Explaining microfinance's resilience: the case of microfinance in Australia

ABSTRACT

Microfinance has been unsuccessfully deployed as a poverty reduction strategy in the Global South. However, despite advocates acknowledging this shortcoming, the sector continues to grow. Moreover, over the past decade it has expanded its geographic scope, targeting poor communities in the Global North under the banner of financial inclusion. This article investigates the growth of the Australian sector. Analyzing the impacts of reforms to Australia's social security system alongside the political economy of the microfinance industry, it argues the debtfare state in Australia has provided fertile ground for microfinance's expansion. Documenting the advocacy strategies and tools to target vulnerable communities used by microfinance organizations and corporate partners, it charts how government support and subsidies have created a favourable regulatory environment, driving the sector's growth. This has benefitted these coalitions while displacing other forms of social security, despite the lack of robust evidence demonstrating microfinance's benefits for the poor.

KEYWORDS:

• Debtfare
• microfinance
• banking
• social security
• Australia

Acknowledgements

The authors are grateful to Jacob Broom for his research assistance.

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Kelly Gerard http://orcid.org/0000-0002-4725-6703

Melissa Johnston http://orcid.org/0000-0002-2400-7341

Notes

1 Insurance and savings are generally considered to be part of microfinance and financial inclusion, but these products are less widespread.

2 The Australian government's rhetoric on ‘mutual obligation’ promotes recipients’ obligations while side-lining others’ – notably those of government and businesses – as well as recipients’ existing mutuality in paying at minimum, consumption tax (Henman, 2002, p. 81).

3 The Northern Territory Emergency Response was a suite of reforms, including to social security and law enforcement, rolled out across indigenous communities in the Northern Territory by the Howard Coalition government in response to reports of child abuse and neglect. New Income Management was intended to address the Northern Territory Emergency Response legislation requiring the restriction of the Racial Discrimination Act and Northern Territory anti-discrimination legislation; nonetheless, the vast majority of those included were indigenous (Taylor et al., 2016, p. 15).

4 This mode of conditionality was then introduced outside of the Northern Territory with the cashless debit card, trialled in communities across the country from February 2016 to June 2017 and extended in all existing sites until 30 June 2019 (DSS 2018a).

5 This reflected Australian households’ increased ability to borrow, due to financial liberalization and lower nominal interest rates; increased demand, due to population growth; and constrained supply, due to a combination of zoning issues, geography and inadequate transport (see Lowe, 2017).

6 This was calculated using the Speckle online calculator https://www.speckle.com.au/

7 Calculated from Good Shepherd Microfinance's Annual Financial Reports, all available at http://goodshepherdmicrofinance.org.au/annual-reports/

8 The authors are not named on the report but a media release by GSM notes the former ANZ bank chief Saul Eslake supervised the modelling (GSM and FIAP, 2017).

9 Figures calculated from Many Rivers Microfinance's Financial Reports, available at http://www.manyrivers.org.au/about-us/annual-reports/

Additional information

Notes on contributors

Kelly Gerard

Kelly Gerard is a Senior Lecturer in the School of Social Sciences at the University of Western Australia. Her research focuses on the political economy of development policymaking in Southeast Asia. Kelly is the author of ASEAN's Engagement of Civil Society: Regulating Dissent (Palgrave 2014) and co-editor of the Palgrave series, Studies in the Political Economy of Public Policy (with Toby Carroll, Darryl Jarvis and Paul Cammack).

Melissa Johnston

Melissa Johnston is a Postdoctoral Fellow at Monash GPS. Her doctoral dissertation, ‘The Political Economy of Gender Intervention: Social Forces, Kinship, Violence, and Finance in Post-Conflict Timor-Leste’, accounts for the uneven outcomes of gender programming. Previously, Melissa has worked for the United Nations Industrial Development Organisation on Asia-Pacific development, and for Women Against Violence Europe on European Union programmes to protect women from severe intimate partner violence.