thomas fisher and m s sriram with contributions from malcom harper ajit kantikar frances sinha sanjay sinha and mather titus beyond micro credit putting development back into microfinance shorter notices2002-3

Abstract

Thomas Fisher and M. S. Sriram (with contributions from Malcom Harper, Ajit Kantikar, Frances Sinha, Sanjay Sinha, and Mather Titus). Beyond Micro Credit: Putting Development Back into Micro-Finance. New Delhi: Vistaar Publications, 2002. 390 pages. Paperback. Indian Rs 340.00. Beyond Micro Credit: Putting Development Back into Micro-Finance challenges long-held assumptions about micro-credit and urges the development community to reform its approach. This corrective comes at a time when micro- finance has gained widespread acceptance as a vehicle for sustainable growth. It is perceived as an alternative to one-sided subsidies and dole, which come out of either charity or public funds and give priority to small loans at low rates of interest aimed at helping the poor secure new means of livelihood. Thus, resources are recycled and the productive capacity of the economy is increased. The theory is extremely attractive. The reality, however, falls short of expectations. First, the assumption that micro-enterprises financed by micro-credit will ensure improved incomes for the poor fails to factor in risk. Providing the very poor at the bottom of the social pyramid with capital actually increases the level of risk for them. One result is that a significant percentage of recipients of the micro-finance panacea have actually become worse-off. Second, the poor, given a choice, would prefer secure wage labour to the stress of running their own business. This preference is no doubt motivated by the uncertainties of the market and the poor asset base of the micro-entrepreneur, which leaves him or her more vulnerable than most to fluctuations in demand. Third, many recipients of micro-credit simply use the money for consumption. This enhances the level of risk vis-à-vis the credit provider and may propel the family in question into deeper poverty, though a measure of stability may be gained in the short-run. That said, micro-finance is preferable to falling victim to the traditional village moneylender. There are two schools of thought as regards micro-credit. One believes that financial sustainability holds the key to the success of micro-finance. The other emphasises reaching those in the greatest need of credit and related assistance. Beyond Micro Credit argues that the applications of micro-finance are more varied than those of the traditional sources and may include empowerment and local democracy in addition to livelihood promotion. There exists a need to recognise that the poor require some form of collective organisation to help balance the risks of competing on the market with borrowed capital. The twelve chapters of the book provide a thorough treatment of the problem. Of particular interest are the linkages between effective democratic functioning of organisations, accountability, and ownership issues. The Self Employed Women’s Association (SEWA) Bank, the Cooperative Development Fund (CDF), and the Grameen of Bangladesh provide practical examples of how effective micro-finance can be achieved through diverse strategies in different contexts without compromising the core of financial sustainability, which distinguishes it from other approaches to development. Beyond Micro Credit draws on the experiences of organisation development and entrepreneurship and challenges the present simplicity of micro-finance analysis. Relative to other publications in the field of development economics, the authors and contributors to this volume have not relied greatly on techno-babble. As a corrective to established views the book is potent, though more research work along similar lines is needed. It is highly recommended for students, teachers, and writers on the subject of micro-finance and credit.