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Microcredit, race and poverty: a comment  

3/1/2016

2 Comments

 
What we often call ‘common sense’ is not always as obvious or even sensible as it might seem at first glance.  This is particularly so in the use of untested assertions about the place of race two decades into South Africa's post-apartheid dispensation. For what some see as obvious assumptions about race sometimes mask changing material realities, resulting in an inadequate understanding of change, and misdirected efforts to  interpret the power and policies of new elites.

Milford Bateman has raised some important issues about the consequences of micro-lending to financially stressed South Africans (‘Microcredit: a principle cause of poverty in SA’, M&G, 29 December 2015, initially published as part of The Conversation Africa). He has also sought to identify who has benefitted and who has lost in the development of this system of micro-credit extention.
 
Bateman argues that the microcredit movement in South Africa expanded partly as a result of ‘policy responses of the first democratically elected government’, followed a ‘debilitating trajectory’, and that the model is ‘a fundamental block on sustainable development and growth at the local level’.
 
Professor Batemen has written an influential and generally well-received book on this subject (Why Doesn't Microfinance Work? The Destructive Rise of Local Neoliberalism), although at least one reviewer accused the writer of ‘sloppy thinking’, ‘dramatic conspiracy claims’, being loose in reasoning and careless in use of evidence. He has also undertaken major case studies on micro-lending which range, according to the book’s publishers, from India to Cambodia, Bolivia to Uganda, Serbia to Mexico.
 
These credentials notwithstanding, I have some concerns about Professor Bateman’s use and mobilisation of ‘race’ as an explanatory tool in his discussion about micro-lending:
 
'The microcredit movement thus helped plunge large numbers of black South African’s into deeper over-indebtedness, poverty and insecurity. At the same time, not coincidentally, a tiny white elite became extremely rich by supplying large amounts of microcredit to black South Africans.

'Not surprisingly, many in South Africa say that microcredit brought about the country’s own sub-prime-style financial crisis. It had its own local flavour, generating even more disturbing race-based exploitation overtones than even in the US.'


It may be that the vast majority of micro-lenders who took advantage of the policy choices made by South Africa’s first democratically-elected government were from what Professor Bateman terms a ‘white’ elite – although I have some recollection of micro-lenders linked to trade unions in the troubled Marikana area. Equally, in the early years of the new government, when I worked as a long-term consultant to a national department, I remember the micro-lenders who were decimating  the monthly salaries of many of the staff I supervised being set up and run – at least in Pretoria – by small scale black owned financial institutions which were opening and closing at a rapid rate in the centre of the city.

I also recall then Finance Minister Tevor Manuel, who was political head of the Department I consulted to, publically expressing concern about the consequences of micro-lending and the repayment systems – including garnishee orders – which left some public service staff with a take home salary at month end inadequate  even for food. This suggests that government was not unaware of the consequences of its new policy choices encouraging micro-loans.

I am inclined to query the professor’s  unsubstantiated comments about the relationship between micro-lending and a ‘tiny white elite’ which became ‘extremely rich’ through micro-lending to black South Africans, and the ‘race-based exploitation overtones’ which this implied.

It is difficult to understand why the new post-apartheid government, elected by a majority of South African voters (by far the largest number being black) would introduce policies intended to benefit a ‘tiny white elite’. It is more credible that many new policy initiatives were aimed at facilitating and encouraging the development of a black middle class with a loyalty to the new poltical order, and an interest in its stability. This is a far more compelling explanation of developing financial, economic and political policy following the 1994 elections than the priorisation of a ‘tiny white elite’. If existing economic interests from the older order benefitted from this, it was more likely an unforeseen consequence of ‘black economic empowerment’ than a policy choice by the new government.

If Professor Bateman wants to ague that the the system of microcredit benefitted a ‘tiny white elite’, helping to make it ‘extremely wealthy’, then he needs to establish this through reference to research and credible data – not just by assertion.
This principle is even more important when assessing Professor Bateman’s assertion that the system of microcredit developed post-apartheid generated very disturbing ‘race-based exploitation overtones’. This may be so. Alternatively, it may rather be that the exploitative nature of post-apartheid micro-lending has benefitted an emerging entrepreneurial and rent-seeking class which defines itself in racial terms (‘black’ economic empowerment) but is better denominated by the nature of its economic activity than any assumed ‘racial’ identity.

That is why an agenda for substantial socio-economic change – transformation, if you will – cannot be developed solely on the basis of assertions about race and assumed ‘racial’ interests. This cannot explain developments or change in society, nor be the basis for challenging power relations and the elite interests they advance.

Glenn Moss
2 Comments
milford bateman
7/1/2016 03:32:51 am

Hi Glenn, a mate in SA just sent me the link to this. An interesting comment, but you miss or confuse a few things that are important. First, let me clear up the 'sloppy thinking' claims, etc, made by David Roodman, who was writing a book financed by the World Bank and other similar institutions. All of these claims were nonsense as I demonstrated with my response to his claims, which were motivated by trying to invalidate any claims that microcredit was not working. That was why he was being paid to write a book that centrally accepted microcredit did not reduce poverty, but it was still valuable for many other spurious reasons. That is, he was a bought and paid for apologist for failed microcredit. He has now disappeared from the scene almost completely, partly thanks to his stupidity in making claims against my book that did not stand up. I do owe him a debt of gratitude, however, in that his attempted smearing of my book raised its profile, generated interest, and turned it into a modest best-seller, with very many contacting me to say they heard about my book through his blog posting 'review' which they found to be a travesty of what was actually in the book.

OK, that aside, you need to know that I did not say that the microcredit policy introduced by the ANC was knowingly designed in advance to benefit a white elite. The ANC was seduced by the World Bank, USAID and others into believing microcredit would create a bottom-up momentum leading to jobs and incomes for the black community, which would make the job of retaining the capitalist system intact in SA much easier. But microcredit failed in its assigned task, as it has everywhere else around the world. The ANC were thus not alone in being fooled into believing in a policy that was really designed on ideological grounds.

The white elites, however, saw the opportunity to make billions of dollars lending small sums to poor Black individuals and they rushed into the market The owners and shareholders of Capitec Bank and African Bank made out like bandits, as did previous mainly white owners of Sambou Bank and ABSA, which pioneered microcredit in the first wave after 1994. And just because some Black individuals did well too does not mean that the narrow white financial community was not the primary beneficiary of the microcredit experiment: they were. You might wish to read this article on the issue:

https://www.researchgate.net/publication/281761380_South_Africa%27s_post-apartheid_microcredit_experiment_moving_from_state-enforced_to_market-enforced_exploitation

Reply
Glenn Moss
8/1/2016 02:18:11 am

Dear Milford,

Thanks so much for taking the trouble to respond to my comments on a narrow aspect of your Conversation/M&G article.

Thank you also for clearing up the issues associated with David Roodman’s review of your book. That’s very important because it was his comments which came up first when I entered your name into Google for some background.

I had not realised that, when you wrote of South African micro-lenders, you were referring to established mainstream financial institutions which were also involved in extending micro-credit and micro-loans (Capitec, African Bank, ABSA). I have since been advised that was made clear in the original, piece but edited out because of space constraints. That certainly clarifies the overall thrust of your comments about elites and massive enrichment in the micro-credit sector.

I have no disagreement with your analysis of the consequences of micro-credit, especially in its failure to have any positive impact on poverty, inequality and unemployment.

My argument rests on the attribution of ‘race’ as an explanatory category., and I am concerned that racial descriptors (white elites, black poverty) do not serve to explain the underlying structures and interests at play. Finance capital and financial institutions under capitalist relations are best analysed, defined and explained by their interests and ‘behaviour’, and the consequences of these. I am not persuaded that the ‘racial’ identity characteristics of those who benefit or lose from the operations of financial institutions are particularly helpful in analysing and understanding the consequences and interests of finance capital. I would argue rather that categories derived from the core socio-economic interests involved are more helpful in finding ways to critique and change what exists.

In my comment of your article, I hoped to signal the dangers in accepting too readily the increasingly common tendency to accept a populist use of ‘race’ not only as a mobilising tool, but also as a category of explanation.

Thanks again for your on-going engagements on these critical issues.

Glenn Moss

Reply



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