Microfinance Preys on the Global Poor

“Beginning with the idea of microloans in the 1980s and then expanding to cover other sorts of financial services, “microfinance” was sold by global elites as a way to transform the economies of the Global South by allowing poorer communities easy access to banking and credit”

“fintech and microfinance schemes have often pushed people deeper into destitution, while making exorbitant profits for the Western investors behind those schemes”

“In spite of hundreds of billions of dollars of microloans dispersed to the global poor, it was not possible to detect any meaningful net positive impact on global poverty”

“Microfinance institutions have extracted huge economic rents from the poor”

“financial inclusion has not been about addressing global poverty so much as continuing the building of financial markets that include the poor as clients in order to benefit global investors”

“Fintech is often described as “microfinance on steroids.””

“You therefore did not get sustainable poverty reduction, but simply what economists have termed “job churn”: the constant entry and exit of simple microenterprises, a process that has little-to-no positive impact on local economic development”

“the use of microloans shifted to satisfying consumption needs rather than investment in microenterprises. That is where even more problems began to arise, because if the microloan does not kick-start additional income generation, how do you service the debt? The inevitable end result was that countries such as South Africa were turned into economies with some of the highest household debt ratios in the world”

“black communities didn’t really need microcredit; they needed small business credit on affordable terms and maturities, as well as business and technical support. But that’s not what they got”

“financialization and microfinance ease a contradiction that arises from labor’s shrinking share of the income distribution: it supports poor people’s consumption demand via consumer debt while allowing for poverty wages to be sustained”

“all microloan and fintech companies initially offer services as cheap as they need to to rapidly build up a client base and scale up their business to lower the costs of their operations. But as sure as the sun rises tomorrow, in a few years’ time, they’ll start to raise the prices of all the services they offer because, they hope anyway, that you’ll be locked into their network”

“Vodafone plc finances its telecoms investments in the UK, which are vital to UK development and growth, out of the dividends it receives from the profits that are extracted from some of the poorest communities in Kenya”

“There is a very interesting movement in Brazil trying to link financial technology to local development. It started in the city of Maricá near Rio de Janeiro”

“Maricá has a conditional basic income program that is paid out through its community bank (Banco Mumbuca) in a local currency (the mumbuca) using a fintech platform. It works very well to provide important financial services to the community. The Mumbuca Bank introduced a credit card and later an app on mobile phones to pay out a conditional basic income without the intervention of, for example, Visa, Mastercard, or PayPal”

“They operate without any charge levied on the poor by profit-driven banks or the digital payment corporations. There is no charge to the recipient when receiving the basic income that is paid in mumbuca. In other words, you get 100 percent of the amount that is officially due to you”

“Mumbuca Bank covers its operating costs by charging the many local businesses that accept the mumbuca a 1 percent fee to convert any mumbuca they receive from recipients of the basic income into the Brazilian currency (the real).”

“Maricá has also established its own modest sovereign wealth fund in order to ensure that the key elements of the Maricá model can be maintained into the future. But the key here was the use of fintech in a way that benefited the entire citizenry”

“Lula’s Bolsa Família is targeted at the bottom 10 or 15 percent of the income distribution. Those were conditional cash transfers, because often you would expect the household to make sure their kids attended school or make sure they went for their vaccinations”

“The libertarian right doesn’t like conditional cash transfers because you shouldn’t be telling people they should take their kids to school and so forth. I disagree. I think people don’t need only incomes; they also need fulfilling jobs to be part of the community. Just having an income and doing nothing solves very little and changes very little. It simply eases the pain a little and, crucially, lowers the chances that the poor will totally reject the capitalist system”

“That is why the billionaires such as Mark Zuckerberg and Peter Thiel and the like support a universal basic income. They believe it is better that you address poverty with some money so that people are a little less poor but, crucially, the rich can pretty much go about their business and lives as usual”

“The Brazilians do basic income, however, in a way that is beneficial to, and so acceptable to, a broader working-class constituency”

“the tiny financial transactions that are made are not “mined” by investor-driven fintechs and the value transferred out of the community”

“Mastercard wants to abandon cash so it can intermediate most of the tiny financial transactions made by the poor and extract a growing amount of value from them”

“they hasten the process whereby the global poor abandon cash and switch to using Mastercard-intermediated transactions, such as those involving mobile phones and debit cards”

“international development institutions, notably the World Bank, like the idea of pulling all financial inclusion products together and selling them to the poor, as CPS did. It is a simple form of financialization that brings the poor into markets rather than offering relevant public services to them, and it also generates higher returns for the fintech platforms”

“control of the local financial system is the gift that keeps on giving — it means you simply quietly skim off your slice of every financial transaction every day forevermore”