loan shark
I often write about the failure to move towards sustainability in spite of the best intentions of the actor. What is advertised as some kind of greening activities or a form of corporate social responsibility (CSR) turns into greenwashing whether intended or not. Muhammad Yunus won the Nobel prize for creating and providing microcredit, a rare and outstanding example of the business sector providing a model with the primary goal of alleviating poverty, one of the most critical steps in moving towards sustainability. Yunus’s model, which was build on a new form of bank that he founded in Bangladesh, was not only a pure form of corporate social responsibility, but a profitable one at the same time. But now the underlying forces within capitalism have worked to turn the model 180 degrees and have put profit before social responsibility, threatening the system Yunus put into play.
Yunus writes in the New York Times,

In 1983, I founded Grameen Bank to provide small loans that people, especially poor women, could use to bring themselves out of poverty. At that time, I never imagined that one day microcredit would give rise to its own breed of loan sharks.

But it has. And as a result, many borrowers in India have been defaulting on their microloans, which could then result in lenders being driven out of business. India’s crisis points to a clear need to get microcredit back on track. . .

Commercialization has been a terrible wrong turn for microfinance, and it indicates a worrying “mission drift” in the motivation of those lending to the poor. Poverty should be eradicated, not seen as a money-making opportunity.

Yunus continues to explain this turn and to plead for some form of regulation to limit the entry of banks with a stronger motive to prey on the poor rather than assist them. He admits to have missed this possibility when he got started. There’s a force at play here much like the one that subverted the “public” intentions of the US financial system, and was a factor in its recent collapse. The public purpose of the banking system is to provide capital to businesses so that the economy can prosper. That is their primary social responsibility. But when that goal was overwhelmed with the drive for profit, the system was undercut and eventually collapsed.
Although the circumstances are very different in Bangladesh, the pattern Yunus describes is much the same. And the same lessons can be gleaned. One is that social systems are complex, always with the possibility of all sorts of unintended consequences that may eventually subvert the very processes originally designed to keep the system healthy. Another is the fragility of the whole concept of corporate social responsibility in a capitalist system. The echoes of Milton Friedman’s phrase, “The social responsibility of business is to increase its profits,” still reverberate long after its appearance in 1970.

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