The Anthropology of Development 101: Microcredits vs Cash Transfers

Foreword

The Anthropology of Development 101 intends to review the contributions of anthropological knowledge to development theories and practices in ‘underdeveloped‘ and ‘developing‘ societies, as well as the critique of development as a social, economic, and political phenomenon. It critically examines the major theories, strategies, institutions, and the social consequences of global development while emphasizing what development means in relation to particular places and people. By placing development theories and practices into broader historical contexts, these articles look at development as a dynamic phenomenon that is continuously shaped and reshaped by new social, economic, and political circumstances.

This 101 series is divided into six articles including:

1. The Anthropology of Development 101: Theoretical Underpinnings and Alternative Approaches

2. The Anthropology of Development 101: The Discourse on Development and Its Effects

3. The Anthropology of Development 101: The Challenge of Participatory Development

4. The Anthropology of Development 101: Neoliberal Approach to Development: Microcredits vs Unconditional Cash Transfer

5. The Anthropology of Development 101: The Gendered Politics of Development

6. The Anthropology of Development 101: The Development of Difference: Rethinking Indigeneity, Ethnicity, and Social Movement

Microcredits and Cash Transfer (CT) programs are among the most discussed, promoted, and contested social assistance innovations of the 21st century. They are known for their potential to revolutionize the global capitalist economy and repair historical injustices. However, these programs do not come without contestation. Evidence from ethnographic observations highlights some of these programs’ ambiguities. First, this article will examine how microcredits are embedded in neoliberal ideologies, often at the expense of the very people they attempt to help. Second, it will investigate how social protection and neoliberalism can develop together simultaneously with the rise of (conditional and unconditional) cash transfer programs. Finally, the article will explore the shortcoming of these programs while emphasizing the benefits of an anthropological approach.

Providing money to disadvantaged communities has become a widespread strategy in development policies

The Neoliberal Approach to Microcredits

Microcredit-oriented development policies – offering very small loans to groups of people, especially women, in the Global South – have gained considerable attention in the last decades. Microcredit has inverted certain aspects of the historically dominant developmental trajectory. Practices once considered “backward” and an obstacle to development have become the “vanguard of entrepreneurial savvy in the global age” (Elyachar, 2002, p. 496). Microcredit is perceived as a way “for the poor to help themselves and the economy at the same time” (Ibid, p. 500). As Schuster states, “debt [is] the condition of having” (2014, p. 563-4). Borrowers are entrenched in credit: they own multiple loans that allow them to purchase items via installments. In this sense, microfinance schemes are deeply embedded in a consumption model. Without the capital provided by loans, these individuals would not be able to respond to the need of a consumer-driven society. The debt cycle benefits not only international banks and Western countries but also consumer products.

Microfinance programs are shaped by neoliberal ideology

Microfinance programs are embedded in an ideology of self-sufficiency that supports neoliberal governmentality while overlooking structural sources of inequality. As microcredit programs transfer development responsibility down to the people, they obscure the origin of poverty as well as the role of the state in addressing these issues. Rankin explains, "By focusing on the benign qualities of social capital, mainstream development discourse offers a clear economic, and even moral, justification for reducing the state’s role in the provision of basic social protections” (2001, p. 11). Microcredit institutions place a considerable amount of responsibility on the individual rather than on the state and bureaucratic institutions for providing services to people. For example, the phenomenon of “self-help development” requires women to self-regulate the borrower groups. Not only are they bearing the cost of the loan, but they also hold additional responsibilities such as collecting themselves the loan (Ibid, p. 24). The author further notes that the emphasis placed on the word “capital” in social capital suggests a “zone beyond politics” responding to “natural” laws of economic rationality, thus requiring no political accountability (Ibid). Although microcredits may dramatically transform some local economies, these programs do not redress the broader systems in which they are implemented. Microfinance programs that do not take into account socioeconomic structures cannot in themselves catalyze social changes (Ibid, p. 18).

Several adverse consequences result from microfinance programs

There are certainly success stories from microfinance programs. However, “even empowerment money has a price” (Elyachar, 2002, p. 513). This is well-illustrated in the BBC article: “India’s micro-finance suicide epidemic,” which highlights the human cost of microcredit (Biswas, 2010). Unable to pay back their loans, many individuals detach themselves from social life and interactions. Without a way out, some borrowers even commit suicide. Despite the advertised increased empowerment, ethnographic evidence points to microcredit schemes as increasing existing inequalities rather than creating social change (Rankin, 2001, p. 32-34). Microfinance shows the limits of a model of development purely economic. For many, well-being, happiness, and prosperity lie outside a capitalist model.

Cash Transfers

Contrary to common beliefs that understand neoliberalism as the decrease of welfare states in favor of the market, many states are embracing neoliberal policies together with a great level of social assistance. Over the past three decades, development aid practitioners, politicians, scholars, and the general public have seen cash transfer (CT) programs – the direct regular provision of small sums to eligible individuals – as one of the most promising social assistance and welfare state innovations. Proponents point to CTs’ ability to reduce poverty, transform the relationship between citizens and states, change gender hierarchies and household dynamics, and so forth (De Sardan & Piccoli, 2018). CT programs were first introduced in Latin America to combat the detrimental consequences on social protection and people’s livelihoods caused by 1980s neoliberal structural adjustment policies. Today, CTs encompass a large variety of programs developed worldwide that seek to break the intergenerational cycle of poverty (Ibid).

Cash transfer is seen as one of the most promising social assistance

In Give a man a fish (2015), Ferguson builds upon Mauss’ idea that the whole society, not only workers, is involved in producing value (Mauss, [1925] 2016). Consequently, mere societal membership should be enough to make people eligible for unconditional cash transfers (UCTs). In this sense, UCTs are “rightful shares” of a nation’s wealth, not “charity” (Ferguson, 2015, p. 24). Ferguson (2015) further draws from the example of famine response in Southern Africa to illustrate the potential of UCTs and universal basic income. He demonstrates how providing cash in response to food deficit can work with markets to help recipients achieve relief while letting them decide for themselves what their most pressing needs are. Therefore, welfare does not lead to dependency. Instead, CT can provide a path away from dependence by allowing greater agency, reciprocity, and interdependence in order to develop oneself in the broader socioeconomic system (Ibid). Similarly, evidence from Zambia shows that rather than creating dependency, CTs play an essential role in reducing poverty, stimulating economic investments, and ultimately empowering people (Handa et al., 2018).

Microcredit and CT programs allow individuals to gain access to capital

Both CTs and microcredit programs allow impoverished individuals to gain access to capital. However, these programs have different approaches regarding debt and loans. Beneficiaries of CTs can choose freely how to spend the money that has been given to them without being concerned about paying it back. In contrast, microcredit programs require beneficiaries to pay back the loan, often with interest. Consequently, “reducing outstanding debt is a key concern of [the beneficiaries]” (Handa et al., 2018, p. 50).

Limitations to Microcredits and Cash Transfer Programs

A closer look at the narratives about CTs (and microcredits) and their implementation suggests a lack of consideration for the local contexts, including household structure, institutional capacity, perception of poverty, and the meaning of money (De Sardan & Piccoli, 2018). For example, it has been demonstrated that money represents much more than a mere medium of exchange (e.g., Zelizer, 2017). Myriad actors ascribe a plurality of meanings to money that comes from CT programs in contrast to other forms of money. In this sense, CT money is not only technical but is also entangled with social practices, moral hierarchies, and political discourse (Green, 2021). Additionally, CTs (and microcredits) remain shaped by top-down approaches to development interventions as they impose imported and standardized norms and procedures regarding conditionality targeting and delivery (De Sardan & Piccoli, 2018). As such, these programs inevitably mark boundaries between insiders and outsiders that can conflict with diverse local norms; external norms are reinterpreted, circumvented, and sometimes contested by local populations (Ibid). Shipton's (2010) study on microcredit in Kenya, for example, explores how policymakers presupposed that certain forms of solidarity and collective identities among the beneficiaries would facilitate the distribution of credit. However, contrary to their expectation, the provision of microcredit resulted in cultural conflicts within and between communities. Among the Luo of Kenya, borrowing and lending have not only an economic dimension, but also a ritual, religious, and emotional meaning, resulting in cultural rules that forbid some forms of economic exchanges among the Luo and other African peoples (Ibid).

CT may increase gender inequalities

Microcredits and CT programs may also transform hierarchies within communities, households, and kinship networks. For example, Cookson (2018) analyzes the adverse consequences of the World Bank’s conditional CT in Peru for mothers. Although these programs promoted social inclusion and solidarity, the fact that they relied only on women leaders turned out to increase gender inequalities. The ideology of care implied in these programs translated into mothers having to perform extra unpaid labor. In general, most microcredits and CT programs alleviate individuals from some inequalities, but in doing so, they create new forms of inequalities (Green, 2015).

Conclusion

Microcredits and CT programs aim to achieve a more equitable wealth distribution and make development aid interventions more efficient. They are thought of as efficient tools to alleviate poverty, provide quick relief during economic crises, improve the position of women, and increase community resilience. However, there is an urgent need to connect these programs to their historical and social context and to examine how they impact gender relations, state-citizens relations, and local power relations that affect the lives of disadvantaged social groups.

Bibliographical References

Biswas, S. (2010). "India’s micro-finance suicide epidemic". BBC News. http://www.bbc.co.uk/news/world-south-asia-11997571

De Sardan, J. O., & Piccoli, E. (2018). Cash Transfers in Context: An Anthropological Perspective (1st ed.). Berghahn Books.

https://doi.org/10.2307/j.ctvw04jbv

Elyachar, J. (2002). "Empowerment Money: The World Bank, Non-Governmental Organizations, and the Value of Culture in Egypt". Public Culture 14 (3): 493–513.

https://doi.org/10.1215/08992363-14-3-493

Ferguson, J. (2015). Give a Man a Fish: Reflections on the New Politics of Distribution. Durham: Duke University Press.

https://doi.org/10.1002/ajhb.23020

Green, M. (2015). "Making Africa Middle Class: From Poverty Reduction to the Production of Inequality in Tanzania". Economic Anthropology 2 (2): 295–309.

https://doi.org/10.1002/sea2.12032

Green, M. (2021). “The work of class: Cash transfers and community development in Tanzania.” Economic Anthropology 8 (2): 273–86.

https://doi.org/10.1002/sea2.12218

Handa, S. et. al. (2018). “Can unconditional cash transfers raise long-term living standards? Evidence from Zambia”. Journal of Development Economics 133: 42–65.

https://doi.org/10.1016/j.jdeveco.2018.01.008

Mauss, M. (1925) 2016. The gift. Expanded edition. Chicago: University of Chicago Press.

https://press.uchicago.edu/ucp/books/book/distributed/G/bo22485556.html

Rankin, K. N. (2001). "Governing Development: Neoliberalism, Microcredit, and Rational Economic Woman". Economy and Society 30 (1): 18-37.

https://doi.org/10.1080/03085140020019070

Schuster, C. (2014). "The Social Unit of Debt: Gender and Creditworthiness in Paraguayan Microfinance”. American Ethnologist 41 (3): 563-578.

https://doi.org/10.1111/amet.12095

Shipton, P. M. (2010). Credit between Cultures: Farmers, Financiers, and Misunderstanding in Africa. New Haven, CT: Yale University Press.

https://yalebooks.yale.edu/book/9780300181289/credit-between-cultures/

Zelizer, V. A. (2017). The social meaning of money: Pin money, paychecks, poor relief, and other currencies. Princeton: Princeton University Press.

https://www.jstor.org/stable/2780903

Visual Sources