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Microcredit and the Subsistence Crisis Contract

By way of concluding this lengthy discussion of microcredit, I will note that much of the evidence supports the view that small loans were often used to smooth consumption. This is frequently taken as a negative finding, because it suggests that they therefore played no role in poverty reduction. But as earlier chapters have shown, the early decades of Bangladesh were a time of great trauma and risk; it is probable and perhaps even likely that microcredit helped provide people with the buffer they needed to replenish their depleted human, social, and physical resources, before or while turning to the matter of material advancement. But while microcredit reduced the vulnerabilities of a population that was already depleted by its longue durie experience of impoverishment, and its more recent crises of subsistence and survival, it did so by tying people into wage labour to make the regular repayments, and exposing them to the downside of debt. In Bangladesh at present, microcredit remains all but omnipresent, thoroughly part of the social, economic, and indeed political landscape. But its recent growth has been upward, with the financial sustainability and economic growth agenda served by larger loans and more integration into formal systems. The poverty mission has also come to renewed attention, with schemes better tailored to the needs of the ultra-poor; this includes not debt but subsidized support, including for consumption. It is hoped and expected that the ultra-poor will 'graduate' into microfinance when they have moved sufficiently far out of poverty to make good use of small loans. Whatever the impacts of microfinance in other settings, in Bangladesh at least, it seems that the technology emerged at the right moment and served an important purpose—even if it was not that which the theory assumed.

While it contained a large subsidy element, credit probably helped a great deal in preventing people from sinking further: its main intervention was on vulnerability. As has been established in Chapters 2 to 5, the population in the 1970s and 1980s had seen their resources depleted by the onslaught of disasters, wars, and famines of the period. The evidence seems to support the view that what microcredit did was to protect a minimal level of consumption, to get as close to a reasonable level of social reproduction as was possible for people without assets in an under-developed labour-rich rural economy. Credit bought time in moments of crisis, space for some longer-term livelihood adaptation, countering the worst effects of bad short-term coping mechanisms. The micro-entrepreneur, the Cinderella figure in this story, turns out to be women engaging in a wider range of essentially domestic activities, some small investments, but chiefly expenditure-saving and consumption work. These were mainly subsistence activities. But it is the idea that a population this undernourished and weakened could have been expected to focus on more than the task of keeping going that is misplaced here. It is surely in this vital domain at the very core of social reproduction or care, in the consumption-smoothing of the economics language, that credit mattered most.

Evidently there are no magical market solutions to poverty. The poor cannot pay so much of the privatized costs of their basic social protection. Subsidy is essential: some redistribution of resources—and of power—remains essential to make any inroads on poverty.

Bangladeshis in the Global Economy

A key conclusion from this brief survey of developments in the microcredit, international labour migration, and garments sectors is that the empowerment they bring is the individual power of the cash-earning consumer, the strength of people with the capacity to pay because of what they earn. But individual empowerment has rarely, to date, aggregated to institutionalized forms of collective power. Garments workers continue to struggle for basic rights to organize; the absence of genuine industry-wide trades unions means that the many and frequent worker abuses push them to risk their lives and livelihoods through last-resort mobilization, often involving violence. Migrant workers have little to no protection or rights in the countries in which they work, in particular the Middle East, and the government is regularly criticized by civil society groups for its failure for protecting its workers' rights. And microfinance users remain clients and have little to no role in the governance of the institutions that so strongly shape their lives; of the vast literature on the impacts of microfinance in Bangladesh, few, if any, studies mention that poor rural women are governed by these organizations, and have no effective means of holding them to account. There are major downsides to this inventiveness, and courageous expansion: these new economic sectors have emerged without safety nets, informal or official, to protect these brave new entrants from the inevitable risks of economic activity. When markets dip, crash, or fail, those who have been stitching T-shirts, servicing the international rich, or borrowing from financial markets are exposed to the downturn. It is increasingly plain that a new social contract is needed to protect against these risks.

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