A new Balkan tragedy? The case of microcredit in Bosnia

“The microcredit lobby got poverty wrong: it is not about supply, it is about demand”, argues Milford Bateman, Visiting Professor of Economics at the University of Juraj Dobrila, Pula, Croatia. The results of Bateman’s research were presented at the second conference of the LSEE Research Network on Social Cohesion in SEE

South Africa's post-apartheid microcredit-driven calamity: Comparing 'developmental' to 'anti-developmental' local financial models

Microcredit was once universally lauded in international development community circles as a 'magic bullet'. Using the example of South Africa, this paper shows that microcredit has actually been an 'anti-developmental' local financial model, and one of the most calamitous financial sector interventions in South Africa's short post-apartheid history. This disastrous performance is compared to a benchmark local financial model that I call the 'developmental' local financial model, a financial model that was quite decisive to much recent European and Asian local economic development success. Overall, microcredit can be viewed as South Africa's own sub-prime-style disaster which, like the original US version, has mainly served to benefit a tiny financial elite working within and around the microcredit sector, whilst simultaneously destroying many of the most important pillars of the economy and society. It clearly behoves policymakers in South Africa, as well as policymakers in other African countries and elsewhere in the international development community, to learn from South Africa's negative experience with 'anti-developmental' microcredit to date and promote alternative 'developmental' local financial models

Small Enterprise Policy in Transition Economies: Progress with the Wrong Model?

The paper starts by considering the neo-liberal approach to small enterprise development and why it was to underpin small enterprise policy in Central and Eastern Europe (CEE) from the very first years of the transition. Author briefly considers what other policy models or alternatives were realistically on offer at that time. His final concern is with the actual results of the neo-liberal policy interventions in CEE in practice. The paper focuses particularly on the programmes supported by the international assistance community, since they were largely responsible for both the financing and the design of the bulk of the interventions which emerged after 1989

A post-Washington consensus approach to local economic development in Latin America? An example from Medellín, Colombia

Following thirty years of Washington Consensus policies, the new millennium saw Latin America adopt a wide range of new economic and social development policies that were leftist-oriented. A new role was seen for the state, including the state at local level. In Colombia, the city of Medellín has spearheaded this new movement for local activism, and the early results of this radical new trajectory have been positive. This Background Note argues that Medellín’s progress in building a ‘local developmental state’ needs recognition for promoting enterprise and social inclusion. However, it also cautions against complacency, arguing that important adjustments are needed for more rapid and sustainable progress in combating poverty, underdevelopment and inequality in Medellín. The detrimental role of microenterprise development is highlighted as one important aspect of Medellín’s policy package that needs rapid re-evaluation. This Background Note is based on field visits to Colombia in 2010 and early 2011, using data from round-table discussions, case studies of microenterprises and key informant interviews carried out in Medellín

Poor People’s Politics in East Timor

YesPoor people attempting to claim a share of resources in post-conflict societies seek allies internationally and nationally in attempts to empower their campaigns. In so doing, they mobilize the languages of liberalism, nationalism and local cultural tradition selectively and opportunistically to both justify stances that transgress the strictures of local culture and to cement alliances with more powerful actors. In the case of poor widows in East Timor, the languages of nationalism, ritual, and justice were intermingled in a campaign aimed at both international actors and the national state in a bid to claim a position of status in the post-conflict order

Is fin-tech the new panacea for poverty alleviation and local development? Contesting Suri and Jack’s M-Pesa findings published in Science

Financial technology, or simply ‘fin-tech’, is increasingly seen as one of the key tools to facilitate poverty reduction and local economic development. One article in particular by Tavneet Suri and William Jack published in the leading publication Science has played a hugely influential role in promoting the fin-tech model in the global South using the example of Kenya’s iconic M-Pesa money transfer platform. The authors’ central claim is that M-Pesa has been instrumental in facilitating a major episode of poverty reduction. Our analysis shows that their analysis and claims are extremely problematic

Microfinance, over-indebtedness and climate adaptation: new evidence from rural Cambodia

Microfinance loans are leading to an over-indebtedness emergency that undermines borrowers’ long-term coping and adaptive capacity in a changing climate

The Age of Microfinance: Destroying Latin American Economies from the Bottom Up

This article argues that the microfinance model that arrived in Latin America in the 1970s has proven, as elsewhere around the world, to be an almost wholly destructive economic and social policy intervention. Centrally, I argue that the microfinance model is responsible for embedding and giving continued impetus to an adverse 'anti-development' trajectory in Latin America's economies, one that has progressively helped to de-industrialise, infantilise and informalise the overall local economic and social structure. Until recently, the extent and precise nature of this 'anti-development' trajectory has been ignored for fear of undermining and delegitimizing the global microfinance model and, with it, the dominant political-economic philosophy - neoliberalism - that essentially gave life to it. Effective local industrial policies and 'pro-development' local financial institutions are now urgently required in Latin America to build genuinely sustainable and equitable solidarity-driven local economies from the bottom up

The Contribution of the Microfinance Model to Bosnia's Post-War Reconstruction and Development: How to Destroy an Economy and Society Without Really Trying

Academic analyses and impact evaluation studies produced by the international development community almost all conclude that the microfinance model has made an important net contribution to the economic and social recovery of post-war Bosnia and Herzegovina (hereafter Bosnia). However, as we now are finding is also the case in many other countries, these far-reaching claims are almost entirely based upon often deliberately flawed impact evaluation methodologies and inappropriate success criteria. This article provides an alternative assessment of the available evidence accumulated to date which, in our opinion, actually shows that the microfinance model has made a distinctly negative contribution to Bosnia's reconstruction and development effort. We argue, centrally, that the microfinance model has assisted the Bosnian economy to move to an unsustainable institutional development trajectory marked by the deindustrialisation, informalisation and infantilisation of the enterprise sector. More widely, we argue that the microfinance model in Bosnia has led to a sub-prime-style episode in Bosnia's post-war history, one that has materially benefitted a tiny elite working within and around the microfinance sector whilst simultaneously destroying many of the most important pillars of the Bosnian economy and society. We find that the best possible explanatory framework for what has transpired in postwar Bosnia is contained in the "control fraud" concept developed by William Black