Co-optation, Cooperation or Competition? Microfinance and the new left in Bolivia, Ecuador and Nicaragua

Abstract

The past decade has been marked by the resurgence of leftist political movements across Latin America. The rise of the ‘new left’ masks the ambivalent relationships these movements have with broader society, and their struggle to find an alternative to the prevailing development model. Filling the void left by failed public banks, the microfinance sector has grown significantly across the continent in an increasingly commercial form. Analysis of Nicaragua, Ecuador and Bolivia reveals that their new governments share a common distrust of microfinance. Yet, in the absence of viable alternatives for financial service provision, governments and microfinance stakeholders are forced to coexist. The environment in which they do so varies greatly, depending on local political and institutional factors. Some common trends can nevertheless be discerned. Paradoxically, the sector seems to be polarised into two competing approaches which reinforce the most commercially oriented institutions on the one hand, and the most subsidised on the other, gradually eliminating the economically viable microfinance institutions which have tried to strike a balance between social objectives and the market.

Notes

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4 See, in particular, the international seminar organised by a Latin American network of rural microfinance institutions, ‘Políticas Públicas y Marcos Regulatorios para las Microfinanzas’, Seminar forolac–redcamif, Managua, 17–18 March 2009.

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11 J Beasley-Murray, MA Cameron & E Hershberg, ‘Latin America's left turn: an introduction’, Third World Quarterly, 30(2), 2009, pp 319–330.

12 Ibid, p 328.

13 C Trivelli & H Venero, Banca de desarrollo para el agro: experiencias en curso en América Latina, Lima: Instituto de Estudios Peruanos, 2007.

14 MF Long (ed), World Development Report, New York: World Bank/Oxford University Press, 1989.

15 DW Adams, DH Graham & JD Von Pischke, Undermining Rural Development with Cheap Credit, Boulder, CO: Westview Press, 1984.

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17 H Weber, ‘The imposition of a global development architecture: the example of microcredit’, Review of International Studies, 28, 2002, pp 537–555.

18 J Morduch, ‘The microfinance promise’, Journal of Economic Literature, 37(4), 1999, pp 1569–1614.

19 B Helms, Access for All—Building Inclusive Financial Systems, Washington, DC: cgap, 2006.

20 R Martinez Ramirez, 2009 Latin America and Caribbean Microfinance Analysis and Benchmarking Report, Washington, DC: The mix, 2010.

21 R Rosenberg, A Gonzalez & S Narain, The New Moneylenders: Are the Poor Being Exploited by High Microcredit Interest Rates?, Occasional Paper, Washington, DC: cgap, 2009.

22 Yield average 33.8 per cent for the entire continent. Martinez Ramirez, 2009 Latin America and Caribbean Microfinance Analysis and Benchmarking Report, p 18.

23 I Guérin, C Lapenu & F Doligez, ‘La microfinance est-elle socialement responsable? Introduction’, Revue Tiers Monde, 197, 2009, pp 5–16.

24 R Marconi & P Mosley, ‘Bolivia during the global crisis 1998–2004: towards a macroeconomics of microfinance’, Journal of International Development, 18(2), 2006, pp 237–261.

25 S Morvant-Roux, ‘Accès au microcrédit et continuité des dynamiques d'endettement au Mexique: combiner anthropologie et économétrie’, Revue Tiers Monde, 197, 2009, pp 109–130.

26 Bédécarrats & Marconi, ‘L'influence de la régulation sur la capacité de la microfinance à contribuer au développement’, p 76.

27 Marconi & Mosley, ‘Bolivia during the global crisis 1998–2004’.

28 H Do Alto & P Stefanoni, Nous serons des millions: Evo Morales et la gauche au pouvoir en Bolivie, Paris: Raisons d'Agir, 2008.

29 R Vogel, A Gomez & G Tabares, Regulation and Supervision of Microfinance Activities: The Bolivian Case Study, Washington, DC: usaid/mbp, 2000; and Bédécarrats & Marconi, ‘L'influence de la régulation sur la capacité de la microfinance à contribuer au développement’.

30 Data compiled from the Superintendencia de Bancos, at http://www.superintendencia.Gob.ni/index.php?Tempcont=&id=10&Seccion=1, accessed 12 May 2010; and Asomif, www.asomif.org/index.php?option=com_content&view=article&id=28&Itemid=5, accessed 12 May 2010.

31 J Bastiaensen & P Marchetti, ‘A critical review of cgap–iadb policies inspired by the Fondo de Desarrollo Local, Nicaragua’, Enterprise Development and Microfinance, 18(2–3), 2007, pp 143–157.

32 Thus, multilateral and bilateral agencies in 2008 accounted for 60 per cent and 29 per cent of funding sources for Procredit, the largest microfinance bank in the country, operating mainly in urban areas, compared to 13 per cent and 14 per cent for fdl, the largest, unregulated and mainly rural microfinance ngo in the country. Conversely, social and commercial investment funds accounted for 11 per cent of Procredit's funding, but 50 per cent of fdl's. Statistics compiled by P Acabar, cited in D Roodman's Microfinance Blog, 2010, at http://blogs.cgdev.org/open_book/2010/03/who-inflated-the-bubbles.php#comment-4365, accessed 25 April 2010.

33 M Flaming, E Duflos, B Helms, H Siedek, R Summerlin & S Duarte, Country-level Effectiveness and Accountability Review, Washington, DC: cgap Aid Effectiveness Initiative, 2005.

34 JL Rocha Gómez, ‘Crisis institucional en Nicaragua: entre un estado privatizado y un estado monarquizado’, Nueva Sociedad, July–August 2010, pp 4–13, at http://www.nuso.org/upload/articulos/3702_1.pdf.

35 Translation of Daniel Ortega's speech printed in El Nuevo Diario, 14 July 2008.

36 In the field many debtors and mfis are now tending to negotiate the restructuring of debt bilaterally and pragmatically in exchange for the (legally, but not really) confiscated properties, aiming to turn this page as soon as possible.

37 Trivelli & Venero, Banca de desarrollo para el agro, pp 88–102.

38 S Basabe-Serano, ‘Ecuador: reforma constitucional, nuevos actores políticos y viejas prácticas partidistas’, Revista de ciencia política, 29(2), 2009, pp 381–406.

39 The concept of social economy refers here to organisations engaged in economic activities defined by the status of collective ownership, such as co-operatives, mutual societies, associations or unions. See J-L Laville (ed), L'économie solidaire: une perspective internationale, Paris: Hachette/Pluriel, 2007, pp 31–38.

40 M Zeller, C Lapenu & M Greeley, Measuring Social Performance of Micro-finance Institutions: A Proposal, Washington, DC: Argidius Foundation–cgap, 2003.

41 Rhyne, ‘Microfinance among the populists’.

42 S Strange, The Retreat of the State, Cambridge: Cambridge University Press, 1996.

43 A Rodriguez Carmona, El Proyectorado: Bolivia tras 20 años de ayuda externa, La Paz: Intermón Oxfam, 2008.

44 See G Toro, La pobreza: a gran negocio-análisis crítico sobre Oeneges, Microfinancieras y Banca, La Paz: Oficina contra la usura Bancaria–Mujeres creando, 2009.

45 N Bobbio, Derecha e izquierda: razones y significados de una distinción política, Madrid: Taurus, 1995.

46 M-N Chamoux, D Dehouve, C Gouy-Gilbert & M Pépin-Lehalleur, Prêter et emprunter: pratiques de crédit au Mexique, Paris: Éditions de la Maison des Sciences de l'Homme.

47 In Nicaragua, for example, fdl was established by Jesuits and Prestanic by the Council of Protestant Churches. Compartamos, the largest Mexican mfi, was founded and is still largely controlled by the traditionalist Legionaries of Christ. (In Bolivia and Ecuador faith-based mfis are less important.) Microfinance has even been mentioned, albeit in very vague terms, in a Papal Encyclical. Benedict XVI, Encyclical Letter Caritas in Veritae of the Supreme Pontiff on integral human development in charity and truth, Vatican, 29 June 2009, at http://www.vatican.va/holy_father/benedict_xvi/encyclicals/documents/hf_ben-xvi_enc_20090629_caritas-in-veritate_en.html. It should be noted, however, that, in line with their ideological and programmatic differences, these faith-based organisations do not necessarily share similar political positions with respect to the role of microfinance.

48 D Lehmann, Democracy and Development in Latin America: Economics, Politics and Religion in the Post-war Period, Philadelphia, PA: Temple University Press, 1990.

49 M González de Kauffman, ‘El pago de servicios públicos: garantía para la devolución de microcréditos del programa “Ciudadanía Plena” en Maracaibo, Venezuela’, Revista de Ciencias Sociales, 15(4), 2009, pp 363–707; and M Penfold-Becerra, ‘Clientelism and social funds: evidence from Chávez's Misiones’, Latin American Politics and Society, 49, 2007, pp 63–84.

50 Banco do Nordeste in Brazil, indap in Chile and Banrural in Guatemala. For Brazil, see Abramovay et al, ‘Social movements beyond the iron cage’. For the two others see Trivelli & Venero, Banca de desarrollo para el agro.

51 R Dahl, Polyarchy: Participation and Opposition, New Haven, CT: Yale University Press, 1975.

52 Asomif (www.asomif.org), founded in 1992 in Nicaragua, Red Financiera Rural (www.rfr.org.ec), founded in 2000 in Ecuador, and Finrural (www.finrural-bo.org) and Asofin (www.asofinbolivia.com), created in 1993 and 1999, respectively, in Bolivia.

53 F Ramírez Gallegos & A Minteguiaga, ‘El nuevo tiempo del estado: la política posneoliberal del correísmo’, osal, 22, September 2008, pp 87–103, at http://bibliotecavirtual.clacso.org.ar/ar/libros/osal/osal22/D22RamirezGMinteguiaga.pdf.