How Much Voice for Borrowers? Restricted Feedback and Recursivity in Microfinance
| DOI | http://doi.org/10.1111/1758-5899.12474 |
| Published date | 01 November 2017 |
| Date | 01 November 2017 |
| Author | Philip Mader |
How Much Voice for Borrowers? Restricted
Feedback and Recursivity in Microfinance
Philip Mader
Institute of Development Studies, Brighton
Abstract
This paper studies the governance of microfinance and asks about its recursivity: whether the system is responsive to changes
prompted by feedback from borrowers or not. It draws on Hirschmann’s heuristic of exit and voice and the idea of participa-
tion in development, to examine three channels of feedback from borrowers to rule-makers and ask to what extent they have
facilitated or restricted recursivity in microfinance. The standardisation of microfinance along a financial template is shown to
have created very open flows of financial information, useful for monitoring clients’exit, but not granting them voice. The
more recent creation of systems for social performance management and pursuing ‘responsible’microfinance, however, has
not resulted in similarly robust information flows, because, despite intentions to capture client satisfaction and feedback, these
channels are severely restricted. They offer borrowers little chance to practically exercise voice and convey feedback which
affects the rules. Recursivity studies, it is suggested, might integrate participation and exit/voice frameworks to explore the
prospects of feedback from grassroots rule-subjects and better understand the factors that can restrict it. For microfinance, it
is suggested that government regulation and clients’collective action could be necessary where the sector’s governance
system shows itself to be unresponsive.
Policy Implications
•Microfinance, as presently conceived, is a top-down financial intervention with little scope for participation and voice for
clients, which has made it rigid and even potentially harmful to borrowers.
•Support for organisations which represent borrowers more directly, such as debtors’associations, could be more effective
than continuing with fraught efforts to channel borrower voice within the microfinance industry.
•Donors can support indigenous or grassroots financing initiatives (e.g. cooperatives) as alternatives to create competition
that indirectly pushes the microfinance industry to be more responsive.
•Government regulation for client protection –if need be including interest rate caps, rules prohibiting lending to particu-
larly vulnerable clients, and restrictions on strong-armed collection practices –should be implemented and strengthened.
1. Recursivity, participation, and voice
The concept of recursivity describes possible reciprocal
interactions between regulators and regulatees, and more
broadly between the making of rules and their implementa-
tion, when feedback triggers their revision. This paper con-
tributes to the study of recursivity through an examination
of microfinance, which, like many other programmes for
development, is premised on the idea that interventions
from ‘outside’can create favourable changes in the environ-
ments and lives of poor people. The idea of ‘participation’in
development, however, has challenged such a fundamen-
tally top-down logic and insisted that the voices of ‘benefi-
ciaries’and their local knowledge must inform development
programming. Participation has become deeply inscribed
into the development mainstream since the 1990s, as schol-
ars and activists have demonstrated repeatedly that the
designers and implementers of development programmes –
‘outsiders’, often from the global North, or members of
domestic urban elites –are usually deeply ignorant of the
circumstances that poor people, particularly in rural areas,
live in. Therefore, the latter must be allowed and enabled to
participate in –or better yet shape –development interven-
tions, both as a route to programme improvement and as
an intrinsic right (Chambers, 1997).
Participation is understood here with Chambers (1994,
p. 2) as ‘an empowering process which enables local people
to do their own analysis, to take command, to gain in confi-
dence, and to make their own decisions’. This may seem a
tall ask for microfinance; but it squares with popular depic-
tions of microfinance as an intervention that ‘recognizes
that poor people are remarkable reservoirs of energy and
knowledge [and microfinance therefore has] an untapped
opportunity to create markets, bring people in from the
margins and give them the tools with which to help them-
selves.’(KofiAnnan, cited in Brown 2010). Meanwhile, these
notions of hearing and including the knowledge of poor
people echo more recent conceptions of recursivity in gov-
ernance, wherein feedback from ‘below’triggers the revision
of rules (Malets and Quack, this volume). In both participa-
tion and recursivity, the idea is that systems which give
rule-subjects a chance to shape the rules are more adaptive
©2017 University of Durham and John Wiley & Sons, Ltd. Global Policy (2017) 8:4 doi: 10.1111/1758-5899.12474
Global Policy Volume 8 . Issue 4 . November 2017
540
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