[p2p-research] anti-microfinance movement in nicaragua protests usury

Andy Robinson ldxar1 at gmail.com
Fri Nov 20 00:17:37 CET 2009

I have a feeling this discussion is at cross-purposes.  I doubt the protests
are targeting the small sector of microfinance which comes from NGO
initiatives aiming to alleviate poverty (I remember a scheme like this in
Venezuela being one of Chavez's most popular policies).  I'd describe these
initiatives as ideologically worrying but well-meaning, and quite possibly
able to bring local benefits.

(Ideologically worrying for three reasons: because they encourage the
constitution of neoliberal 'entrepreneurial' subjectivities among the poor,
undermining the formation of dissident subjectivities; because they bracket
questions of the causes of poverty and of 'distributive justice' for want of
a better term, in relation to histories of colonialism, slavery and
expropriation; and because they retain a system of market-exchange as
opposed to gift economy).

A lot of microcredit comes from standard lending institutions such as banks,
from international agencies like the World Bank and their local allies, or
from local NGOs which are actually fronts for the usual powerholders.
They're classified as "micro" because the amounts involved are very small.
I would guess that most of them lend in local currency and are repaid in
local currency.  Many of them are no doubt engaged in pursuit of profit, and
have connections to other elites in the local society.  Even the
well-meaning humanitarian stuff can get caught up in local power networks.
The reason they continue to invest in things like this, when they could
invest in more profitable forms of banking, is that it provides a return in
terms of local power, as well as profit - the trick is to get people into
debt and therefore dependent or subordinate.  Also, quite probably the usual
lenders are local figures who deal in local currency and who wouldn't have
stable access to international currency exchange, being small players who
don't necessarily travel and given that foreign institutions may well be
wary of converting unreliable currencies except at some cost.

I wonder how widespread Ryan's case actually is, in terms of microcredit
lending.  Southern currencies left to themselves may well be in freefall,
but many of them are pegged somehow.  For instance, several Latin American
currencies are either dollar-pegged, or else supplemented with local use of
the dollar, so microcredit may well be loaned in dollars.  The CFA Franc,
used 14 African countries, is pegged to the Euro.  And some of the other
currencies, particularly in East Asia, are holding up alright.  I daresay
someone who lent before the financial crisis, and received the same amount
back from a country marginal to the financial system, would be getting a
better exchange rate - some currencies plummeted a lot more precipitately
than others.

Anyway - I'd suspect the initiative he's involved in is atypical.  The
normal case would see either local lenders or NGOs lending in the local
currency and seeking repayment in the local currency, plus interest, with
the full amount then funnelled back into further microcredit.  If the
organisation is a local business, state, NGO, etc., then the issue of
currency conversion does not arise.  If it is a global NGO or an
organisation such as the IMF, foreign currency would be used for startup
(probably from donations), but the aim of the scheme would be ongoing, so
the local currency would be recycled locally.
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