WC Archive

Richard Dawkins is also there; I blogged an BBC.com article about his presentation on "Meme Power." (I didn't blog it here because I knew there would be more coming from Alex).

I remain a sceptic of the success and importance of phones for rural communities. They're often coupled to microcredit, which in 95% of the cases yields unsuccessful results. (no matter the good intentions, as we all know now, microcredit does not work - the Year of Microcredit has opened our eyes).

As long as there isn't a series of services accessible by these phones, I don't see the point.

-the failure of both telemedicine and telefood prove that expert advice reaching rural communities, does not in any serious way impact health and food security (in some cases, it makes things worse)

-services like agricultural advice and meteorological news should be accessible by such phones, at very low cost. But that doesn't give farmers seeds, fertilizer or pesticides which to use that advice on.

The phones are far more relevant at the interface between cities and rural communities, where local traders can speed up their business.

But for the vast mass of rural people themselves, I must see the first report which mentions any successful application of mobiles.

Let's not forget that Grameen Phone is a company, a corporation. It has no social obligation, its primary motive and goal is "making profit", and it does not have to prove its real value to development as such. (The swelling bank account of the Grameen corporation is not an indication of successful development per se).

Secondly, 95% of microcredit institutions are unsuccessful and as yet, there's no proof of microcredit having a positive impact on the poor's lives. (Again, often the contrary is true).

So all in all, I think much more effort should be put in top down development (which, by the way, is making a strong comeback in international development circles - the 1990s are over).

States must establish seedbanks, fertilizer banks, pesticide banks, knowledge banks; they must train trainers who train locals; they must establish radio networks with agricultural advice; they must invest massively in infrastructure; they must invest in marketing outreach programs for rural communities; etc...
As long as these "top down" approaches are neglected (which is often the case), I don't see mobile phones helping rural development an inch forward.

I have recently been doing research in using mobile phones for financial transactions. Imagine if an SMS sent to the checkout person could pay for your groceries. It would solve a lot of problems in the developing world - and would be a tremendous leapfrog over both checks and credit cards - neither of which have any penetration - at least here in Malawi. If anybody has any experience please get in contact - for now I have found this:

http://www.celpay.com/zm/pages/b/04.php

I have recently been doing research in using mobile phones for financial transactions. Imagine if an SMS sent to the checkout person could pay for your groceries. It would solve a lot of problems in the developing world - and would be a tremendous leapfrog over both checks and credit cards - neither of which have any penetration - at least here in Malawi. If anybody has any experience please get in contact - for now I have found this:

http://www.celpay.com/zm/pages/b/04.php

Lorenzo, can you explain this statement?

"They're often coupled to microcredit, which in 95% of the cases yields unsuccessful results. (no matter the good intentions, as we all know now, microcredit does not work - the Year of Microcredit has opened our eyes)."

What are you talking about? I had thought that microcredit was extremely successful and is being replicated in numerous areas. The New Heroes series recently on PBS made a big deal out of the Grameen Bank and how it had changed so many lives in Bangladesh.

Well, there are quite a few reports which show that around 95% of microcredit enterprises fail to bring real income changes to those who are targetted. Many are not willing to look at the real figures.
Some remain critical and are beginning to think that the entire microcredit industry is a tool to make the poor dependent on a monetary logic that only benefits those who don't need more money (Citibanks and Monsantos, to name a few - as you know, many micro-credit schemes are coupled to all kinds of mega-schemes, like buying Monsanto seeds or mobile phones). It's a way to turn poor people into micro-Americans - forever endebted and eternally dependent on a logic that turns them into powerless consumers who're chained by mega-corporations, while giving them the illusion that they are benefitting. The numbers clearly indicate that in real terms, microcredit does not lead to higher incomes.

Then of course, there's the critique that microbanks themselves are not profitable (those very few exceptions that are successful, are big banks, who always couple loans to products that are responsible for making those who borrow poor in the first place! The Monsanto microcredit initiative is emblematic here.)

Finally, microcredit never reaches the poorest of the poor (that's a well known fact, not many dispute it). This in itself is an indication that microcredit remains an ordinary tool of inequality (the gap between the rich and the poor is growing, globally; but the gap between the microcredited poor "elite" and the really poor grows much faster!).

I really believe that top-down approaches to development are much more urgent and much more efficient than this kind of bottom up approaches.

To give just one example: there's absolutely no use in lending money to a poor farmer in Africa, as long as he can't market his produce because there are no roads to the city. The farmer may buy a Grameen phone, to call his family in the big city to tell them how desperate he is because he's now endebted and has just ruined his chances to make an extra profit.

I'll post some references to microcredit critiques here asap.

[WC mods, how strange, posts containing the word "f*nance" are automatically blocked?]

Lorenzo, please do post links to the critiques. I haven't seen them, but I fully admit that I'm not as immersed in the literature on microcredit and the Grameen project as others here.

As for blocking the F-word (the one that rhymes with "phinance"), we got a recent rash of spam on that topic. I'll see if I can make the spam filter a bit mor nuanced.

Just to let you know that Opportunity International Bank of Malawi is a profitable fully sustainable microfinanze bank. They have 30,000 savings clients after just two years of being open. Having a bank account is utterly transformational - the poor start dreaming about what is possbile in the future - something impossible if any money earned needs to be spent right away to battle inflation/theft/etc. And they aren't dreaming the American consumer dream - just one of life and hope for their families and their future. But they also do loans - and they do loan to the poorest working people in Lilongwe - and trust me these clients are very poor by anybody's standards. There is a link about OIBM on my blog:
http://www.vdomck.org/blog/?p=38

Lorenzo said:

"The numbers clearly indicate that in real terms, microcredit does not lead to higher incomes."

and then:

"microcredit remains an ordinary tool of inequality (the gap between the rich and the poor is growing, globally; but the gap between the microcredited poor "elite" and the really poor grows much faster!). "

How can the gap between the microcredited poor "elite" and the really poor grow if microcredit does not lead to higher incomes?

The whole "gap between rich and poor" is a red herring anyway because the only way you could not have such a growing gap is if the whole world was moving toward the kind of absolute poverty of the worst run countries. How would that be a good thing?

Lorenzo also says:
"Finally, microcredit never reaches the poorest of the poor (that's a well known fact, not many dispute it)"

Not many dispute it because not many have heard this claim I have seen many popular articles by people who have no connection to Monsanto discussing the pros and cons of micro lending and I have not heard this claim.

As for making profit by lending credit, try walking down your home town street. Look at all the restaurants and small businesses owned by immigrants and the Ma and Pa operations. Do you think they all started up with old money or corporate grants from gifts from evil corporations. They exist because some bank thought that if they lent the entrepreneur some money for capital investment and charged some reasonable interest they could get some profit back. The evil pursuit of profit built your community not government hand-outs. Why should the poor be prohibited from getting similar access to investment for capital?

I have not looked at the data but in the popular accounts the claim for microcredit that stands out for me is the low default rate. If the default rate is low, the investment is not much of a risk.

Lorenzo has to make up his mind whether microcredit schemes do nothing to increase income or are actually increasing income so much that the gap between "the microcredited poor 'elite' and the really poor" has become a painful reality.

:: The political economy of microcredit: how it pushes a very particular kind of neoliberal logic, which disempowers especially women (who are often targetted by these schemes). Points out how the "micro" is entirely embedded in the "mega" of big corporations, governments, and global institutions (let's not forget that the World Bank and the IMF are vehement supporters of market oriented development strategies,- microcredit being the jewel in the crown today):

http://unpan1.un.org/intradoc/groups/public/documents/APCITY/UNPAN011685.pdf

(Ironically, this emblematic text takes Nepal as a case study, where Marxists happen to offer a different approach to development...)

:: Goetz, A.M. and Gupta, R. S.‘Who takes credit? Gender, power, and control over loan use in rural credit programs in Bangladesh’, World
Development 24: 45–63.

:: Why microcredit increases inequality: www.devstud.org.uk/publications/papers/conf01/conf01copestake.doc

:: Why microcredit destroys social capital and wealth in people, and why it is basically an Anglosaxon idea, promoting superficial Anglosaxon notions of poverty, society, power, wellbeing and wealth:
http://www.elon.edu/ipe/Zephyr_Edited.pdf

:: How microcredit is part of the global push towards more privatization; you can privatize everything, like wars (Iraq, with its 20 000+ US paid mercenaries), social services, drinking water, health care, social security or public transport; but does it work? It clearly does not, not everywhere, not all the time, and most often not. So what happens when you privatize "development", which is what you're doing with microcredit?
http://eprint.uq.edu.au/archive/00000397/01/brigg01.pdf

I must say many of these articles and reports are rather old (a few years), but I remember that during my studies, we discussed microcredit a lot and there was a lot of critique.

No doubt there may be positive aspects related to it too. And things will very much depend on local contexts.

But the basic idea that a neoliberal market approach to development is value-free or effective is far from clear.

Rather than viewing it from afar, why not view microcredit close in? That is, go to the people who have received these small loans, the women who have purchased sewing machines or grain mills, the villagers who have sponsored other villagers, and ask them, directly, what difference it has made to their lives?

David is right to take a closer look at the people being affected. I'll share one story (I have many) from Rwanda (I'm currently managing the GFUSA Village Phone program here in Kigali). One of our Village Phone operators runs a restaurant/bar in the Ruhengeri region of Rwanda and recently took out a loan from her microphinance institution to set up a Village Phone business as an adjunct.

She's making plenty of money to make her loan payment, and is using the rest of the profits from the Village Phone to build a new house for herself and her children (she is a widow, like many of our Village Phone operators here in Rwanda). She's also found that the phone business helps the restaurant business, and vice versa, as people who come in for one end up spending money at the other.

One example does not, clearly, make a study but anecdotally, on an individual basis, the vast majority of operators that I work with are both *really* happy with the phone and finding that it is improving their lives and the lives of the people in their village. Another guy I visited in Ruhengeri had almost the entire village around him; their pride in him, his business, and the fact that they now have access to a phone (to call a doctor, relatives, markets, whatever) was palpable.

I'm not as steeped in the microphinance side of things as I would like to be (and will be at some point in the near future) so I'll stick to the utility of phones in deep rural areas.

Lorenzo makes the claim (I paraphrase) that a poor farmer can't do anything with a phone except call his family to tell them how much his life now sucks. I disagree. We're finding that farmers use the Village Phones (they're usually clients, not operators) to call nearby markets to check crop prices... they're then able to command a stronger price from the trucks who drive through purchasing the produce. They call into town to find out what goods are in demand so that they can plan their crops and harvests more effectively. They call for a truck to come and get the harvest, rather than waiting and hoping it (and their profits) don't rot.

Farmers don't necessarily make the best Village Phone operators, although in some cases farmers who also sell (for example) seed potatoes can supplement an existing business with a Village Phone.

Again, this is anecdotal, but what I see here every day in the field is that the Village Phone has multiple positive economic benefits in the areas where they are purchased and deployed. The operator makes a profit on the phone (and after the microcredit loan is paid off, operation is pure profit unless they break something and need to replace it). The surrounding community can use the phone to become more engaged in the regional economy (see farmer example above) and yes, they can call their relatives... I don't think that this is a bad thing. They can call into radio shows and make their voices heard alongside all of the urban Rwandans who have typically dominated the airwaves on the talk shows. They can call a doctor when their child is sick...

Lorenzo does hit on some of these, but he seems to think that services need to constitute some sort of formalized program. The reality is that these services, on an informal basis, are available today; what's missing is the communications capability, which is what Village Phone provides. To be sure, there's a lot of room for growth; more services, more aggregation and dissemination of data. And to be sure, there's room for work in lots of other fields as well, from agriculture to infrastructure to health to human rights.

However, from my perspective here, and from what our Village Phone operators tell me when I visit them, there is no doubt in my mind that Village Phone and our associated microphinance partners are having a serious, positive impact on the lives of some of the poorest people on the planet.

(Note: microphinance a newly invented word due to the WC spam filter)

Rather than viewing it from afar, why not view microcredit close in? That is, go to the people who have received these small loans, the women who have purchased sewing machines or grain mills, the villagers who have sponsored other villagers, and ask them, directly, what difference it has made to their lives?

Sure, that's exactly what many of those studies do. They go to the people, ask them what they think has changed, then check these subjective experiences against other criteria and concepts. The results are often negative.

But subjective perceptions are only part of the story. You also have to look at the political economy of things like microcredit. Subjectivism is often a sneaky and intellectually dishonest way of looking at things.

As you know, in the 19th century, the Big Fat Capitalists cruised European cities to visit the Little Thin Proletarians to give them Big Fat Saucages when the elections were coming up, or when manifestations had to be put down. If you asked this "proles" whether they like the saucages, I'm sure they would say yes. But then they heard of Karl Marx, who told them another story. Not one about saucages. And their perceptions changed...

"there is no doubt in my mind that Village Phone and our associated microphinance partners are having a serious, positive impact on the lives of some of the poorest people on the planet."

Tsk, tsk! The poor bastards, laboring under a state of False Conciousness that makes them think they're better off.

Do the right thing and take those phones back, George.

What is this, kick your allies in the butt day or something? I know it's a hundred degrees outside (at least where I am), but that's no excuse.

Stop with the pointed comments, please.

And there comes the rational democratic wiseguy, trying to defuse the dialectics of the debate! Bourgois!

(Comment removed.)