Microcredit programs: Objectives and functions

Abstract

Microcredit programs mostly target poor women who do not have access to credit in the formal financial system because they lack the necessary collateral or formal employment, which secure a stream of future income. It is believed that the poor women can use the credit as some sort of seed money to turn themselves into entrepreneurs, even at a small scale. Since the founder of the microcredit programs Muhammed Yunus won the Nobel Prize in Economics, we have been hearing about the success of the programs. It is widely argued that this is not only an institutionalization of a welfare mechanism, which otherwise would be a burden on the state resources, but also a means to empower women. However, there are also serious criticisms against these programs. One group of critics argues that there is no solid evidence that supports the success of microcredit programs in reducing poverty and those successful examples we hear are only a few exceptions to the majority of the credit users who do remain impoverished. Another group of critics draw attention to a particular subjectivity created by these programs in the developing countries. Such subjectivity can be described as agents responsible for their own well-being, as woman entrepreneurs who invest wisely, work hard, and rely only on their own efforts to take care of themselves and their families. Yet, such critics continue, neither this subjectivity nor access to finance through microcredit can challenge existing social hierarchies as ideological barriers to gender transformation are quite strong.