Discussion about this post

User's avatar
Harry O'Brien's avatar

Great article as always Sam, thanks for this

Expand full comment
Milford Joseph Bateman's avatar

I found this an extremely interesting article. This is not least since, coincidentally, I am writing a short section on the Irish loan funds in the 2nd completely updated edition of my 2010 book “Why Didn’t Microfinance Work?’ due out early next year with Bloomsbury.

Let me make two observations related to what I wrote. I challenge the very common idea that the loan funds were the forerunners of the modern microfinance movement. First, you did not mention the radical politics of Swift and how he saw the loan funds as a way of helping the poor for sure, but also as a backdoor way of advancing his staunch anti-capitalist/anti-English/anti-Imperialist views. There are many reasons why the loan funds would promote such goals - promoting self-sufficiency meant not buying from the hated English; targeting support at good businesses and turning away poor prospects and directing them to other social programs, thus saving hapless individuals from their likely fate, showed the correct (non-capitalist) way to do business; validating the general concept of not-for-profit enterprise as opposed to capitalist for-profit enterprise; and so on. Since Swift’s ideological position and goals are the exact opposite of those individual capitalist goals (see Hayek, Friedman, etc) that gave life to the modern microfinance movement in Latin America in the 1960s under USAID tutelage, I find it really hard to agree with those that claim Swift’s loan funds are the first microfinance institutions. Apart from some obvious operational similarities, their respective goals were a million miles apart.

Second, Hollis and Sweetman’s work is very interesting, but also in a way that you did not refer to. They precisely pinpoint the fall of the loan funds to 1843, which is the year when the nascent financial elites likely bribed Irish government regulators to pass regulations that forced the loan funds to drop their social mission, cooperative format, commercialise and become for-profit financial businesses but in a way that they could not compete with the private commercial banks just getting started. The end of the loan funds was made inevitable. Many soon began to lose clients, some were taken over by greedy entrepreneurs and turned into their own money-making machines, and so on. My point here is that his destructive conversion episode is very similar indeed to what happened to begin to destroy the modern microfinance movement and effectively led to its fall from grace. This is to say that the microfinance industry was also forced, from the 1990s onwards, to commercialise and become a for-profit business and to drop all remnants of its original social mission. The result of this transition is now all around us: the largest microfinance institutions now rake in Wall Street-style profits from their reckless lending activities in the global south, while the evidence that microfinance is having a quite destructive impact on the global poor overall is now, in my opinion, beyond a doubt.

I’d value any comments/corrections!

Expand full comment
4 more comments...

No posts