Reflection in a Distant Mirror: Why the West Has Misperceived the Grameen Bank's Vision of Microcredit

Abstract

This article critiques a very popular model for economic development and poverty reduction. Developed by the Grameen Bank in Bangladesh, the model uses microloans (or microcredit) to aid the poor in becoming self-employed. In the United States, microcredit is often perceived as a panacea, receiving ever greater funding and bipartisan support. However, partly because the information we have about the model is more myth than fact, the development community in the US has reached unsupportable and false conclusions about the model's ability to solve market failure, increase participation by the poor in functioning markets, and incorporate indigenous values. In reality, the model fails to eliminate the informational and other problems that contribute to market failure in poor communities, arguably leaving the poor with even fewer resources to sell their products or services. In addition, rather than teaching the poor the values necessary to participate in mainstream markets, the model encourages the poor to engage in informal behaviors that have the opposite effect. Finally, contrary to the Grameen Banks claims that it has captured an indigenousness that causes its program to stick with its target population, the more chilling reality is that those features of the Grameen Bank that are so attractive to the development community in the West are largely a reflection of Western values, which had previously been exported around the world. The indigenousness that the Western development community perceives is in fact a more dubious hybridity that fails to incorporate the true values of the target population. The implications of this hybridity ought to give us pause as we consider the pros and cons of the Grameen Bank model. This discovery should also require us to confront the extent to which the West's increasing market dominance redefines the struggle for cultural integrity and economic survival at the most local level.