Financial inclusion is commonly presented as being of key instrumental value in delivering the Sustainable Development Goals. But it is not simply an ethically neutral tool to provide entrepreneurial capital, smooth consumption or provide an alternative delivery mechanism for public goods. Rather, it represents a particular macroeconomic view on how development can be achieved; a particular political view that the poor’s route to achieving access to essential public goods should be a financialised one; and a philosophical view that assumes that the offer of credit to the poor should place respect for their autonomous choice ahead of a duty of care owed them.
“Card Crusaders, Cash Infidels and the Holy Grails of Digital Financial Inclusion”, Dr Phil Mader, Research Fellow, IDS Brighton
This paper analyses the turn toward financial inclusion in general, and digital money and the end of cash in particular, in development policy. It examines the profit-oriented logics at work and raises critical questions about the moral crusade being waged over digitalising poor people’s money. It begins with a discussion of why financial inclusion has displaced microfinance on global development agendas, and has introduced new practices and players to the space of poverty finance. It shows how financial inclusion brings a modified theory of change, with financial intermediation rather than income generation now being seen as crucial to poverty alleviation, and explains the particular emphasis on promoting cashless payment systems in the name of inclusion. As becomes evident, powerful actor coalitions (card crusaders) seek the end of cash and the full digitalisation of poor people’s money in pursuit of three holy grails: to capitalise on everyday transaction costs, to seek and analyse big data generated by the poor, and to exert greater governmental power over poor people’s money. This draws into doubt the prospect of empowerment through financial inclusion.
“The rise of Cambodia’s microcredit sector: an unfolding calamity”, Professor Milford Bateman, Visiting Professor, Juraq Dobrila University of Pula
A relatively late starter in accepting the microcredit model, Cambodia has since 2010 seen a spectacular increase in the volume of microcredit and it now ranks as one of the world’s most microcredit penetrated countries (Rozas, 2015). As much as 45 per cent of its total financial resources is intermediated as microcredit (Sinha, 2013). However, as elsewhere (Bateman, 2010), the much-anticipated gains for the poor and for the county’s overall development ambitions have yet to be realized and, in fact, this paper argues, a major calamity is approaching. While some new microenterprises have emerged to create employment and incomes as per the general model, at least four very serious and inter-related drawbacks swamp these minor benefits (see also Bateman, 2010). First, the financial sector is now thoroughly responsive to the needs of petty informal microenterprises, self-employment ventures and consumer lending, which is a far more profitable business to be in than lending to formal SMEs. Cambodia’s financial sector thus provides almost no support for productivity-raising enterprise development projects (on the importance of this, see Bateman and Chang, 2012), which is why in recent years it has fallen behind all of its neighbouring countries – notably fast-growing Vietnam – that have taken concrete steps to carefully divert its financial resources into the most important technology-based productivity-raising uses. Cambodia’s microcredit sector is thus helping trap the country in what Rodrik (2015) has termed ‘premature de-industrialization’. Second, massive over-indebtedness of Cambodia’s poor is now the norm (Simanowitz and Knotts, 2015). Household assets and family savings are now routinely forfeited in the regular event of default, as well as providing impetus to forced migration to neighbouring Thailand (Bylander, 2013). Third, it is possible to realize large profits in Cambodia’s microcredit sector. This, of course, is why it is now increasingly being targeted by international banks, hedge funds, investment groups and by so-called Microfinance Investment Vehicles (Sinha, 2013). As Mader (2015) notes in general, however, this has resulted in a major outflow of scarce capital from the poorest parts of Cambodia into the hands of a narrow global financial elite. Fourth, the land-grabbing that has been taking place in Cambodia for some years is materially aided by parts of the microcredit movement. Land rights campaigning organisations increasingly report that microcredit institutions encourage the poor to extinguish their mounting debts (and also, in some cases, to get into serious and unrepayable debt in the first place) by handing over their land certificate. This is then passed on – at a significant profit – to developers wanting to build tourist facilities, high-end apartments, business estates, commercial plantations, and so on. In some parts of Cambodia, for example, the major landholder is ACLEDA, by far Cambodia’s largest microcredit institution, which increasingly takes land certificates to ‘resolve’ the growing number of defaults (Dell’Asin, 2011). As the experience from many developing countries shows, a gradual loss of land is one of the principal causes of the poor plunging into irretrievable poverty. Combined these four ‘anti-developmental’ trends have greatly undermined Cambodia’s potential to reduce poverty, inequality and deprivation.
“Constructing the digital farmer: smallholder development in the fintech era”, Dr Sally Brooks, Lecturer, York University
This paper examines the growing importance of digital-based financial inclusion (FI) as an international development approach driven by a globalised ‘fintech-philanthropy-development complex (FPD)’ of state institutions, development organisations, ‘philanthropic’ investors and a rapidly evolving, but under-regulated ‘fintech’ sector (Gabor and Brooks 2016). It focuses on the integration of FI into programmes that ‘bundle’ informational and financial services, such as crop and climate information, digital payment services and weather index insurance, and make these available to would be ‘digital [smallholder] farmers’ in sub-Saharan African countries via their mobile phones. Such programmes build on a now well established trend in smallholder development programming of constructing the smallholder farmer as consumer of technologies – in marked contrast the knowledgeable agent of the ‘farmer first’ era (cf. Ashby 2009) – and link financial providers, multinational seed companies and a host of other actors within multi-stakeholder ‘platforms’. These initiatives go a step further in the ‘art of behaviour change’, however, by seizing the potential of mobile technologies to shape financial subjectivities through the integration of behavioural nudges in algorithm design, and capture ‘digital footprints’ for future commercial use. This paper explores some of the socio-political, ethical and practical issues raised by this particular convergence of information and crop technologies, microfinance and the ‘behavioural turn’ in rural development.
Dr Lesley Sherratt, Visiting Lecturer, King’s College, London