I am working on a new research project, Financializing Human Development, which examines human development projects that place money at the center, such as microcredit, mobile banking, asset building, and financial literacy. Questions I want to explore include: How do these projects help and harm income- and asset-poor people? How can they do more helping and less harming?
The project recognizes the powerful process of financialization that involves the proliferation of financial services and the deepening of financial motives in society. Pressures to integrate into the system come from a variety of sources including consumer motives, the market, the state, and society. In some cases this integration causes harm to individuals, communities and nations (not to mention the world) and in other cases it helps. The rapid expansion of sub-prime mortgages in the US leading up to the financial crisis of 2007-2008 is an example of the former and some microcredit schemes, e.g., BRAC’s –a large Bangladesh-based Nongovernmental Organization– overall integrated microcredit-health-education approach, is an example of the latter. The outcome depends a lot on the design of the financial product and the political and social capacity of vulnerable people relative to the financial service providers.
This latter point has a lot to do with power asymmetries. When large organizations –be they for-profit companies or large nongovernmental organizations– deliver stand-alone financial services to vulnerable individuals, while covering their costs (including a return on investment for the company) there is greater asymmetry and greater scope for a troubled impact, e.g., payday lending. On the other hand, if the organization is seeking to facilitate local individual- or collective-capacity building then power asymmetries can be minimized and outcomes could be more helpful for vulnerable people. It is not simply more finances that vulnerable people need for human development. They often need this but it must be accompanied with the means to build social capital and political empowerment.
This research project focuses on vulnerable people, people with limited income and assets, drawing on examples from around the world. Financialization changes manifest themselves in different ways in rich, middle, and poor countries but their manifestation is real and powerful. In Canada and the US, for instance, financial services for vulnerable people are proliferating from the fringe bank sector, e.g., payday lenders. In some poor countries, e.g., Kenya, Bangladesh and the Philippines, microcredit and mobile banking are powerful manifestations of financialization. In middle income countries such as India and South Africa, it is manifested in major efforts to expand bank access for poor people.
Do you think the financialization of human development efforts is a real phenomenon? Does placing money more centrally in the human development process create more risks or more opportunities? Any thoughts you have on this research project are most appreciated.