Charity and Change: Some Reflections on Micro Credit

Elizabeth Bowman
Robert Stone
Tuesday, November 1, 2005

Many of our fellow San Miguelenses in both the foreign and national communities work hard in organizations to improve the lot of less privileged Mexicans. We also know that one billion of the 6 billion humans live in the direst poverty, which is often today defined as less than $1 a day income. To us in the money economy, this shocking fact may impel us to ask: what can be done, if anything? In the 1960’s we used to say: change not charity. We would like to argue that change and charity belong together.

To attempt to change society is to address persisting structures of class, race and gender domination that frustrate even great nations’ claims to serve humanity. To practice charity is to refuse to overlook the suffering of neighbors and to try to alleviate it one person at a time.

So what is wrong with individual charity aimed at individuals? If everyone did it, wouldn’t the world be changed? It seems so to many. But to multiply such acts, even to infinity, is also to multiply the basic economic relation that underlies those acts, namely a system that arbitrarily confers on some more than they need so that if they choose they can help those with less. To change the world is to first change that relationship so that no one’s needs go wanting in order to make a surplus for others.

As Dr. Martin Luther King, Jr. remarked: “True compassion is more than throwing a coin to a beggar. It demands of our humanity that if we live in a society that produces beggars, we are morally commanded to restructure that society.”

Take the micro-credit movement as an attack on the worst poverty. Following the lead of the Grameen Bank started in Bangladesh in the 1970’s, this movement has spread successfully to the point, according to a recent PBS special, that it appears as one element in any serious plan to eliminate world poverty. The movement operates on the principle that even small amounts of credit, extended to reliable individuals within small lending circles — mostly of women — can foster a profitable entrepreneurship that alleviates suffering by the poorest while repayments become available for new borrowers.

Isn’t this a model combination of change and charity?

We see a Kenyan fisherwoman, backed by a modest loan from Kenya ’s Yehu Bank, starting a business buying and marketing fish, hiring her husband and daughter, repaying with interest from her increased income. A woman markets purses she has made from fruit containers; another sells shopping bags made from cement bags. Their lives are transformed, as are their families. But is the village as such, the local community of which they are a part, also changed? Grameen means village, but the PBS special leaves this penumbra in soft focus.

A San Miguel friend who saw the PBS special asked if folks at the Center for Global Justice were willing to embrace the micro-credit strategy. We can only speak for ourselves and our answer is yes and no. The reliance for generating savings and for payback, not on individuals but on groups of 5 women, amidst circles of 50 is key to Grameen success: if one of the 5 cannot make a payment one week the other 4 take up the slack, resulting in astonishing 95% payback rates. But as for those who receive the loans, why is it that we see only individuals, not groups? Do such loans strengthen or weaken true wealth?

The point may seem minor but it is crucial: if you lend to individuals you reproduce the wage system of the formal, money economy. Someone is boss and someone else gets not only his orders but his living from the boss. And you need someplace — typically a city — in which to spend the wage and earn more. But if you lend to groups — in particular, to worker cooperatives — you move into new egalitarian relations of production. Cooperative production not only marries change and charity it is a source of true wealth.

On the dollar-a-day definition of poverty wealth is having money. But this presumes the poorest live in the money economy where needs are met by buying commodities. Thus a PBS interviewee says micro-credit aims to get the poorest individuals on “the lowest rung of the ladder to real wealth.” But is that where true wealth lies? The vast majority of humans live by subsistence agriculture at the village level, that is, with a large percent of unpaid collective labor producing not for sale but for direct, shared consumption. At this level even cash often comes from common property. In a World Bank sample of Indian villages typical of the third world 14 to 23 percent of all income came from use of common property resources, rising to 84 to 100 percent of income of the poorest. If a person on $1 a day were given a choice between $2 or even $4 or assurance of mutual support, what would she choose? Cash is needed for eyeglasses and gas but not so much for food, water or shelter, not to live. To live on cash one would have to leave the village, which is not wanted.

This point was brought home to us on a recent visit to agricultural cooperatives in a small town in Hidalgo . The main organizer explained that one co-op needed cash to buy a heater to keep the mushroom crop at a stable temperature. Another needed cash to buy irrigation hoses. But to live, they didn’t need money. Families did not need to send men north for cash, thanks to the cooperatives. There is indeed self-sufficiency here but it is at the level of the community not the individual. Loans may be needed to buy a tractor but then everyone can use it on a rotating basis. Micro-lending could play a crucial role here but in strengthening, not weakening, the community bonds where true wealth lies.