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| Worker making jeans from recycled denim |
The main challenge of development is, as it always has been, empowerment through good institutions. It is institutions which can regulate the free market, protect human rights, provide citizens with a say in their government, provide a social safety net, settle legal disputes, and build a society that cares for its citizens. In terms of quantifiable results, microfinance seems but a tiny step on the way to good institutions. And yet, if it wasn't effective, microfinance wouldn't be a global enterprise; clearly something is working.
Microfinance's biggest gift to the developing world can't be measured in terms of the number of poor people who have been able to get away from predatory loan sharks, turn a profit, send their kids to school, or purchase their own home. As revolutionary and amazing as those benefits are, the best thing about MFIs is that they change people's perceptions--what the Indian firm BASIX calls social capital. For example, a good chunk of MFIs are targeted towards women, a critical component of the developed work force which is neglected or discriminated against in many developing nations; by getting a woman who had never left her house to earn a wage, get a bank account, save money, get a loan, and repay it, microfinance radically alters social paradigms. Suddenly, purchasing a home becomes a feasible goal--or even a reality--to families who could once never have imagined it would be possible. This transformation is vital to development, because it is vital to institutions. For someone to be able to fully participate in the political system, for example, they must be integrated members of society who believe that they can achieve change.
Thus any system of microfinance should be--and some already are--holistic efforts which help people to form and interact with institutions. BASIX calls this an "inclusive growth model" and provides agriculture and business development services (such as productivity enhancement and risk mitigation programs) and institutional development services (functional company know-how, legal coaching, and a focus on creating or fixing policy) in addition to strictly traditional microfinancial services. Grameen Bank has partnered with mobile phone companies and food producers, and even does action research. Other firms offer job training, advice and products for farmers dealing with climate change, in knowledge dissemination services. -Elizabeth Solch Texas A&M MPIA 2012
Digging out of Corruption: Different sides of the Highway
While out visiting some of the Basix beneficiaries our route took us through various parts of Delhi. It was very astonishing to see the stark contrast from one side of the road to the next. There were houses that look highly western, very clean and mostly with four and five cars out front. Granted most houses in India are shared between families, with the estimated value of these areas being about $2 million for 5000 square feet of space, these people were well off. On the other side of the roadway there were shanties, often dilapidated looking structures which barely looked like they could survive a strong gust of wind much less the every day rigors of providing shelter for multiple families.
Noting this difference in the housing structure, we as students were presented with interesting news; all of the "nice" house were owned and built by former tax collectors soon after they retired from government service. On the other hand the poor housing was actually Government housing in which the Indian government owned the land and allows for citizens to build their housing. Money provided by taxpayers designed to help the less fortunate was being pocketed by the actual tax collectors and used for their own benefit.
Basix creates the middle ground—an intermediary really to get the funds designed for the poor in the hands of the people who can benefit from them. As Dr. Kishore Gwande explained, this is truly revolutionary for an organization to be doing this without being deemed as corrupt, an organization actually achieving the goals that it set out to achieve. As World Bank is looking to India as a model for the world's MFIs, Indian MFIs should look to Basix as a model for the new hollow state, organizations that will serve the poor for the government without the interference of corrupt officials. -Ashton Cooper Texas A&M MPSA 2012
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