Studies in National and International Development

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National and International Development

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The Age of Microcredit: Destroying Local Economies from the Bottom-Up

Milford Bateman

Visiting Professor of Economics, Juraj Dobrila at Pula University, Croatia;
Distinguished Visiting Professor of Development Studies,
St. Mary's University, Halifax, Canada.

THURSDAY, OCTOBER 9th, 2014

1pm-2:30pm, Mackintosh-Corry Hall, Room D214

Although once universally lauded in international development community circles as a ‘magic bullet’, in recent years the microcredit model has been increasingly challenged. Today, in fact, the microcredit model has been exposed as one of the most calamitous financial sector interventions impressed upon developing countries. Rather than promoting poverty reduction, the microcredit model actually constitutes a ‘poverty trap’ of historic dimensions. Adherence to the microcredit model has manifestly added considerable impetus to de-industrialisation, informalisation, disconnectedness and primitivisation trends already underway in many developing countries, thus destroying the chance of any real ‘bottom-up’ development trajectory. Importantly, informal microenterprises and self-employment ventures – the typical clients of microcredit institutions - have absorbed scarce financial resources that would have been far better directed into formal small and medium enterprises (SMEs), which economic history convincingly shows are the principle drivers of sustainable and equitable development in poor communities. Needed progress towards greater trust, equality, solidarity, reciprocity, mutual support and social justice has also been undermined and blocked by the increasingly Wall Street-style greed-driven operations of those financial institutions providing microcredit to the poor. It is clear that microcredit should more accurately be viewed as the developing world’s very own sub-prime-style disaster which, like the original US version, has mainly served to suck up value from the poor in order to benefit a tiny financial elite working within and around the microcredit sector, whilst simultaneously destroying many of the most important functional pillars of the economy and society. Finally, to explain the rise and, most of all, the continuing popularity of the failed microcredit model in international development circles we have to look to the politics and ideology that nurtured the microcredit model, and specifically to the ascendance of the neoliberal project in the 1980s and its celebration of all forms of individual entrepreneurship and self-help.

Milford Bateman

About the Speaker: Milford Bateman is a freelance consultant on local economic development policy, since 2005 Visiting Professor of Economics at Juraj Dobrila University of Pula, Croatia, and currently a Distinguished Visiting Professor of Development Studies at St Mary’s University in Halifax, Canada. After obtaining his PhD at the University of Bradford, UK, in 1993 Dr. Bateman became a tenured Lecturer in East European Economics at the University of Wolverhampton, and also one of the most active University-based policy consultants to the international development community advising on many aspects of local economic development policy. In 2000 Dr. Bateman moved into the private sector to become a full-time consultant on local economic development policy, eventually heading up the Western Balkans economic development consulting practice for one of the major UK-based consulting companies. He subsequently headed up projects on local economic development policy and program design and evaluation right across Eastern Europe, and more recently, including as a freelance consultant, in the Middle East, China, South Africa and Latin America. Dr. Bateman has published widely on issues of local economic and social development through several edited books on entrepreneurship and SME development and a number of peer-reviewed journal articles and book chapters. He is the author of the modestly best-selling book ‘Why Doesn’t Microfinance Work? The Destructive Rise of Local Neoliberalism’ published by Zed Books in 2010. His latest work is a co-edited book with Dr. Kate Maclean entitled ‘Seduced and Betrayed: Exposing the Contemporary Microfinance Phenomenon’ , due out with SAR Press in early 2015