Re: Microcredit, microresults

[Jim Devine <jdevine03@xxxxxxxxx>]

One of my former economics colleagues at LMU once presesented a paper
on micro-lending. (Strangely, he presented almost exactly the same
paper 6 years later, after getting tenure. My addled memory banks
didn't tell me it was a rerun until later.) Despite all the math in
the paper, its basic point was very simple: Grameen and other
micro-lenders don't require that borrowers supply collateral (because
they don't have any) but instead use social sanctions to get the 99%
payback rate that Grameen brags about. If a woman (the usual borrower)
doesn't pay back the loan, others in the village punish her.

My point at the time (both times!) was simple: yeah, maybe that works,
but such an institution puts a lot of stress on the village's social
institutions. After all, Grameen is using them as their collection
agency, encouraging borrower antagonism towar the village. So
capitalism still is undermining the traditional structure. My guess is
that these loans will allow a very small number of families to rise
out of poverty, leaving the vast, vast majority in the village in
perhaps even worse poverty.

BTW, the fellow moved on the for-profit sector.
--
Jim Devine / "To initiate a war of aggression, therefore, is not only
an international crime; it is the supreme international crime
differing only from other war crimes in that it contains within itself
the accumulated evil of the whole." -- Nuremberg Tribunal