Citation

Bastiaensen J, Marchetti P, Mendoza R, Pérez F. Div. Change 2013; 44(4): 861-885.

Copyright

(Copyright © 2013, Institute of Social Studies, Publisher John Wiley and Sons)

DOI

10.1111/dech.12046

PMID

unavailable

Abstract

This article argues against 'microfinance narcissism' and calls for a re-politicization of the microfinance paradigm. The dominant verdict on microcredit has undergone a damning transformation, from 'magic bullet for poverty reduction' to 'cause of suicide'. Nowadays, both radical critics and mainstream voices deplore microcredit's negative impact on micro-entrepreneurs. They argue for a reorientation where credit is targeted at established small and medium-sized enterprises, particularly in rural areas. The crisis in microfinance worldwide, including burgeoning protests, are viewed as proof of the commercial derailment and/or misplaced faith in microfinance's positive social and economic impact on the poor. This article engages with this debate through a study of the Nicaraguan micro-finance crisis. It challenges existing analyses that pin the crisis on agricultural over-indebtedness, lack of due diligence, or Sandinista populist politics. Illustrating the dangers of neglecting the diverse nature of microfinance, it reveals the paradoxical outcomes of the crisis: a refocus on the urban at the expense of agricultural credit for small and medium enterprises and a consolidation of the power of national processing elites. Nicaragua's Non-Payment Movement is also shown to be both a product of elite manipulation and an expression of legitimate resistance to an industry that turns a blind eye to the manner in which markets and politics constrain clients' potential. © 2013 International Institute of Social Studies.

Language: en

Keywords

Nicaragua; governance approach; microfinance; debt crisis; financial market; financial system; microenterprise; poverty alleviation; small and medium-sized enterprise