South Africa's post-apartheid microcredit-driven calamity

Abstract

Thirty years ago, the international development community was abuzz with excitement. The reason was that the almost perfect solution to poverty, unemployment, inequality and low growth in developing countries appeared to have been finally located. This solution was microcredit. As originally conceived, microcredit is the provision of tiny micro-loans to the poor to allow them to establish a range of income generating activities, thereby supposedly facilitating an escape from poverty. A widespread assumption quickly emerged suggesting that the microcredit model would, among other things, generate significant local employment opportunities, raise average incomes, empower women, reduce inequality, and so, overall, create the basic foundation for sustainable bottom-up local economic and social development. Not surprisingly, given such assumed benefits, microcredit was quickly and very centrally incorporated into the international development community's array of local development policies and programs, ultimately becoming the most important international development policy of all.