Upstream - Microlending and the Financialization of Poverty with Sohini Kar

Episode Date: September 12, 2023

It was once very difficult for people experiencing poverty in the Global South to obtain credit and loans because they were seen as unable to provide adequate collateral. This situation changed with the emergence of microfinance, a model pioneered by Muhammad Yunus and the Grameen Bank in Bangladesh which has now been widely disseminated to countries around the world.  At the heart of the Grameen system is the organization of borrowers into groups of women (97 percent of the bank’s loans are to women) where collateral is each woman's social connections and reputation. This model is touted for contributing to Women’s Empowerment and for “rising people out of poverty” and even won a Nobel Peace Prize in 2006.  But does this model actually empower women? Does it address the structural causes of poverty? Or is it just another frontier for capitalism — a new way of profiting off of the most marginalized, exploiting the trust and social cohesion among groups of women, and even triggering what’s been described as “India’s micro-finance suicide epidemic”? To answer these questions, we’ve invited on Dr. Sohini Kar, a socio-cultural anthropologist at the London School of Economics who focuses on the economic anthropology of South Asia, particularly in urban India. She is also the author of Financializing Poverty: Labor and Risk in Indian Microfinance.  In this conversation, Dr. Kar breaks down what microfinance is and how it’s hurting women in India and beyond, she shares stories of the experiences women in India have had with microcredit programs, she connects microlending in India with predatory payday lending in the United States as part of capitalism’s financialization of poverty, and finally, she offers truly transformative and empowering financial pathways for both investors and purchasers alike. Thank you to Carolyn Raider for this episode’s cover art and to Gopal Maurya for the intermission music. Upstream theme music was composed by Robert Raymond/Lanterns. Further Resources: Dr. Sohini Kar at LSE Dr. Sohini Kar Subprime Empire: On the In-Betweenness of Finance, The University of Chicago Press Journals This episode of Upstream was made possible with support from listeners like you. Upstream is a labor of love — we couldn't keep this project going without the generosity of our listeners and fans. Please consider chipping in a one-time or recurring donation at www.upstreampodcast.org/support If your organization wants to sponsor one of our upcoming documentaries, we have a number of sponsorship packages available. Find out more at upstreampodcast.org/sponsorship For more from Upstream, visit www.upstreampodcast.org and follow us on Twitter, Instagram, Facebook, and Bluesky. You can also subscribe to us on Apple Podcasts, Spotify, or wherever you listen to your favorite podcasts.

Hello all, Della here with a bit of news. Upstream has recently lost our second and last grant and we are now 100% listener funded. We are so grateful for all those folks who have donated in the past and who are subscribed as recurring donors. And we also want to ask if there's anyone who hasn't donated and who's willing to donate, if you can support us now with a one time or recurring donation so that we can keep this podcast free and sustainable and keep producing stories and conversations about economic systems change. It is incredibly difficult to get grant funding for indie podcasts, especially leftist, post-capitalist, socialist political education projects. especially leftist, post-capitalist, socialist political education projects. The liberal philanthropic industrial complex is just simply not interested in this, and it's horrifying because the right wing in this country is more than happy to provide unlimited funding for right wing political education projects. Podcasts are incredibly popular and the industry

continues to grow exponentially. So it's a shame that left-leaning funders aren't supporting this type of work and don't understand how important this medium is. please visit upstreampodcast.org forward slash support. That's upstreampodcast.org forward slash support to chip in a monthly or one-time donation that will allow us to continue to produce media that serves as an indispensable alternative to the mainstream capitalist propaganda that dominates the airwaves and the RSS feeds. Thank you. The reason I look at it as financialization of poverty

is because they're not actually looking to get rid of poverty. Poverty is a source of accumulation. The poor, by taking out loans, by paying for private health care, are generating wealth at the top. And so I think there is a critical disjuncture between how profits are derived, how wealth is derived, and the need to sort of actually address

poverty and inequality. You're listening to Upstream. Upstream. Upstream. Upstream. A podcast of documentaries and conversations that invites you to unlearn everything you thought you knew about economics. I'm Robert Raymond. And I'm Della Duncan. It was once very difficult for people experiencing poverty in the Global South

to obtain credit and loans because they were seen as unable to provide adequate collateral. This situation changed with the emergence of microfinance, a model pioneered by Muhammad Yunus and the Grameen Bank in Bangladesh, which has now been widely disseminated to over 40 countries around the world. At the heart of the Grameen system is the organization of borrowers into groups of women, 97% of the bank's loans are to women, where the collateral is each woman's social connections and reputation. This model has been touted for contributing to women's empowerment and for raising people out of poverty, and it even won a Nobel Peace Prize in 2006. But does this model actually empower women? Does it address the structural causes of poverty? Or is it just another frontier of capitalism,

a new way of profiting off of the most marginalized, exploiting the trust and social cohesion among groups of women, and even triggering what's been described as India's microfinance suicide epidemic? To answer these questions, we've invited on Dr. Sohini Kaur, a sociocultural anthropologist at the London School of Economics who focuses on the economic anthropology of South Asia, particularly in urban India. She's also the author of Financializing Poverty, Labor, and Risk in Indian Microfinance. In this conversation, Dr. Kaur breaks down what microfinance is and how it's hurting women in India and beyond.

She shares stories of the experiences women in India have had with microcredit programs. She connects microlending in India with predatory payday lending in the United States as part of capitalism's financialization of poverty. And finally, she offers truly transformative and empowering financial pathways for both investors and purchasers alike. And now, here's Della in conversation with Sohini Kaur. Welcome to Upstream. So happy to have you on. Let's start with an anthropologist, a sociocultural anthropologist. I look specifically at more economic issues. And so I've previously looked at microfinance, which we'll be talking about today more. But I'm also interested in issues more broadly of how finance shapes our everyday life and how it's sort of reshaping the way we do everything from sort of debt to

social activism. And so that's broadly what I look at and sort of my background. Thank you for that. Yes. And it was really meeting you and hearing a lecture that you gave at the London School of Economics that really felt like a moment of unlearning and rethinking finance to me. A lot of things that I thought I knew and understand you really debunked, demystified and really invited new ways of thinking about them. So thank you for your work. And I'm wondering if you could tell us how did you come to be interested in finance and in microfinance in general? So the longer trajectory is actually I started off my undergraduate career as an

economist doing economics as an undergraduate. And that's what I had planned on studying. So in some ways, I was always interested in sort of economic issues and sort of issues around finance. But I really had sort of a crisis and conscience, you could say, in some ways when I was a senior in my undergrad, and trying to sort of, I was working on a senior thesis and reconciling what I knew about India, which was the topic of my senior thesis. I was on fiscal deficit, so something quite different. But at the same time, there was a degree of discrepancy between what I knew from being there, from visiting, which it's where my family's from,

and what you could sort of get at from just purely quantitative sort of analysis. And I started to look at other disciplinary approaches to looking at things like economic life. And so I really came to anthropology in my last year of my undergrad, decided that was what I wanted to pursue. And so kind of switched gears to looking at things from an ethnographic perspective to doing sort of long-term field work and understanding things really from the ground up with a more qualitative approach to understanding various dimensions. So I came in with this sort of interest in economic issues, but sort of reassessing how we could look at it rather than sort of from a purely quantitative perspective to looking at economic life by how people actually lived it.

And so that's how I came to economic anthropology, how I came to the topic of microfinance itself. I started out when I was first doing my PhD, looking at issues around inflation and how market vendors understood inflation, which has somehow become more recently a thing that I've been thinking about again as inflation has been hitting again globally. But as I was talking to a lot of these market vendors, they started telling me about their debt lives, where they had loans from, how they managed it. And so I kind of started to look at how poor communities in India manage debt. And through that, I started to sort of notice the patterns in sort of the rise in the numbers of people who had microfinance loans and what that meant. you know really the way in which it was widely available to a lot of urban poor communities and so I started to look more specifically at microfinance and eventually at commercial microfinance which I'm happy to talk more about but as a specific

sector of microfinance that is driven by finance that's driven by a for-profit model. But to say, you know, what is actually happening when we have this kind of for-profit microfinance sector expanding into the lives of the poor? What are the actual impact of that? And so that's, I started to sort of look into that. And I ended up spending 14 months doing ethnographic fieldwork in Kolkata, looking at the urban microfinance. So that's sort of the trajectory into looking at microfinance in India. Wow, thank you for that. And I really appreciate hearing about your academic journey and really resonate. I did get to study economics quite generally in undergrad. And then similarly, the one moment of awakening for me came from an

economic anthropology course, which was the only course that really interrogated and challenged ideas like the tragedy of the commons and the exchange paradigm and other things. So it was really that course that was like, oh, there's alternative ways of creating our economies, but there's also we can interrogate, challenge and question the assumptions underlying mainstream economic thinking. So I really hear you. Yeah. And so, yeah, today we're really focusing on India and microfinance and the poor of India too. And I think when I first heard of microcredit microfinance, just to say a lot of folks may feel similarly, it was really articulated as a really good thing, like something that folks in the global north could invest in, right, could contribute to.

So it's this really interesting journey that you've been on to really say, well, it's a little bit more nuanced and complex than that. So let's dive in. Let's start with what is microfinance and microcredit? Just for someone who maybe is like that, like, let's get clear on these concepts before we dive in. And maybe a few real world examples of how somebody might engage with microfinance, microcredit. Sure. So when we're using, we say microfinance, microcredit? Sure. So when we say microfinance,

it's actually a broad set of financial tools that are available to the poor. So on the one hand, we sometimes use microfinance and microcredit interchangeably, and I do that in my own work. But just to clarify, microfinance can include things like microcredit, microsavings, and microinsurance. Those are the three primary kind of financial products that are available under the broad umbrella of microfinance. So microcredit, as the name suggests, is sort of small loans that are given to the poor. Again,

there are different models of microfinance and microcredit. The most well-known one is sort of the Grameen Bank model, which is to say that loans are given often to poor women, but people who lack collateral. So again, microcredit, when we seek credit, often we need to put up something as collateral. That can be anything. If you have a mortgage, your house is essentially collateral. If you are taking some other kind of loan, you might have other things that are available as collateral to the bank that they can take if you are unable to pay that back. Again, the problem with poor households is that they don't have collateral.

So one of the solutions to microfinance is to say that, well, what do poor people have? And that, and again, this comes from the Grameen model, is that they have social capital. So if you have people in groups, the bonds that form between those people can serve as a kind of collateral in the absence of material collateral, in the absence of things like assets that might otherwise be available. And so the Grameen model, again, sort of harnesses this idea that you can form a group. And again, this has various kinds of forms that it takes and ideas about why it works. Some is about the peer pressure amongst group members that drives people to repay, the idea that other group members can pay back in the case one person is unable to.

So again, all of these things, the idea that social capital can back a loan, can become the collateral, is sort of the driving force between what becomes microcredit. Microsavings and microinsurance. Insurance is a growing sector, actually, and we increasingly see the push towards microinsurance. And we increasingly see the push towards micro insurance. Again, this is the idea of providing insurance products to people who otherwise can't afford the high premiums of insurance. So again, insurance, things like term life insurance, you know, allows us to hedge risks, right? But again, the poor can't always afford the premiums that go into typical insurance.

Again, the micro sort of insurance model has attempted to sort of make that available to the poor by redesigning the model of insurance as well. Savings, I would say, is actually sort of the smallest and least kind of dominant category of the microfinance tools. It is sort of seen as a need for, you know, the availability of savings products. Again, one of the problems of poverty, of course, is that a lot of people don't have savings. You know, if you're poor, you probably don't have significant amounts of money that you can put into savings. And I think that drives the limitations in the sort of micro

savings sort of sector, which is not to say that it's not there, and people aren't thinking about it, but just that it remains sort of the smaller of the three categories of microfinance. So I'm hearing a few things, one that microfinance is the overarching umbrella. And really, the main focus today, then is micro credit, that's very helpful to distinguish. And then also this point around when folks don't have access to collateral in the sense of buildings or infrastructure or material things, they use social capital as that collateral. So I think that's this is a key point to drive in. So give us an example of a person who says, okay, I want to have a microcredit loan. And then what do they do? And how does this form?

And what happens? So typically, what happens is that I'm going to primarily talk about women, because a lot of microfinance is targeted towards women. It's not absolutely the case, but it tends to be the case, especially in India. So when I talk about groups and women forming groups, that is the reason. So I will sort of focus on that gender dimension of it, but just to say why. So all the times women will form groups, this can happen. Often there's a person who becomes the kind of default group leader. They decide that they would like to access a loan. And so they bring together people in the community. Usually it ranges between 10 to 30 women in a group, and they will sort of come to the microfinance institution and say that, you know, we have this group and we'd like to sort of get loans as part of this group. Again, being part of the groups means being accepted by all the other members. Often there are the requirements by the microfinance institution that group members live within a certain area.

So the microfinance institution that I did most of my field work with, for example, required people live about five minutes walking distance from each other. So again, these are people who are your neighbors, right? There are people in your community who are coming together to form these groups. The groups meet weekly, usually, and they meet at a certain time in the morning. And the loan officer from the microfinance institution comes to that group meeting, and everybody comes and pays back part of their loan. So again, the women are getting the loans individually, but they do pay back at these

meetings as groups. And so their creditworthiness is dependent on all members of the group paying back. And so one of the ideas, again, about that social capital works as the kind of collateral is that on the one hand, everybody knows each other. is that on the one hand, everybody knows each other. So if there's someone that's particularly unreliable that other group members may not think, you know, should get a loan, they'll probably be excluded from the group. So there's a degree of sort of community management

of people who would be likely to default or not pay back. Second of all, by having these sort of weekly meetings, it allows the microfinance institution to sort of check back in on everyone. Again, make sure that everybody is on track. and if required, that there would be peer pressure. So again, as I mentioned, often the creditworthiness is not just of the individual, but of the group itself. So if a member is failing to repay or multiple members are repaying, then this can affect the ability for another person to get a loan in that group,

even though they've paid back the loan. So they're likely to put pressure on the defaulting member to pay back their loan or in worst case, sort of cover that payment so that the group as a whole doesn't sort of get punished for the defaults. So this is seen as sort of the model of microfinance and how people come to access it. There's very little actually advertising by microfinance institutions. A lot of this is run by word of mouth. So once people in a community hear about a microfinance institution that's in an area, they're likely to sort of go out and seek the MFI rather than the MFI really having

to go out and sort of build these groups in the community. So there is this like demand for these microfinance loans within a lot of urban poor communities that I've worked in. So that's sort of essentially how the groups work. Again, there is an idea that something more happens in these group meetings. So the initial idea that, you know, on the one hand, it's supposed to build social, sort of relies on social capital, but also that it would build social capital amongst the women themselves and lead to sort of gendered empowerment as well.

And a lot of the microfinance groups actually do hold up this idea of women's empowerment as part of what they're doing by having these meetings, that it would give people a chance to discuss things that pertain to sort of women's well-being. This can be everything from domestic violence to other sort of neighborhood issues. And there are people who have, other scholars who've looked at this and, you know, particularly in sort of the rural context, have argued that there is this effect of microfinance group meetings where

you know women come to learn about things like domestic violence and have attempted to address it by going to the house of someone who's being abused to sort of stop it so there there has been in some documented cases where where there is this additional sort of effect of having these group meetings again i didn't see that in my own work. And I can unpack a little bit more why that's the case. But I don't know if there's any other clarifying questions that you had. So I'm hearing that this group comes together, there might be, you know, developed financial literacy, could be women's empowerment as they speak with one another, and they become entrepreneurs in some way, thereby lifting themselves out of poverty.

So what's the problem? Why is this so? Why is this so challenging? Because certainly that is the message that I had heard about microcredit. So what is the dark side? Why should we be concerned? And how did you uncover it? So I think there's a couple points to address there. First is that, you know, there's this ideal model that you talk about in terms of women who get a loan, get empowered, become a sort of small business owner and entrepreneur. My first issue is the idea that microfinance leads to sort of this entrepreneurial person, that it somehow lifts people out of poverty. And the reality is it doesn't. And this is, I think, increasingly well documented, not just from my own work, but from other researchers who have been looking at microfinance now for about two decades.

the researchers who have been looking at microfinance now for about two decades. And I think the primary sort of issue is, A, what are the loans actually being used for? And the idea, again, was that if someone had a loan, they'd be able to start a small business and, again, follow the sort of standard narrative. The reality is when you ask people what they use their loans for, quite often it's for consumption purposes. And when I say consumption purposes, it's everything from paying for health care, especially privatized health care in India. It's for paying for privatized education for their children. It's for doing house repairs. And sometimes it is for a business, but quite often that is a family business or their son's or their husband's business.

It's not necessarily this singular woman who's taking out a loan. That's not to say that there are no such cases, but I'd say that was in the minority. The majority of cases people were taking either to support their families or to support some other kind of consumption need. So when you look at that, the loans are simply not there to enable people to get out of poverty, it becomes like every other kind of, and we can look at things as a kind of

credit landscape in poor people's lives, right, that they have different sources of credit, microfinance becomes one more source of credit, which they use to make do. And so it enables people to sort of manage these costs. And they may enables people to sort of, and this is what people really wanted, they wanted a lump sum payment. And this is what microfinance was for them, that once a year, they would get a lump sum of money that they would be able to put towards something which otherwise, again, it's very hard for poor households to build up as savings. It was easier to access as credit and to pay off, again, with interest than it was to be able to save that up in the long run. So they really wanted this lump sum of money for, again, all of these different uses that

I've mentioned. All to say that that doesn't lead to people getting out of poverty. It simply enables people to make do in the conditions that they have. The related problem, and I think this starts to get into more of what I would say is the dark side, is that if people are taking loans out to make do, then what is the interest on it? Again, when we start to break down interest rates, and again, microfinance is celebrated as giving access to credit to the poor. But what we talk about less is at what cost. And when we say cost, we're actually talking about the interest that people pay on their loans, right? And quite often,

these are actually quite high rates, they can be anywhere around 25%, which is significantly higher than what people get directly from a bank. So the irony often is that the poorer you are, the higher the cost of borrowing. And so I think the challenge for a lot of poor people is that the only way to access credit is to pay high interest rates. Microfinance is often talked about as an alternative to the informal sector, to money lenders who have extortionately high levels of interest. And it is, but it's also not cheaper than interest that, you know, a middle class person, for example, can get from a commercial sector bank. So we start to see that the poor are, we're celebrating this access to credit, but at reasonably high costs.

So that's the first issue. The second issue is that when we look at the growth of the commercial microfinance sector, and this is where my research is focused on, and again, where it's increasingly financialized, there are large financial institutions that are investing in microfinance. And they do so because microfinance is seen as quite profitable. It's often seen as having over 90% recovery rates of loans, which is extremely high. But again, it's doing so on the backs of the poorest and at high interest rates. So we start to have this question of, okay, so the poor are getting access to loans,

but who's actually benefiting from it? And I think that's part of the question that we need to push back more on and think about more critically, which is to say that who actually benefits from microfinance? For the poor who are accessing it, it enables them to make do, but they're not profiting much from it. Those who are profiting from it are in the financial sector. And I think that's something that doesn't get talked about enough and about if we follow the money, where is it actually going? So in terms of the institutional side, I think that's one of the dark sides. The other is, again, as we look at this issue of over 90% recovery rates, it puts an inordinate amount of pressure on poor women in particular to repay these loans.

And the consequence of this has often been extremely high levels of peer pressure. As I mentioned, again, this is often seen as a way to maintain these high levels of repayment, but that can have significantly negative consequences on the well-being of women, of people, of families, including numerous cases of suicide, which were related to pressures from having to repay loans. So again, we can see that things that get celebrated, these high rates of repayment, are actually problematic if we start to unpack them more closely and have significant effects on the health and well being of the people who it's supposed to help. Yeah, wow, I there's so much there to unpack, you know, first, I love how you're breaking down the assumptions. And even this idea of getting people out of poverty, by giving them more money to be able to meet their financial needs through capitalism,

right? That's so fascinating that what the women are using the money towards are things like healthcare costs, or, you know, helping other consumption costs, education, and also the needs of other family members businesses. So that that tells you that's not helping, right? And it's even subsidizing capitalism in a way. And then what you're saying about the really high cost of microcredit for the poor, this 25% interest rate, that is really shocking. And I love your question, who actually benefits from microcredit? And of course, then there's the, you know, the suicides and the social pressure. And I love how you're bringing in that the qualitative, the experience of the women um so maybe tell us a little bit more about

this peer pressure and the suicides in terms of if you know any statistics or any stories to to kind of like give us a little bit more around like what does that actually look and feel like and the impact of that so i don't have hard numbers on the number of suicides. In 2010, when I was doing research in India, there was actually a crisis in the microfinance sector. Part of it was driven in the state of Andhra Pradesh, which the state government started looking into these issues around the number of suicides. So the government actually had a set of documentation at that time looking more specifically at within that state at the cases. So there is some sort of more documented sort of following of what that is. But again, it's quite hard to get these exact numbers. Often families don't want to sort of register things as suicide for various reasons, legal, logistical, etc. So it's not always documented as such. So it's a little bit tricky to get those numbers in terms of hard numbers. But in my own work, again, I did my

research in West Bengal, which is the state in the east of India, where there wasn't this kind of state driven sort of attempt to document or capture the number of suicide cases related to microfinance. But when I was doing my research, I did come across a number of cases that people told me about, whether it was the loan officers or the group members. And so I have the kind of stories that I came across in my own research. One of the stories that really stuck with me and I talk about in my book as well is this case of this young woman who she had taken loans out, had become unable to repay the loan, and she had two young children. But at one point, the group members put a lock on her door. And again, in India, sometimes you can sort of put a padlock on the outside of the door.

And so the family was essentially locked out of their house until they could get enough money to repay their weekly loans. So you can see the kind of social pressure that comes from the community. These are people who are neighbors. They know your house. They know your family. And so this woman was facing quite significant pressures by not being able to repay the loans. And the woman who were recounting the story to me, you know, they said that the last they heard that she had first left Calcutta and gone to Mumbai and that eventually she had died by suicide in Mumbai. that eventually she had died by suicide in Mumbai.

And I think one of the tragic things about the story is in the case of microfinance in India and what I've looked at, a lot of them are actually backed by life insurance. And so when people take out a loan, they are required to take out a life insurance policy. And this is sort of a micro insurance kind of model. And so it's often presented as a fee. But what the insurance does is that it covers a loan in the case of the death of the borrower. And what happens in this case is that because the death

was never recorded, this family was still liable for this loan, even despite this insurance, despite the fact that this loan was supposed to make their lives better. It led to the sort of loss of life of a young woman who just could not bear the pressure anymore of having to repay and living in a community that was putting so much pressure on her. And so I think the other case was also a woman who had taken multiple microfinance loans out. And this is often done where one person might be servicing multiple loans, so they actually get other people to take loans on their behalf, but they're paying off all the loans. So they it, it's a huge burden to have to manage. And so in another case, it was a case of someone who had taken what they're called syndicate loans, had taken a syndicate loan, became unable to repay it, and again, eventually died by suicide. Again, it's not always clear that it's a clear path into microfinance.

And there's multiple reasons, right, why people get to that point where life becomes unlivable. You know, lots of people are facing immense pressures from microfinance. So often, it's the sort of intersection of multiple things happening in people's lives that lead to that. But it does raise the issue of if we're relying on peer pressure, if we're relying on this model of the community and putting pressure on someone to repay, what happens when there's no real space for debt forgiveness? And that's, I think, a big problem in microfinance is that there's not much flexibility. And the reason it succeeds is because there isn't a lot of flexibility in repayment. there isn't a lot of flexibility in repayment. Wow. Yeah, those are really, really powerful stories. And yeah, I'm thinking of a few things. One, I'm thinking of, we got to speak with Vandana Shiva on the show who talked about farmer suicide in India. And then we also, I remember a story in Japan where there was a high rate for suicides among men. And then the government lowered the amount

of debt that one person could accumulate. And all of a sudden, the suicide rates went down. So somebody could not become so overwhelmed by debt. So it's just it's this is so powerful to look at how economics is not this just numeric abstract thing, but it really does impact people's lives and health and well being. And I can imagine for you just hearing those stories and being there and getting the sense, what were the emotions and feelings that came up for you, particularly with your family being from India? Like what, what happened for you personally during this research? I think it's one of the things that I hadn't expected to really come across when I did preliminary work, when I sort of, you know, had the earlier narratives of microfinance.

So in some ways, I wasn't fully prepared to encounter these stories. And in some ways, even sort of in the process of fieldwork of writing it, it took to sit down and writing about it when I actually came to writing up that I did find it quite difficult in that period of writing about these lives and these women's stories and how to sort of present it in a way that was respectful of their lives

without sort of emphasizing death over life. And I think that's something that ultimately I also use as part of my argument is to say that often we wait until things come to sort of the, you know, issues around suicide or death, that we actually do anything about it. And that the point should be before that the point should be understanding suffering before it leads to these sort of critical moments. So I think really sitting down and writing and thinking about it has pushed me to think more about why can't we stop these kind of things at earlier stages? What is it about the model that pushes people into these kind of decisions. And I think that, for me, has been the sort of most helpful way to think about it and to sort of learn from these cases is to say,

not to dwell on sort of the very sad and sort of unfortunate cases themselves, but to say, okay, well, where do we have to look at first in order to not go down that path? And I think that's something that there's something sort of, and I write about this in my book about the way in that there's something spectacular about these stories of suicide, right? That, you know, we focus on them because they're so, in a sense, horrifying. But it's also horrifying to hear stories of people who are not eating because they need to sort of pay back a loan it's also horrifying to hear about people making these choices about how to provide for their children but those stories need to come to the front as well because if we don't bring

them to the front we end up to the sort of worst case You're listening to an upstream conversation with Sohini Kaur, a sociocultural anthropologist at the London School of Economics and author of Financializing Poverty, Labor and Risk in Indian Microfinance. We'll be right back. खचिया कुदारिवाला कामलेक परवा पेटवा पालत रहनी पूरा परिड़ावल सिनायानावा, लेगैले हामराके पापी बेईमानावा, अंगरेजे अपनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अनावा, अन That was Bhojbhuri Folk Song on Indentured Migration by Gopal Maura. Now, back to our conversation with Sohini Kaur. This show is called Upstream because it's about taking the challenges of our time and going upstream to the root causes. So let's take these stories, these examples of this suffering that is happening, and let's go upstream from them. One upstream thing that I'm hearing is that the institutions are for profit, right? Like they are actively trying

to make money. And you write about the financialization of poverty, right? So it's the profiting from poverty, that is part of it, part of the problem that these institutions are for profit. And then another is that the needs of the people in these cases, are increasingly financialized and commodified, right? The ways that they meet their medical needs, their education needs, etc. They need money to do so. And so that's why they need to take these loans. So that's why they see that they need to take these loans. And then of course, there's also this undercurrent of like, what is progress or success, this kind of wealth generation money, that piece two comes up for me.

But what would you also add? Or what would you say about those as like, when you go upstream from the suffering that you had really visibly and also experientially been with during your research, what are the root causes of that suffering? I mean, I think at the end of the day, we are left with an issue of poverty and inequality. And unless we can address that sort of structural dimension, everything else becomes sort of a quick fix and doesn't address the realities of why people are taking loans in the first place. You know, as I mentioned, people are taking loans so that they can put their children in private schools or to pay for private health care, which is because of the failures in the public system. So there's not sufficient investment in public infrastructures and public health care and public education, which means that, again, the poor are sort of having to pay to send their children into private sector, which even health and, you know, this is where the sort of financialization issue comes in is because each of these sectors are

becoming more and more financialized themselves. So not only are people taking out financialized loans to pay for them, they're now in for profit education, they're going to for profit healthcare. They're now in for-profit education. They're going to for-profit healthcare. And so we see this increasing sort of wealth generation for those who accumulated at the top. And the reason I look at it as financialization of poverty is because they're not actually looking to get rid of poverty. Poverty is a source of accumulation.

The poor, by taking out loans, by paying for private health care, are generating wealth at the top. And so I think there is a critical disjuncture between how profits are derived, how wealth is derived, and the need to sort of actually address poverty and inequality. And so I think that to actually seriously sort of move away from that, to make a fundamental difference in people's lives, we need to look at what people are actually spending their money on. I think this is actually helpful when looking at microfinance, is to say, you know, what are people spending their money on? Is there a way to transform that to make it a sort of transformative sector? So if people are paying large amounts for

private health care, then the first thing we should sort of think about is improving public infrastructures of health care, improve public availability of things like health insurance, so that people aren't going into debt in order to simply pay for health care. If people are paying for education, why is it that people are choosing to take their kids out of the public sector education and pay high amounts for private provisioning, often which isn't that good anyway? It's simply seen as better,

but it's not necessarily that much better in terms of provision. And so I think, to me, what microfinance clarifies often is where we could actually address the needs of the poor, because we can actually identify what people are spending their money on. So rather than sort of following this narrative of, oh, people are taking loans out and building a business, we can actually think more critically about, well, are there ways that we can fix it? If it's about housing, are there better ways of providing sort of grants and things for people to be housed more securely? So I think, to me,

what microfinance really highlights is those areas. And it gives us a chance to ask those questions about how would we actually make it feasible for people to spend less on things that they can't really afford, basic things, right? These are not luxuries. So again, often when we say things like consumption loans, it sounds like they're spending it on a luxury, but it's not. It's very bare basic necessities. So yet again, going upstream from these challenges, we find neoliberal capitalism, right, and the increasing financialization and removal of the public sector and safety nets. And what I'm hearing is interventions need to be systemic, our investment in public education and public health care. healthcare. What else might you note by way of how do we address inequality and poverty? I mean, I know that's a huge question. And yet you have been dedicated to studying this. So what would you say are some of the most inspiring or helpful pathways to a more equal and more equitable world? I mean, I think part of it is just listening more to the people who actually are in those conditions.

And I think this is something that comes from my own training in anthropology to actually speak to, talk to the poor. And often we see solutions coming from the top down as policymakers sort of attempt to solve poverty, but without always fundamentally understanding what live poverty is. And often when I'm talking about microfinance, people want me to say, you know, so should we just get rid of microfinance? And my answer is actually no, because that's not what people want. Because if you took it away suddenly, it would leave this gap in what people have figured out a way to make do. So I think, you know, just coming in with solutions without, even in areas that are problematic, have issues, if you simply take it away without consulting why it matters to those who take those loans, we don't have a full picture. But as I mentioned, if we talk to people and understand what matters, how it matters, then we can start to reshape those very institutions.

And one of the things I think is important to understand about issues around credit and debt is that credit is very powerful. The wealthier you are, the more likely you have better access to credit, that you have better access to loans, to buy a house, to all those things that are valuable for wealth. Accumulation comes from having access to loans to buy a house to all those things that are valuable for wealth accumulation comes from having access to credit. But it has to be on more equitable terms for the poor. So again, as I mentioned earlier on, the poor are paying the highest costs for loans. And again, loans, having credit aren't inherently, I don't think they're inherently bad things. I don't think they're inherently bad things. They enable us to do lots of things like buy a house to save up for other occasions. But we have to do it in a more equitable way to enable the poor to have access to lower interest rates so that they do actually have equal terms of engagement in credit markets.

And I think flexibility in repayment is a huge sort of issue. And as I, again, as I mentioned earlier, you know, the sort of idea that microfinance relies on over 90% repayment rate, this is extremely high. So again, this is not a rate that's met by regular loans. And so this means that people are struggling to repay these loans, but they have no option to default. They have no option to declare bankruptcy. They often don't have options to sort of ask for some kind of pause in repayment schedules if they're ill or if a family member loses their job. All of these things that would enable to be more humane in the way that we approach people's access to credit. I think those things are actually feasible steps. Again, like you said, structural change is great, but it's really hard to get to in the short run.

And I think that doesn't mean we should stop thinking about it or stop attempting it. But there are things that would make life more livable, more better for the poorest if we gave them the same terms as we give the wealthy. And I think that when we talk about inequality, we talk about inequality as just wealth, but actually it's inequality and access to so many things.

And that I think is actually relatively easy to fix. We just have to have a more dedicated political will to fixing that kind of access. Yeah, thank you for that framing. And I'm reminded of Catherine Trebek. She came on the show and she told us about there are some policies or ideas or proposals that help folks survive today. And then there are those that help us build tomorrow.

And both are necessary, right? We need to pull people out of the river who are drowning and help people survive today. We need band-aids and we need to go to the root causes and systemic solutions as well, both and. And so I am hearing that addressing the longer structural issues would be what are people spending the money on and decommodifying housing and healthcare and education, right? Allowing greater access to that. And then on the surviving today side, I'm really hearing addressing debt and debt forgiveness, ability to default. I'm also even thinking about, you know, usury and high interest rates and, you know, the idea from Islamic banking, and also even from like, Jesus's early teachings around usury being a sin.

And then also having the banks, the microcredit lenders be not for profit, right? I think that's a huge aspect. Like what if they were mission driven instead of profit driven? And then also I'm thinking about the public banking movement around the world where public banks allow for cities or bioregions to be able to invest where they'd like and also determine interest rates and different structures that are more supportive of people and place of their community. So just want to add those. I'm wondering if you have any connection in what you were sharing about women in India with payday lending in the US, just because like I'm based in the US and I know a lot

of our listeners are and I know that comes up for me. Payday lending can disproportionately impact low income folks in the United States. So do you have any kind of connection there around the financialization of poverty in other parts of the world, particularly the US? Yeah, I mean, I think, you know, absolutely, payday lending in the US and the UK, where I'm currently is a significant issue, and often have similar kind of target markets. In terms of poor communities, about what own work, I actually argue that we should talk about microfinance more in line with things like payday lending and working class credit.

Because when we talk about microfinance, you know, and its relation to the Grameen Bank and sort of Muhammad Yunus getting the Nobel Prize, it's given a kind of sheen over what it does and that it's supposed to be this sort of positive force and something that's inherently good. But if we think of microfinance more as we do things like payday lending, then we actually have a better idea of what is happening in terms of a targeted market towards working class communities globally. And it's, you know, we do see actually a movement of microfinance from the south to the north. So it's one of these things that has actually moved from a purely sort of development sphere into in the North America or other places where microfinance is being offered as an alternative kind of credit. So it is worth thinking about the ways in which what we call it actually changes the way we perceive it. So

in many ways, microfinance is not that different from payday lending, but we just don we call it actually changes the way we perceive it. So in many ways, microfinance is not that different from payday lending, but we just don't call it that. Payday lending, there's a long history of sort of working class credit and what it means and what it's done for different communities. And even in the payday lending sector, we do see it's increasingly financialized, right? There are these larger banks that are funding it, that profit off of it. Often, these were, again, things that were quite local and sort of community based that have become networked into these larger financial institutions. And I think there, we start to see these sort of linkages between commercial microfinance and payday lending, where especially in sort of payday lending, we tend to sort of, the larger

banks distance themselves often in terms of the name and things like that, because they don't want to be sort of seen as payday lenders. But they are still part of the financial network that finances it, that allows it to sort of exist. And so a co-author and I have recently written a piece called Subprime Empire, which actually thinks about the ways in which this category of subprime, if we go back to the 2008 subprime crisis, actually folds in these global networks of lending to the poor, both in the US and North America and Latin America, Asia. And so I think it's worth thinking about the growth of the subprime, not as just something that happened in 2008, but this really dedicated way of sort of incorporating the poor into this larger financial system and why it continues to sustain a financialized economy by sort of harnessing the capital of the poor. Yeah, thank you for that. sort of harnessing the capital of the poor. Yeah, thank you for that. We have to talk about Muhammad Yunus and Grameen Bank. So in 2006, Muhammad Yunus was awarded a Nobel Peace Prize

for his work with Grameen Bank in Bangladesh. Tell us the story from your perspective of Muhammad Yunus and Grameen Bank. You know, in many ways, the Grameen Bank, again, I talked earlier about sort of the Grameen Bank model, and he really sort of established this model of lending through these groups. And often it's become sort of the shorthand of talking about microfinance group lending. That's the Grameen model. And so Yunus sort of established this Grameen model in Bangladesh, and it's been widely sort of successful in Bangladesh. and it's been widely sort of successful in Bangladesh. Also, there's been a number of scholars who have looked at the Grameen Bank and sort of critically engaged with the problems with the Grameen Bank in Bangladesh.

It's not my area of focus, so I don't talk about Bangladesh in particular. But I can, you know, he has been hugely influential in terms of the microfinance model globally. There are two issues to flag here. One is what giving the Nobel Peace Prize does for microfinance. So he's recognized through the Peace Prize, right? Not the Economics Prize. This is going towards recognizing something that is for social good,

it's for the well-being of people around the world. And so if we think of what that prize does for microfinance, again, I said, you know, I talked a little bit about the shame that microfinance has against, say, payday lending. And this is established through things like the Nobel Peace Prize, right? And this claim that credit is a human right. And this is something that he talks about, that, you know, people have a right to credit. Again, we might question that, you know, does credit fall on the same line as, you know, right to health or water or everything else. But even just moving, you know, from the obvious, we can ask, again, by placing it at that level, we do give microfinance this kind of credibility that

isn't available for other ways of sort of giving credit to the poor. So I think when we look at the sort of awarding of the prize itself, it really gives microfinance a kind of credibility, a kind of gene that otherwise it wouldn't have gotten at that point. And so I think the need to be able to critically engage it more, to be able to sort of criticize that sort of idea became more challenging once he had the, you know, the Grameen Bank had the Nobel Peace Prize. So I think that's one aspect of it. The other is that there is actually an interesting debate in terms of Eunice's approach to profit versus others who

come from a more for-profit side of microfinance. And this is that for Eunice, a social business like Grameen Bank, the profits signify a success of that institution, but that the profits should be reinvested in the model itself. So if microfinance is generating profits, that it should go back and enable the microfinance institution to lend more to women to sort of build that part of it, but that the profit isn't drawn out of the institution itself. part of it, but that the profit isn't drawn out of the institution itself. Vikram Akula, who founded what became SKS Microfinance in India, was one of the largest microfinance institutions. It's since changed its name a couple times. But Akula, and he comes from sort of a McKinsey background, he's sort of much more in the for-profit microfinance institution side of it. And his argument is that, you know, you have to have profits that come out and they can be financialized, they should go to shareholders. And again, SKS was the first microfinance institution to be

publicly listed in the Indian Stock Exchange. And so his idea of profit is something that is quite different from Yunus's idea of profit. And so I think while both of them look at profit in a certain way, I do recognize the fact that Yunus's argument is not about sort of expanding profit for wealth accumulation at the top. That is something that's coming out of the for-profit microfinance sector that's distinct from it. And I do think it's worth sort of pointing that there are those important differences between Eunice's idea of

the Grameen Bank and how it's subsequently been taken up in the for-profit sector. Very helpful to hear your thoughts on that. Thank you. So to close, I want to think about the practicalities for inviting listeners. So as I said, I do know folks over the years who have thought, you know, I really want to help, you know, the global south and then women in India or wherever, I'm going to either invest in micro credit or donate to micro credit projects, like it really is seen as like a, sometimes a gesture of goodwill, right? And so what would be your invitation for folks who are like, well, should I not invest in it? Or like, what should I do? How can folks be

in solidarity with women in India in this situation, or Global South folks in general, just like what are the practical hands on invitations for folks listening to either get involved to shift the system or also to contribute in a way that would be more helpful? Yeah, I mean, I think there's sort of a number of ways to address it. First is that I think you have to sort of research where you're giving money to. There are institutions that do microfinance lending, but are much more focused on things like empowerment, on livelihood training, on actual ways of sort of enabling people to sort of develop their employment or employability.

And it is worth, if you do want to give money for those kinds of institutions, they do exist. And it's worth sort of spending the time to identifying which those are and being able to sort of give money to those kinds of institutions. I mean, I think interestingly, the for-profit sector of microfinance, they're raising money quite differently. They're raising money on capital markets, they're raising money by listing on public stock exchange, they're getting private equity. So those are not necessarily the ones that are looking for people to sort of invest in. What is interesting about that kind of financialized sector, though, is that they are getting things

like social investments. And so when people are looking at ethical investment, for example, portfolios, often microfinance is falling within that. And it's worth thinking about or pushing, where is that investment actually going? And is it ethical or not? So I think, again, as it gets packaged into this kind of financialized world, where microfinance gets this sort of automatic checkbox on the ethical investment, we should be a little bit more cautious and think about, well, are those MFIs actually ethical? Do they have ethical practices? are those MFIs actually ethical? Do they have ethical practices? And if you're someone who's based in the global north who wants to do good, who has, you know, pensions in these kinds of ethical funds, as with everything in those, like it's worth doing the research on those different investments and to actually understand what goes on at the ground. I know it's, you know, possible to do at every single level. But I think that's one of the problems of microfinance, getting this automatic sort of check on the sort of ethical investment side,

and to actually be a little bit more critical, you know, is it more payday lending, or is it actually something that's doing good? So I think that kind of institutional investment are things that we can all sort of start to look at more closely and understand. I think there's more of a push for that from things like fossil fuels, etc, in terms of divestment, but we should also be cautious about what we invest in. So I think that's another aspect of doing the research, not only when we sort of give money directly, but where is our money going indirectly as well? Wonderful. Thank you so much. Anything else you'd like to add or any next inquiries or research projects you want to highlight? Anything you're working on lately?

So actually, just to kind of following up from that, my current work is looking at, you know, how social activists sort of engage with financial markets, and the ways in which financial markets themselves are not this depoliticized space, but that activists in various ways have tried to engage and push for social change through financial markets. Again, there are limitations to what that means, but to think about financialization not as something that, you know, automatically leads to the worst outcomes, but that, you know, can people actually enact change by engaging with financial actors? So that's what I've been looking at now and sort of following from the ways in

which what does, you know, good investment actually look like is a question that I try to follow through on. Any tips for good investing? I mean, I think as many of us have things like pension funds, as our lives are increasingly financialized, often, if you're at a university, if there are endowments, you know, really consciously sort of questioning what those things are financing, and looking at finance as sort of as a kind of collective ownership, and to sort of be able to use whatever power we have as people who have various kinds of investments in our lives to actually push for change. I think that's important for us to not sort of see finance as just this black box that's out there and we don't do anything about it.

But that actually because of financialization, because our lives are so intertwined with it, we do have many spots in which we can sort of push for change. You've been listening to an Upstream Conversation with Sohini Kaur, a sociocultural anthropologist at the London School of Economics and author of Financializing Poverty, Labor and Risk in Indian Microfinance. Please check the show notes for links to any of the resources mentioned in this episode. Thank you to Carolyn Rader for this week's cover art and to Gopal Maura for the intermission music. Upstream theme music was

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