The age of microfinance: destroying Latin American economies from the bottom up
The microfinance model that arrived in Latin America in the 1970s, according to this paper, has proven, as elsewhere around the world, to be an almost wholly destructive economic and social policy intervention.
As the formal sector contracts in Latin America as a result of the global financial crisis, and as the new default option for abandoned workers is an informal microenterprise helped into being by microfinance and crammed into an already over-crowded market space, there is little chance of any improvement soon. Pushing more and more surplus workers into the same depressed informal economic space has no real economic development or anti-poverty justification, still less any ethical content.
The author argues 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 delegitimising 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.