16 Decisions – Neoliberalism and the Microfinance Industry in addressing the crisis of entrenched poverty

• In Event: Key Stakeholders, Power, and Decision-Making

Abstract

In response to the growing poverty crisis, microfinance has received much attention, having been popularized in the early 2000s through the success of the Grameen Bank. Although micro loans and savings programs are centuries old, the scale of success achieved by the Grameen Bank was noteworthy. The success of the model was soon attributed to micro lending activities (the group lending of Grameen specifically), and replication models spread globally, encouraged by the International Year of Microcredit in 2005 and the awarding of the Nobel Peace Prize to Dr. Yunus in 2006. While this aspect of the program was both replicable and scalable, most of the replicated programs neglected a key aspect of the original Grameen model: the ‘16 Decisions’. The 16 Decisions were lifestyle commitments that Grameen members were required to make in order to participate in the financial aspects of the program. These commitments closely mirror general development goals such as clean water, sanitation, and children’s education, commitments now central to the UN Sustainable Development Goals (SDGs) for the eradication of global poverty.

Embedded commitments of the original Grameen model encompassed a holistic development program that financial participants engaged in as they borrowed and repaid their loans through entrepreneurial activities, supported by the critical element of group solidarity. While microfinance and entrepreneurship were important added layers to conventional development wisdom, we argue that the holistic foundation of the 16 Decisions was the key to the success of the original Grameen microfinance program. However contemporary neoliberal hegemony separated microfinance from the 16 Decisions and led to various forms of unmitigated consequences. These include over-indebtedness, domestic violence, suicides, and many other negative and neutral outcomes globally. The microfinance promise (Morduch, 1999) without the 16 Decisions is incomplete. Neoliberal frameworks led to the demise of social solidarity created by the 16 Decisions, and a departure from holistic/community-based models. This approach was replaced by individualized, market led solutions that fail to protect the most vulnerable in society while simultaneously exposing them to the inherent risks of the market. Given the locus of microfinance programs is the global South, poorer communities are the target for what has emerged as a form of entrapment into indebtedness and consequential increased risk of deeper poverty.

In elucidating global progression of microfinance from a holistic development solution to a neoliberal financial industry, we applied a dual research methodology. First, content analysis interrogates the relationship between global South countries and neoliberalization, focusing on economic indicators such as the Index of Economic Freedom and structural adjustments for national borrowing. Second, an in-depth analysis of microfinance institutions (MFI) in each country, using World Bank MIX Market data, evaluates the progression of global MFI from a social solidarity and development model to a neoliberal market model emphasizing individual debt and performance. Research findings showed microfinance progressing further from the Grameen model, and that lost value of social solidarity created by the 16 Decisions is a vital missing part of both microfinance and third sector services more generally.

References

Morduch, Jonathan. 1999. "The Microfinance Promise." Journal of Economic Literature, 37 (4): 1569-1614. DOI: 10.1257/jel.37.4.1569

Authors

• Geri Mason, Seattle Pacific University

• Ruth Lesley Phillips, University of Sydney

• Deanna Davy, United Nations