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Dr Philip Mader: Crusade against cash in the name of the poor?

The Warwick Critical Finance group invited Dr. Philip Mader, Research Fellow at the Institute of Development Studies of the University of Sussex, to speak about his research on the shifting practice of poverty finance in international development policy:

Poverty finance, as Mader pointed out, has come a long way. Historically rooted in the grassroots practice of small Non-Governmantal Organisations (NGOs) it has turned into the commercial sector of a transnational financial industry, with around 3700 microfinance institutions issuing 100 billion Dollars in loans a year. Poverty finance, he reported, has recently been steered away from a micro-finance agenda famously championed by Nobel Peace Prize winner Muhammad Yunus towards a broader financial inclusion paradigm inspired by the seminal book ‘Portfolios of the Poor’, and culminating in the current mobilization of digital finance as THE opportunity for poverty alleviation.


While the financial inclusion paradigm incorporates most of the elements of the microfinance industry, he underlined, it is not a mere re-labelling of microfinance in response to its recent crises, which included critiques challenging its beneficence and social resistance to the repayment of micro-loans. Although financial inclusion helped the industry to continue the same practices with renewed optimism (‘everything is better now’), he emphasized that the new paradigm also introduced new instruments, such as financial literacy programs, or mobile payments, to the fight against poverty, which complement the traditional microcredit schemes to produce a new logic in poverty finance: While microfinance à la Yunus was targeted at the entrepreneurial potential of the world’s poorest to create income, financial inclusion targets their potential to manage their already existing (micro-) assets. The over-riding goal is financial intermediation rather than income generation.


This new logic has reshuffled the field and new players have entered the sector as the general conviction spread that financial inclusion of the poor is best to be accomplished digitally. But in marked contrast to the industry’s promises, Mader argued that the empowering prospects of this new agenda are limited - to say the least. As he provocatively put it, the ‘crusade against cash’ seeks to digitalise poor people’s money in pursuit of three holy grails: to capitalise on everyday transaction costs, to seek and analyse big data generated by the poor, and to exert greater governmental power over poor people’s money. If these become real, he stated, the prospects for the world’s poor are unlikely to improve. Putting inclusion over income and extending the means for control, the door to blame the poor for their own poverty opens further. The common interest between commercial poverty finance and the world’s poor is small and there is no evidence that the financial philanthropism of digital solutions is changing it.


The talk was followed by a lively discussion which centered around questions about the changing feminist narrative and its central role in the promotion of microcredit, the ways in which domestic structures have been reconstituted to match the financial inclusion paradigm, and the resonances of the new paradigm in practices of alternative finance.

phil mader event poster