The Hidden Consequences of Credit: An Illustration from Rural Indonesia

Abstract

ABSTRACTInterest in rural financial development has been booming, but often with a blind eye to the broader consequences. Very few studies have tackled the unintended economic, social and ecological outcomes of ordinary indebtedness, the inevitable other side of credit. This article explores some of the main ‘hidden’ side‐effects of credit/debt relations, with special reference to the Indonesian plantation sector. I argue that widespread credit/debt relations are not only an important factor behind capital, land and labour control; they also generate constraints that foster market discipline and contribute to undermine traditional community bonds as well as environmental conditions. More generally, credit/debt relations represent a powerful mechanism of social selection that has, in the long run, crucially shaped the trajectory of capitalism at the household, firm and government levels.