. Jasmine, age 19, was found in a government hospital writhing in pain because of domestic violence. Microcredit has lead to an increase in domestic violence victims as husbands force their wives to take out loans for their own use. Later the women have to sell their dishes, clothes, and in some cases, their lands in order to repay these loans. When they refuse to take out loans for their husbands, they are mercilessly beaten and thrown out of the house. Some microcredit companies require women to form groups and have meetings regarding how they are going to pay off the loans. Most of these meetings take place in the morning and these women have to leave their household chores and prioritize the meetings. They may become victims of domestic violence as they cannot cook and clean for the family on time.
Microcredit is just another form of commercialized poverty. It lures in helpless people, usually women, who aren’t qualified for a loan from banks. It promises them a better future, but too often these women simply experience a never-ending debt cycle, and possibly ongoing physical and emotional abuse. Microcredit may benefit some of its recipients, but despite the claims of its many proponents, it is hardly a miracle solution to poverty and the low status of women. Rokeya, Jasmine, and the millions of women like them deserve far better.