Fiscal Policies

Microfinance institutions were initiated to extend credit facilities to the poor and vulnerable in the society as a form of empowerment. In most countries, microfinance institutions were established as a solution to the crisis of credibility in the development circles. The policies of the microfinance aimed at helping the poor thus the proponents of their establishment considered them effective in the development and economic empowerment. The institutions operated with the policies that lending small amounts of money to the poor and vulnerable in the society is an effective method of alienating poverty.

In the article, the author’s mention of the risks associated with microfinance is not a case of personal bias as there is proof of the deviation from its initial goals of poverty eradication. Although there is a case of promotion of social ties and democracy,many countries have experienced cases of exploitation (Kleinman, 2014). Most people have complained about the exploitative nature of microfinance institutions as they worsen their living conditions. For instance, there was the rise of themicrofinance institution after the Haiti earthquake and many people turned to them as a part of the reconstruction (Fouron, 2012). However, the results werean increase in debt crisis,depression, and some cases of suicide among the defaulters.

The exorbitant interest rates of these institutions have left many poor people as victims of the schemes to an extent of their property being confiscated.It is clear that the microfinance institutions deviated from their initial goals of alienating poverty by empowerment and turned to be financial investments (Kleinman, 2014). The practice of financialization and focusing on the financial services made the institutions incorporate many people in the capital market and remain dependent on them. It is a risk as the initial goals were poverty alienation.The increase in the number of loan defaulters and microfinance drop-outs is a clear indication that the institutions provided a risk rather than a solution to poverty.

In my opinion, I believe the poor especially the women are most vulnerable to be harmed by the microfinance. Women turn to the microfinance institutions for empowerment loans and considering the exorbitant lending rates; most become defaulters. Besides, women form small groups and turn to microfinance for credit solutions making them susceptible to the harm.

References

Fouron, G. (2012). Poverty in Haiti: Essays on Underdevelopment and Post Disaster Prospects. Journal Of Development Studies, 48(4), 581-582. doi:10.1080/00220388.2011.595946

Kleinman, Yaniv (2014) “When Poverty Becomes Profitable: A Critical Discourse Analysis of Microfinancial Development in Haiti,” Class, Race and Corporate Power: Vol. 2: Iss. 1.
Retrieved from http://digitalcommons.fiu.edu/classracecorporatepower/vol2/iss1/2