Microfinancing: a gap in the moral and political philosophy of poverty

Microfinancing is the practice of extending credit on a very small scale to those who have no assets to offer as collateral for a loan. For the poorest of the global poor, microfinancing typically takes the form of a six-month loan for under US$250 to set up a micro-enterprise, e.g. a one-person vending business, or a tiny agricultural investment.Although microfinancing is widely acknowledged by development specialists to be an effective tool in reducing poverty among the very poor who have access to it, and although it has a strong prima facie claim to empower the people it is extended to, in keeping with the hopes of the international donor community, it has received little or no attention from moral and political philosophers who write about the relief of poverty as one of the obligations of the North to the South in a theory of global justice.

A possible explanation of this gap is that microfinancing institutions are not among those that result from either a domestic or a global social contract along Rawlsian lines, and the Rawlsian framework is dominant in a global justice literature founded by Thomas Pogge at the end of the 1980s and enlarged by Beitz and others in the 1990s. The institutions that result from a Rawlsian social contract are either national legislative institutions along liberal democratic lines, with their tax-collecting and redistributive branches, or else supranational or global counterparts of these. As things now stand, however, microfinancing institutions are often at one remove from legislative bodies and from tax gathering or redistribution. They are not, or are not typically, state actors, and influential promoters of microfinance do not want microfinancing to become a state function. Microfinancing entities are private, or non-governmental, sometimes with Northern funding.

The project is to get the theoretical apparatus, both meta-ethical and normative, of liberal global justice theory to engage properly with microfinancing institutions and the good they do. There is also a need to take stock of the ethics of microfinancing in practice. For example,it is sometimes claimed that microfinancing schemes reach those just under the global poverty line, rather than those at the bottom. Is this true, and, if it is, is it an important criticism of this kind of lending? If this is true in general, or true of particular schemes, such as the Accion scheme in South America, is it an important moral criticism, or just an indication that there is no single lending solution to a variegated group that counts as 'poor'? Perhaps the poorest of the poor need a subsidized micro-credit scheme; or perhaps it may be best for a subsidy to pay for education directly, rather than to support loan activity. The byproducts of female commercial empowerment in traditional, male-dominated societies include domestic violence. Does this fact count against microfinancing in a moral assessment of it? How, if at all, should microfinancing institutions adjust to religious scruples against charging interest, in places where these are strong? Are Islamic financial instruments, which get round this problem, morally superior to alternatives? Group lending appears not to be viable everywhere /in urban areas of the least developed countries, or among the very poor of developed world: should other forms of lending be devised for these groups? Is it just for lenders to penalize members of joint partnerships who are not directly responsible for defaults? These questions indicate the range of issues that the network will turn its attention to in its meetings and in its published outputs.