Forget Occupy Wall St and London. The microfinance sector - small loans and savings - that is supposed to help people living in poverty is actually making life worse for them.
It's no surprise to us that banks and financial institutions are out to help themselves but we were shocked to find that it's not just mainstream finance that has lost its way. Microfinance institutions which exist to help poor people save money and get loans have adopted some of the same bad practices. The Occupy movement should be trying to seize the streets in Delhi and Dhaka, Hyderabad and Chittagong as well, to protest at what microfinance institutions are doing to their customers.
Our research on these microfinance institutes show that originally they had a good social mission. Over time, however their closer links with mainstream finance have put them on the wrong path.
These microfinanec institutes have increasingly begun to compete with each other and get more funds from global financial markets. So financial performance has changed the way their staff behave and this isn't helping the people living in poverty.
Our research found that the staff of many microfinance institutions (and all the large ones in Bangladesh) have personal financial performance targets to achieve: the impacts of loans on their customers becomes secondary issue. We found bullying and violence took place to ensure that loans are maintained/
Things got so bad that in Southern India in 2009-2010, borrowers took their own lives. So why does the West keep saying microfinance is magic? Because it's great PR for big banks to tell the story of helping people in poverty.
The leaders of microfinance in South Asia have a choice – will they follow the lead of mainstream finance and drift into amorality and immorality. Or will they make a serious effort to chart a different path – in which social performance is a genuine pursuit and not merely something managed as a public relations exercise?
