Should access to credit be a right

Should access to credit be a right PowerPoint PPT Presentation


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A few words of presentation... Teaching: Microfinance; Ethics; DevelopmentEuropean Microfinance Programme (European Master in Microfinance)Research topics: Ethics (interest rate, surplus repartition, Compartamos), transformation

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Should access to credit be a right

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1. Should access to credit be a right? May 2009 Birmingham University Prof. Marek Hudon Centre for European Research in Microfinance (CERMi) Solvay Brussels School of Economics and Management (ULB)

2. A few words of presentation.. Teaching: Microfinance; Ethics; Development European Microfinance Programme (European Master in Microfinance) Research topics: Ethics (interest rate, surplus repartition, Compartamos), transformation & public policy Centre for European Research in Microfinance (CERMi) Regional experience: India (+ Morocco)

3. Agenda Context around Right to credit Methodology (Approaches; Pros & Cons) Rights-goal

4. 1. Positive context around MF Royal and political (ranging from the IMF to Morales..) support to MF 2006 Peace Nobel Prize has been attributed to M. Yunus and the Grameen Bank “for their efforts to create economic and social development from below”. Yunus: Credit as human right A. Sen (1999): Credit access improves women’s capabilities Justice philosopher T. Scanlon put (micro)credit in the list of projects that “augment the poor capacities to fend for themselves”

5. 1. But MF also criticized! Potential extreme outcome, weak agency (lack of information) and the inequality in market relations are the three characteristics of what R. Kanbur (2004) calls (ob)noxious markets Montgomery (1996) or Rahman (1999): Success through debt-cycling of borrowers + push to loans and loan recovery or into unsustainable sectors Weber (2001): MF facilitates liberalization Hulme (2004): Is credit best tool/targeted for poor(est)? Guérin and Palier (2005): Empowerment or disempowerment?

6. 2. Methodology: Where to start? Two approaches of MF: Bargaining approach - Market-based : both parties should find an interest ; Win-win (no reference to ?bargaining powers): Demand-based fair IR or even Marginal effect Right would implicitly constrain one of the two actors Libertarian Moral approach because of the socio-economic circumstances: Single possibility that a credit right is needed!

7. 2. Pros Arguments FOR a right to credit: Credit is central in welfare societies (Europe or US) Access to credit related to economic development (new WB databases) Credit right would also help for other rights (shelter, food etc.) Opposable right: French discussion on ‘Droit au logement’, create an institution that would be responsible rather than wait for the credit institutions

8. 2. Cons Arguments AGAINST a right to credit: No need to issue an additional right if other rights correctly applied Right is given (e.g. education, food), not a bilateral relationship Credit for productive activities BUT could be consumption (overindebtedness) & borrower responsible for credit use

9. Impact of MC? No correct study without bias (e.g. Kandhker 5%) ? See W. Pariente and M. Godquin sessions Women empowerment? Goetz and Sen Gupta (1996) found that, on average, only 37% of loans were either fully or significantly controlled by women Limits to the list of rights: Credit as important as education? Manifesto (allocation of duties & realism: feasability of the goal) right – Pogge (2002)

10. 3. Rights-goal Rights-goal approach (Sen + Eco-social convenant): Goals to reach No obligation of direct application Yearly evaluation Work for an institutional order Address the concerns & aspirations

11. Thank You!

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