AN EXERCISE IN WORLDMAKING 2009 - ISS

9 Tailoring Credit Programs along the Logic of the Poor 97
logic of the former and recommend realistic poverty alleviation strategies
to increase the security of the very poor.
This paper attempts to contribute to the discourse by making the case
that understanding the logic of the poor is critical to their inclusion in
microfinance programs. Various microfinance solutions tailored for the
very poor, and their accompanying trade-offs, are presented through innovations
found in the literature. The paper concludes by highlighting
the need to put development back into microfinance, to tailor it as a
poverty alleviation instrument more than a profit-making enterprise.
Microfinance programs as a tool for urban poverty alleviation are perceived
as more than technical activities geared towards product-related
‘hard issues’ (technological, financial, physical and material, in Botes and
van Rensburg, 2000: 46-47). Such interventions are considered political
activities that view process-related ‘soft issues’ as an endogenous aspect
of the developmental process. ‘Soft issues’ refer to community involvement,
decision-making procedures, organizational development for capacity
building, and related processes.
Figure 1 is an analytical framework illustrating the concepts and arguments
in this paper.
THE POTENCY OF MICROFINANCE
The potency of microfinance has been much debated: as a single intervention,
it can be sold to any government and regime as it is widely considered
a cost-neutral way to reduce poverty. Yet this presumed costneutrality
is criticized, particularly with regard to credit programs subsidized
by government to benefit the poor. If the poorest mostly cannot
benefit from microcredit, Eversole (2000) argues, then it is the less poor
who do.
Mosley and Hulme (1998: 783-784) observe that by lending to the uncollateralized
poor, financial institutions have attained higher rates of
loan recovery than commercial banks, and that apparently, a ‘reliable organizational
technology for lending to the poor of developing countries
now exists’. However, they argue that the assumption that this technology
reduces poverty has rarely been tested, apart from studies by the
Grameen Bank. To address the gap, a study assessed the impact of 13
MFIs in seven developing countries (Bangladesh, Bolivia, India, Indonesia,
Kenya, Malawi and Sri Lanka). The findings indicated that the poor
preferred consumption loans, economic shocks made them more vulner-