Critical Theory and Microfinance by Dwight Haase, Ph.D.

CRITICAL THEORY AND MICROFINANCE Dwight Haase, PhD, University of Toledo

ABSTRACT A more fruitful dialogue about the social and economic impact of microfinance requires a full vetting of the assumptions and values built into the theoretical perspectives guiding both academics and practitioners. This paper intends to facilitate that process by relating critical theoretical perspectives – especially from Marxist and feminist schools of thought – to the existing literature on microfinance – both academic and nonacademic. The literature shows that microfinance has some potential to address Marxist concerns of alienation, exploitation and domination in society, but recent trends focusing on financial sustainability have distracted the microfinance community from these goals.

Meanwhile, a rather narrow conceptualization of empowerment has inhibited the full potential of microfinance for transforming gender relations.

KEY WORDS: Microcredit, microfranchise, Marxism, feminism.

INTRODUCTION My first hands-on experience with microfinance was a USAID-funded project in postwar El Salvador. As an intern helping to assess the impact of the project, I accompanied field workers as they hiked over hillsides to reach borrowers. I found it amazing to be walking alongside former FMLN fighters and supporters who now worked for an organization funded by the US Government. At that time it seemed to me Muhammad Yunus had managed to do something countless politicians before him had largely failed to do: find some common ground between Marxism and Liberalism.

Since that time I have noticed increasing antagonism between leftists and the microfinance sector. Feminists also have been vocal in their disgruntlement with microfinance. Meanwhile, advocates of microfinance seem more dismissive of critical thought, as if it is too theoretical to be relevant to their work on the ground. Indeed, a common danger of theoretical dialogue is that it can become to abstract, losing touch with reality. However, microfinance should not lose appreciation for the utility of critical theory in helping us ascertain the causal factors of what they might see occurring in the field, as well as interpreting the data.

In this paper I will consider two facets of critical theory – Marxism and feminism – and how they can help make sense of microcredit’s benefits – and its shortcoming. By no means is this an exhaustive survey of critical theory, but rather a first step in bringing theory back into the discussion of microfinance.

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MARXISM Marxism at first seems irrelevant to microcredit. After all, Karl Marx developed his theories based upon observations of workers in industrial capitalism, and microcredit typically targets self-employed persons, mostly in the informal sector and rural areas.

But Marx’s three central concerns are quite pertinent to the goals of microcredit and its impact. Those central concerns are: (1) alienation, (2) exploitation, and (3) domination. I will address each of these in turn. In so doing I will compare the insights of Karl Marx to the ideas of one of microcredit’s founding fathers, Muhammad Yunus. Yunus himself was inspired by Marxist thought in college, although he says he found it too impractical (2003: 203-4). While such pragmatism has its merits, I will argue that recent developments in microfinance also suggest that practitioners and planners should revisit Marxist theory to better assess their accomplishments, their shortcomings, and where they are headed.

Alienation Alienation is a topic that receives little attention anywhere in the microfinance community. Even Marxist scholars sometimes forget about this more psychological dimension of Marx’s writings. To best understand Marx’s concept of alienation, it is useful to begin with someone who is a primary target of Marx’s critiques: Adam Smith.

According to Smith, the essence of being human is to communicate, which allows us to negotiate, and thus to reach compromises that are mutually beneficial.

Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.

Nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that….

In almost every other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of… The greater part of his occasional wants are supplied in the same manner as

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those of other people, by treaty, by barter, and by purchase (Smith: 168-169).

Marx dismisses Smith’s view as another case of liberals indiscriminately imposing their own believes and preferences – very much a product of their time - on all of history. For Marx, the essence of being human, that which sets us apart from animals, is our ability and propensity to work with both our hands and our minds. Marx accuses Smith and his protégés of simply projecting their bourgeois ideals on other cultures when they advocate for free markets. In fact, there are many examples of societies throughout history that did not trade, so how could this be the essence of humanity? (1858: 345-347) So while Smith sees trade as innate to human nature, Marx sees production as innate to human nature. And for Marx that act of production, work, is a “positive” activity (370); it includes relationships with other workers, ourselves, and the product itself. From this perspective, sitting on an assembly line – or even taking orders from a boss for eight or more hours a day – is not only unfulfilling, it is inimical to what it means to be human (367). Workers eventually come to feel their lives are controlled by the commodities they produce. These products no longer make their lives more convenient or enjoyable, as they are advertised to do, but instead make their lives seem meaningless and empty (1867: 508-510, 515-516). The zombie-like lifelong “shoprat” at the start of Ben Hamper’s (1991) factory memoir, obliviously chain smoking while he stares blankly at the wall muttering expletives (9-10), is a classic example of what Marx feared would become of workers in a capitalist world.

Like Marx, Yunus is has doubts about wage labor - but not because it is alienating.

Instead, Yunus argues that it is an impractical development strategy in many countries, and it may be very difficult for workers to be productive and to accumulate capital through wage labor (2007: 52-54). Yunus presents his stance as a direct contradiction to mainstream economic theory, but at the same time he implicitly affirms the liberal tradition by making productivity and capital accumulation the end game for development.

But even if there is no explicit intention to address problems of alienation, microfinance could do so indirectly. After all, microcredit is not industrial production; and at least in that sense it is not an affront to humanity, in Marx’s eyes. In fact, this might be the most appealing aspect of microcredit: it conforms both to both Marx and Smith’s concept of what it means to be human. But the conformity with Marxist theory is more a coincidence than a commitment, and so the danger is that this aspect of microcredit might be forgotten in the pursuit of liberal objectives. Indeed, we now see new projects in the microfinance sector that are designed to increase the productivity of the beneficiaries, but at the same time decrease their autonomy and creativity as workers. A prime example of this is microfranchising, “a development tool that seeks to apply the proven marketing and operational concepts of traditional franchising to small businesses in the developing world.” According to the Economic Self-Reliance Center’s microfranchising blog site, “The primary feature of a microfranchise is its ability to be streamlined and replicated.

The businesses are designed for microentreprenuers and usually target development issues such as health, sanitation, and energy” (http://microfranchise.blog.org).

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The site goes on to say, As an illustration consider a microcredit borrower who is not particularly gifted as an entrepreneur. With the option of a microfranchise they could get a loan from a microfinance institution along with a 'business in a backpack' and therefore gain access to an entire system of training, support, branding, and marketing as a franchisee.

The franchisor would operate with the efficiency of a McDonalds or Subway and subsequently drive prices down and increase distribution of essential products and services.

Most microfranchises have the ability to provide additional employment to a handful of people beyond the franchisee which could potentially be the poorest of the poor.

These microfranchises include selling reading glasses, solar panels, portable movie screens, and vitamin-fortified yogurt (Fairbourne et al. 2007; microfranchising.blog.org).

It is exciting to see economic activities like these that generate employment while at the same time providing products and services that many communities otherwise would not have access to. But microfranchising also represents a discouraging shift toward a kind of development strategy that treats people as just labor. In fact, perhaps the most important difference between the microfranchisees and the employees of McDonald’s or Subway is that the latter don’t assume the risk of failure of the business; microfranchisees do.

Exploitation Exploitation is the economic dimension of Marx’s concerns with capitalism, and perhaps the most commonly recognized topic of his writings. Again, Marx differs sharply from Adam Smith, who basically regards trading as a win-win situation. Smith’s mentality has endured to this day, and remains a driving force in the mainstream business world, as well as the socially responsible business sector. As Kelley et al. (2008) argue, the business world “can successfully address poverty without converting to philanthropy” (19).

For Marx, while the act of trading – buying and selling – at first glance may appear to be a win-win situation, in fact it obscures the exploitation of workers and appropriation (and often also degradation) of the environment that occurred while producing the items being traded. In his earlier writings, Yunus espouses Marx’s perspective: Poor people have not only survived due to their skills and hard labour, but others have acquired wealth and reaped bounteous harvests because of them. A big part of the national income is created this way by the poor. But it is not admitted in economics textbooks. The poor people, 70 | The Evolution of Thought on Microfinance

however, cannot keep for themselves their due share of what they produce. The bigger share is credited to the accounts of others. To ensure a bare living, they feel so desperate that they are hardly in a position to claim from more powerful people what is their due share. They try to manage with whatever little they get. Moreover, the powerful people have created such social and economic institutions that there is no scope for the poor people to raise any objections. Whatever the poor see around them, they have learn to accept as the inevitable dictum of fate.

Consider their powerless situation, they find it prudent not to raise any loud protests (1992: 26-27).

Yunus is not so sanguine as Smith about the prospects of a free market. He acknowledges that people are poor not for lack of human capital or financial capital, as liberal economic theory might suggest, but because the economic and social system in which they live is has been designed to oppress them. Marx would have agreed; he asserts that labor power creates more value than the laborer consumes, but that extra value he/she created never comes back to him/her in the paycheck. Marx’s solution is class conscientization, which he envisioned would lead to collective action among the oppressed. More precisely, Marx foresaw the workers taking over and ultimately abolishing the exploitative institution Yunus mentions.

But while Yunus and Marx seem to share the same diagnosis of the situation, their prognoses are not at all similar. Instead of collective action, Yunus’ solution is classically liberal: inject capital. This is ironic since Yunus has described a system that is inherently inimical to the interests of the poor, yet he is offering a solution that would encourage the poor to participate more actively in that system. Furthermore, credit ultimately is an individualistic approach to empowerment. Although Grameen borrowers form groups to receive loans and those groups are mandated to “engage in collective enterprises whenever possible,” (Yunus 2007: 58-59) microcredit borrowers often find themselves in competition with each other. And while the groups of borrowers are often called “solidarity groups,” internal conflicts over who should get loans first, or who should get the biggest loan often occur.

Without class conscientization, and without changing the broader economic system in which she is working, the successful entrepreneur may simply go on to replicate the exploitative employment practices of the bourgeoisie – paying her workers too little, offering no benefits, and demanding long hours. Indeed that might be her only chance for success. Unfortunately, little research has been done on microentrepreneurs’ employment practices, so we simply don’t know about such working conditions.

Simply serving the individual without addressing the structural causes of his/her situation also can prove problematic in times of economic volatility. The sharp increase in global food prices in 2008 is a prime example. Due in large part to speculation, free trade policies, laissez faire agricultural policies and de facto dumping of US subsidized surplus The Evolution of Thought on Microfinance | 71

grains, the prices of many staples doubled worldwide in just a few months time. The predicament caused many microcredit borrowers to withdraw savings and cut back on household spending in order to try to keep making payments on their microloans (Duflos and Gaehwiler 2008).

The microfinance institutions’ (MFIs’) high interest rates – often well above 30%, sometimes even over 50% - also exemplify the potential for exploitation in this field.

CGAP’s senior advisor, Richard Rosenberg (2002), offers the standard defense for high interest rates: In most countries, donor funding is a limited quantity that will never be capable of reaching more than a tiny fraction of those poor households who could benefit from quality financial services. We can hope to reach most of these households only if MFIs can mobilize relatively large amounts of commercial finance at market rates (11).

The most recent (and methodologically most impressive) impact assessments by Banerjee et al. (2009) and Karlan and Zinman (2009) call into question Rosenberg’s assumption of benefit, and make one wonder what better impact the MFIs might have by lending to fewer people at lower rates of interest. Furthermore, by taking subsidization off the table, Rosenberg effectively is taking pressure off governments to take responsibility for addressing the economic needs of their poor. Finally, this argument of scarcity of funds seems somewhat disingenuous when over $30 million is spent each year on microfinance conferences (Helms 2006: 13). One can’t help but wonder: if the borrowers knew that MFI funds were being used to send staff to these events in far-off five-star tourist hotels with lavish meals and various souvenirs, wouldn’t they feel exploited?

Finally, the question of microfranchising again comes up when we speak of exploitation.

This is because microfranchisers do not appear to be monitoring their sources of inputs.

For example, Jones Christensen et al. (2007) describe the Vodacom project in South Africa, which offered cell phones to low income customers through phone shop microfranchises. The authors note that the project originally sold thousands of phones made by Siemens, the same company found by reporters to engage in sweatshop labor practices in China (Chan and Ho 2009). Meanwhile, the cell phones contain tantalum, mined in slave-like conditions in the Democratic Republic of Congo (Cox 2006). Yet the microfranchise literature makes no mention of efforts to ensure the materials they procure come from safe and just working conditions. To benefit one impoverished group at the expense of another – and even to reward the corporation involved in the exploitation with a lucrative contract – seems inimical to the ideals espoused by microfinance advocates.

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Domination Domination is Marx’s most overtly political concern; but it also is deeply connected to alienation and exploitation. For Marx, exploitation and the lack of autonomy associated with alienation beget a system of values and decision-making dominated by the wealthy and powerful. It is a system Marx believes must be replaced.

Yunus, on the other hand, opts for gradualism, which Counts (1996) describes this way: In reality, of course, Grameen doesn’t match up with some of his own ideals, either. But it passes the test that guides all the major decisions in his [Yunus’] life – is doing it an improvement over doing nothing? Time and again, when people find fault with Grameen, Yunus admits its theoretical and programmatic deficiencies while defending it as superior to the status quo (308).

This approach has been quite successful for Grameen. But it does come with a cost.

Gradualism means working within a system that impels both the MFIs and their clients to follow its rules and imperatives, and more generally to accept liberal values like efficiency and individualism. Regarding the former, a current trend among MFIs that often is lauded by planners and practitioners but derided by critical scholars is the struggle for financial self-sufficiency.

MFIs’ financers, mostly Western European governments and North American NGOs and foundations, demand that the MFIs be financially self-sufficient. This has discouraged the MFIs from making investments in awareness building among their women borrowers since such activities would raise the MFIs’ operating expenses. Cloke (2000) also asserts that donor demands for MFI self-sufficiency has pushed the MFIs to exclude the poorest from their portfolios. Elyachar (2002) asserts microfinance “accords well with neoliberal ideology in that it advocates a diminution of the state and its disengagement from the terrain of economic activity” (496). She concludes that microcredit is being used as “a mechanism for ensuring that the poor discipline themselves” (509).

Yet another implication of working inside the system is the imperative for competition.

This is often regarded as a good thing among proponents of microfinance. Indeed, under proper circumstances (i.e., with proper regulation) it can impel MFIs to provide better, more appropriate services than they otherwise would. But it also can invite organizations that have little or no interest in helping the poor, and thus are more concerned with making their balance sheets look appealing, rather than truly empowering their clients.

And considering that microcredit often is disbursed in markets with relatively little regulation, this could be problematic. In other words, Yunus’ gradualism is at risk of becoming opportunism.

Finally, it is important to note that when MFIs are following the directives of funders based elsewhere, those MFIs are not able to take their own cultural, political and economic context into consideration before they begin lending. They are like the The Evolution of Thought on Microfinance | 73

economists Marx derided, who imagine their bourgeois preferences are in fact timeless universal laws of economics, which they project on all other people’s, no matter how different (1858: 346-348). As Bornstein (1996) presciently notes, In accepting credit as a development tool, most did not duplicate the process Yunus undertook to arrive at credit.

Indeed, the importance of credit as a development tool is only one of many lessons to be drawn from the experience of the Grameen Bank, and, I would argue … not the most important one (341; emphasis in original quote).

To make his point, Bornstein specifically addresses the topic of microcredit in the US: If Yunus had an American counterpart who spent four years walking around a poor urban neighborhood in the United States (presumably close to where he grew up), asking people what they needed to solve their problems, what would have emerged? Would people have talked about credit? Or vocational services? Or improved public schools? Or locally based policemen? Or better political representation? The answer remains open to speculation.

But one thing is certain: It cannot be ascertained from a distance (341-342).

Grameen’s founders were well aware of this, as is evinced by Grameen’s multiple other programs. Credit is just one of many approaches that Grameen employs, and the organization continues to innovate its services. However, other MFIs lack Grameen’s autonomy and vision, they appear to follow the narrow dictates of their funders to simply lend, lend, lend without first investigating whether or not this is the most effective and appropriate means of intervention In concluding this section, it is important to note that both liberal and Marxist theories are problematic in that Marx and Smith both imagined a male-dominated economy. Rarely did they ever mention women in their most important works, let alone consider how women’s experiences at work might differ from those of men. The next section addresses such issues.

Feminism Feminists often are credited for bringing “empowerment” into the parlance of development (Young 1997b: 371). The Gender and Development (GAD) movement of the 1980s encouraged planners and practitioners to focus more intently on power differentials and gender relations, rather than simply trying to integrate women into the mainstream economy, as was typically the aim of the Women in Development (WID) movement of the 1970s (Visvanathan 1997:17-24; Young 1997b: 371).

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While there is no single feminist definition of empowerment, there is a general agreement that it is a process – a holistic one. According to Young (1997b): [Empowerment] involves the radical alteration of the processes and structures which reproduce women’s subordinate position as a gender. In other words, strategies for empowerment cannot be taken out of the historical context that created lack of power in the first place, nor can they be viewed in isolation from present processes (372).

Radical alteration means merely targeting women for benefits is not itself sufficient. And historical context means that there is no one universal model for this process of empowerment; it varies from one community to the next. And so like Marx, feminists often are wary of mainstream economic theories that treat all people as independent units virtually independent of their social setting. This is even true of feminists who otherwise are relatively favorable to mainstream economics, such as Rebecca Blank (1993) [T]he assumption that I find most problematic in the standard economic model is that in all cases choice is taken as the most useful characterization of how individuals respond to their social and economic environment… There is not a glimmer in this basic model that any individual might ever feel dominated, oppressed, passive, stuck, ill, unsure about his or her abilities, or unaware of alternatives (141).

Young (1997a) would agree, and relating this more directly to microcredit she notes being “much less optimistic about the role of the market as distributor of benefit, and the power that stems from having ‘cash in hand’” (53).

But the above insights seem to be largely lost on the main advocates for microfinance.

Instead they confuse feminine strategies with feminist strategies, and at the same time often essentialize women by emphasizing their compliable nature and undying responsibility for children – read: they are submissive and their proper place is at home.

Meanwhile, a story of a husband or father who is chauvinistic or incapable to provide for his family often is constructed to as the straw man to explain these women’s impoverished status.

The Microcredit Summit Campaign’s (MCS) website lists “empowering women” on its homepage banner. If one clicks on a link to “microcredit success stories,” one finds 13 vignettes of women borrowers. One vignette features Gonuguntla Mariamma from India, who was married off at the age of ten. With the income from her loan she has revitalized the land her husband owns and bought more rice for her family. Another vignette is about Janet Deval in Haiti, who is using her income to send her children to school, even though her husband has been opposed to the idea. Yet another vignette features Alemnesh Geressu from Ethiopia; it explains that the money she earns from trading in the The Evolution of Thought on Microfinance | 75

market is used to buy things for her family and to send two of her children to school, something her husband could not do because he is a poor, landless farmer. And then there is Nurajahan from Bangladesh, who was abandoned by her parents as an infant.

Her neighbors raised her and married her off at the age of 12 to a man who later abandoned her while she was pregnant. With microcredit loans she has acquired land and livestock and she sends her children to school.

Reading through these four vignettes and the others, a motif emerges that is vaguely reminiscent of colonial rationalizations for Western domination: the problem of oppression is reduced to family issues. Men seem either chauvinistic or emasculated, parents uncaring of their daughters. The Western reader can feel gratified knowing he/she is not so sexist, so backward. Meanwhile, the stories have been cleansed of any notion of oppression at higher levels. And so, for example, it seems that in Haiti Janet Deval’s children aren’t going to school because of a bad father – not because the foreign powers have bolstered repressive regimes in Haiti that kept people in poverty, while international lenders have imposed austerity measures that reduced access to public services like education – measures the wealthier, more powerful countries would never accept for themselves.

Furthermore, the implication of these vignettes is that microcredit has empowered these women to be better mothers. Indeed, the fact that these women are able to better feed and clothe their children, and to send them to school is a wonderful thing. But we should not confuse poverty alleviation with empowerment. In fact, these vignettes tend to reinforce the essentialization of women as caretakers.

Evidence Supporting Microcredit’s Empowerment of Women But just because the advocates of microfinance do not grasp the concept of empowerment does not mean empowerment is not occurring. In fact, even in the aforementioned MCS vignettes, one borrower from Peru says she is president of a “mother’s club” that runs a soup kitchen for poor persons; and another borrower from Zambia has started a women’s group to help other women in need. This is getting closer to the concept of empowerment feminist scholars emphasize in their works.

Furthermore, the many studies by scholars in the field offer evidence of microcredit’s empowerment of women. Of course, operationalizing and measuring – while controlling for spurious factors – is a daunting task. But several studies have attempted to do just that. One of the first and most often cited is Hashemi, Schuler and Riley (1996), which looks at six Bangladeshi villages served by the country’s two biggest microcredit lenders, the Grameen Bank and the Bangladesh Rural Action Committee (BRAC). Their research includes a survey of 1,300 married women. Comparing women who are microcredit borrowers to other women who are not, they find that the former enjoy greater mobility outside of the home, more involvement in major decisions, and more political and legal awarness (12-13, 20, 22).

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In another widely cited study, Cheston and Khun (2001) conducted a survey of 1,200 people and find that women borrowers are more likely to defend their rights, and play more active roles in their communities than non-borrowers (12, 42-43). Borrowers also broaden their social networks (25, 35). And by participating in groups they increase their knowledge of political parties, process and channels of influence” (24).

Additionally, several studies in a variety of countries have found that women who borrow from MFIs are more likely to participate in household decision-making (Cheston and Khun 2001; Hashemi, Schuler and Riley 1996; Kabeer 2001; Mahmud 2003; Pitt and Khandker 1998).

Researchers also have noted borrowers’ improved self-esteem among borrowers (Cheston and Khun 2001, Hashemi, Schuler and Riley 1996; Kabeer 2001).

Evidence Against Microcredit’s Empowerment of Women These findings are quite impressive, but often challenged. For example, Goetz and Sen Gupta (1996) find that 38% of women with Grameen and 72% with BRAC don’t even retain full control of their loans. Kabeer (2001) and Mahmud (2003) counter that even if a woman hands over her loan to her husband, she still is empowered if doing so increases her choices or if she at least has some say over how the loan is utilized (81; 583-584).

However, the evidence suggests that women’s range of choices and the extent of their control often are quite limited. In fact, women microentrepreneurs “tend to lose control of their earnings as it increases and becomes more important in the household” (Kantor 2003: 435). And women’s increased earnings may be accompanied by a subsequent reduction of male contributions to the household (Cheston and Khun 2002: 33; Mayoux 1999: 972).

Meanwhile, Agurto’s (2002) research in Nicaragua shows that microloans have not affected intra-household decision-making, which typically was done jointly already before the loan (23). This reminds us that gender relations are culturally specific, and so we should not expect microcredit to have a uniform impact on women worldwide.

But empowerment is not only about control over money. There also is the question of control over one’s own time and labor. Here again the findings are troubling. Cheston and Khun (2002), Mahmud (2003) and Mayoux (1999) all note women microcredit borrowers have heavier workloads than non-borrower women, as they must combine household chores with their business (27; 597; 973). And Haase (2006) shows that women microcredit borrowers work longer hours than male microcredit borrowers, especially when those women are married: [A]fter explaining a daily routine that began as early as 3:00am to both prepare for her business and complete the necessary household chores before leaving for work and later returning to cook dinner, Miriam of Boaco told me, “I can rest later” – meaning when she retires in about 40 The Evolution of Thought on Microfinance | 77

years. Her dedication to her family is indubitably heroic, but it is unfair to her and inhibitive to her business (102103).

In short, women microentrepreneurs often must run their business on top of their laborintensive household chores and childcare duties. Meanwhile, the men in their lives too often do not pick up the slack and society does not offer support in the form of services like affordable childcare. Hence, “women’s businesses remain small and concentrated in less profitable sectors in large part because of the time constraints that women’s domestic responsibilities create” (Cheston and Khun 2002: 41).

This leads us to another dilemma: the limited range of entrepreneurial activities open to many women borrowers. In theory, these women could do anything they want with their loan. But in reality, gender stereotypes, societal norms and the women’s own limited human capital often set rather strict and narrow parameters on what these women can do with their loans. The result is that women tend to engage in less lucrative activities – often those associated with their traditional gender roles (Agurto and Guido 2003; Cheston and Khun 2002; Cloke 2002; Espinal and Grasmuck 1997; Haase 2007; Mayoux 1991; Monteiro 2002). Thus Kabeer (2001) finds “little evidence of any radical change in the gender division of labor. Access had increased their levels of economic activity, but not the range.” So “women remained confined to a small number of ‘female’ occupations” with workloads increased, but not options (68-69, 71-72).

And it might not be just the women borrowers who suffer, Mayoux (1999) asserts that girls are being employed in their mothers’ microenterprises while boys are getting preference for going to school (972). Even when women do educate their daughters, Kabeer (2001) notes their reasons for doing so often do not sound empowering; rather they do so to pay less dowry and to get a better husband for the daughter (78).

These kinds of problems are indicative of an approach to development that does not address the fundamental inequalities of gender relations. Upon receiving a microcredit loan, these women’s lives have changed, indeed, but if no one else around them has changed, the empowering potential of their access to credit is greatly curtailed.

Having surveyed the research on both sides of the empowerment debate, it is imperative to note a methodological problem that plagues most of these studies: sampling bias.

Most studies assessing the impact of microcredit compare borrowers to non-borrowers; they are quasi-experiments. The main difference between these studies and true experiments is that the women being studied were not assigned randomly into the two groups – borrowers and non-borrowers. Instead, borrowers were self-selected (by seeking out a microloan) and/or selected by the MFIs because they were seen as good potential borrowers. Selection bias occurs if the women who take the initiative to seek a loan or who the MFIs select are different from the women who never get a loan. Indeed, that appears to be the case, and Hashemi, Schuler and Riley (1996) acknowledge this sampling bias in their own work: women who borrow appear to already be more

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empowered; so their correlations between microloans and empowerment are exaggerated (643).

The solution to selection bias is a study where borrowers and non-borrowers are randomly assigned, not selected or self-selected. Researchers have begun employing such methods and their results so far show no benefit from microcredit for women’s decision-making power in the household (Banerjee et al. 2009). We await further such studies that look at other indicators of women’s empowerment.

In short, microfinance’s advocates appear to have overestimated the empowering potential of money. In an overly simplistic reading of liberal economic theory - where people are atomistic, wholly rational beings fixated on utility maximization – credit indeed would be expected to empower women in all circumstances. But in reality women must live within the context of families, communities, and broader social and political structures that largely constrain their options and thus their chances for empowerment. The situation is far more complex than a simple a matter of chauvinism within the household, as the MCS website implies.

Some of the aforementioned researchers recognize this reality and have concluded that loans alone are not enough to empower women (Cheston and Kuhn 2002; Kantor 2003).

Mayoux (1999) most pithily expresses this view when she asserts that microcredit “cannot have more than limited impact on women’s empowerment unless there are changes in wider gender inequalities in the broader social and economic contexts in which they operate” (27).

This is not to say empowerment through microcredit is a lost cause. After all, many women report improved self-esteem; at least sometimes women have some increased control over assets and earnings; and the lending groups give women a chance to network and to build solidarity (Mayoux 1999: 972, 975). The problem is that group lending, and the conscience-raising activities that that typically accompany it, is largely being done away with in the microfinance movement’s quest for financial self-sufficiency. For many MFIs in various countries, women’s meetings now are merely an opportunity for the MFI to collect its money, nothing else. Meanwhile, support agencies like the CGAP publish briefs lauding branchless banking via cell phones as a means to reducing operational costs – with no thought given to what might be the social impact of such strategies (Ivatury and Mas 2008). And Microfinance Information Exchange (MIX), the selfproclaimed leading information provider and setter of industry standards for microfinance, offers copious data on hundreds of the world’s largest MFIs, none of which includes any indicators of social impact. Instead the numbers relate to equity ratios and returns on assets to measure the MFIs’ economic viability. Meanwhile, CGAP’s list of essential MFI indicators that investors and donors should monitor includes portfolio quality, profitability, and efficiency – but no mention of empowerment (Rosenberg 2009). Organizations like CGAP and MIX are funded and supported by some of the largest and most influential lenders and donors in the world, including the World Bank and the Bill and Melinda Gates Foundation. Thus their influence in the microfinance

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sector should not be underestimated. So the fact that empowerment is not on the top of their agenda seems ominous for Marxist and feminist concerns.

CONCLUSION The purpose of this paper is not to dismiss or discredit microfinance as a strategy for empowerment. But applying the insights of critical theories like Marxism and feminism does raise awareness to the limitations of microcredit and microfranchising.

Furthermore, the current emphasis on financial self-sufficiency seems inimical to the goals of empowerment. This trend appears to be the consequence of a strategy that attempts to empower individuals through streamlined services, rather than engaging in more holistic involvement and striving for fundamental changes in the social, economic and political structures that oppress people.

But again, it is important to emphasis that this does not mean microfinance is completely incapable of empowering. Even in its current state, microfinance might be creating political opportunities for empowerment among the children of borrowers. For example, the US Civil Rights Movement of the 1950s and 1960s was preceded by decades of slow economic improvements that accumulated over generations for African Americans, giving them the resources and confidence they needed to initiate change from the bottom up (McAdam 1982). It is conceivable that microfinance could play a similar role in liberating poor and oppressed persons around the world. But the question remains whether microfinance is the most appropriate and effective means of doing that, especially with its current preoccupation with financial self-sufficiency.

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