Magazine article New Internationalist

Bandaid Bandwagon: Sarah Blackstock Believes the Reputation of Micro-Credit Has More to Do with Its Corporate Friendliness Than Its Success in Helping Poor People

Magazine article New Internationalist

Bandaid Bandwagon: Sarah Blackstock Believes the Reputation of Micro-Credit Has More to Do with Its Corporate Friendliness Than Its Success in Helping Poor People

Article excerpt

Sarah Blackstock believes the reputation of micro-credit has more to do with its corporate friendliness than its success in helping poor people.

When the women in a small village in Tangall district hear I am researching micro-credit, they approach my translator and ask if we can arrange a secret meeting. They want to set the record straight. Away from their homes, husbands and the NGOs that disburse credit to them, the women feel safe to say the unmentionable in Bangladesh -- micro-credit isn't all it's cracked up to be.

Micro-credit provides poor people with small loans -- usually no more than $50 -- to initiate self-run, income-generating projects. More than 30 million microloans are disbursed worldwide every year -- and they are increasing at an annual rate of 30 to 40 per cent, according to the World Bank.

Micro-credit gained international fame as a result of the widely touted 'success' of Grameen Bank in Bangladesh. Since establishing the Bank in 1976, Professor Muhammad Yunus has tirelessly promoted micro-credit as the most crucial of poverty-alleviation tools, telling politicians, bankers and development practitioners that access to credit is a human right.

Certainly, micro-credit has been useful to many poor people. However, it may not be as successful as its proponents claim. In 1998 Harvard economist Jonathan Morduch studied three major micro-credit organizations in Bangladesh, including Grameen Bank. 'While strong claims are made for the ability of micro-finance to reduce poverty,' he says, 'only a handful of studies use sizable samples and appropriate frameworks to answer the question.' What has really sold micro-credit is Yunus's seductive oratorical skills, which have inspired hundreds of audiences. 'If we can come up with a system that allows everybody access to credit while ensuring excellent repayment, I can guarantee that poverty will not last long,' urged Yunus in a typical speech.

In 1997 the world's elite -- including the Clintons, executives of major banks and multinationals -- gathered in Washington at a Micro-Credit Summit. They pledged their support to provide 100 million of the world's poor families with small loans for self-employment projects by the year 2005. …

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