WUNRN
The Other Financial
Crisis: Poor Women, Small Credits, Big Businesses – Article from Christa
Wichterich
India is in the midst of a financial crisis that shows
striking similarities to the US subprime crisis, both in its origins and the
rescue strategies used. Just as the cheap mortgage granted to low-income
households in the USA, the microcredits given to poor women in rural areas
worked out as financialisation of everyday live and integration of the women
into the global financial market with its return-based logic. This jeopardised
the social processes and the very objectives at the heart of the initial
non-profit microfinance model. The growth of this sector led to an over-supply
of microcredits in villages and in turn to the over-indebtedness of women, the
collapse of repayments and a capital shortage of the microfinance institutions.
What seems at first sight to be a specifically Indian crisis results in fact
from the market rationale of growth, overheating, and crisis.
The crisis of the microfinance sector caused an astonishing
shift in the language and discourse surrounding microcredits. After their
positive impact against poverty and women's high repayment morale were praised
for over two decades, the concepts of poverty eradication, empowerment or even
group solidarity have evaporated completely.
It is now common knowledge that at least half of the women use
the credit to repay other debts, cope with emergencies, e.g. a surgery, or for
consumption, and that they take out new loans to repay the microcredit.
Even if often this process enables women to gain recognition and
bargaining power at home and with the authorities, there is no doubt since the
crash that even the best microcredit system is no substitute for social
security and wealth distribution policies. Structural changes to eliminate
poverty remain necessary. While the microfinance industry is hoping for its
recovery, the debate is only just emerging amongst the Indian public on how to
integrate saving and credit granting into social contracts and structures of a
solidarity economy. It is crucial that the revenue generated by the poor is not
siphoned off from outside but that it stays in local circles to ensure the
survival of the population.
This article, written by WIDE Executive Committee Member Christa
Wichterich, critically reviews Microcredit schemes. The article is now
available in English and in German.