Microcredit is often framed as a feminist, pro-poor facet of the finance industry. This is because it provides tiny loans to people who are otherwise ignored by the banking sector, without access to bank accounts and overdrafts, to help support their small businesses. Often these loans are given to women – some microfinancers only distribute to women.
But, although it sounds good, all is not necessarily as it seems. In order to make it possible to provide the loans at all, interest rates are closer to what you would expect from a loan shark than a bank. According to the Asian Development Bank, some microfinance institutions charge as much as 30-70% interest a year.
At least, though, you might expect that those loans would not be enforced in the same way as a loan shark. But Tanglad, in a guest post for Racialicious, has summed up a report which provides evidence that, in fact, it’s not so very different afterall:
In Bangladesh, for example, women march off together to publicly scold a member who falls behind on her loan payments. The cohort would also scold her husband in public. If she could not produce the money, the other women in her cohort would take anything that could be sold for loan payments — her cows and chicks, grain from her family’s pantry, uprooted trees and plants from her yard. Even her gold nose-ring, an important symbol of marital status for rural women.
When even these repossessions were not enough to repay the loan, the cohort could instigate the ultimate dishonor of ghar bhanga (literally, “house-breaking”), where the defaulting member’s house is sold off to pay for the microloan.
The institution of microcredit has thus forged social relations based on shared debt, undermining previous ones based on shared labor and trust. Women informed on potential defaulters or members who used the capital for unauthorized purposes, such as buying food. Women who defaulted on loans have been taken to police stations and locked with criminals until their families made payments. The resulting shame from all these actions cause wives to lose their honor and virtue, and have led husbands to file for divorce.
That last bit is particularly Dickensian, isn’t it? Is it socially responsible for microcredit institutions – which frequently present themselves as a sort of alternative to charity, whereby investors get their money back with interest – end up with women being shamed, scolded, made homeless and ending up in debtors prison?