What is microcredit?

Microcredit is a loan given out typically to poor people, ranging anywhere between $100 - $25,000. Unlike normal loans, microcredit does not focus too much on the borrower’s collateral. Instead, microfinance institutions try to teach basic money management and investing skills like how to use bank services and manage debt (or at least, that’s what they should do).

It is not a bizarre concept, and you want to believe it works. After all, giving out small loans to the poor to start their own businesses and become self-sufficient does sound great. Microcredit seems like a win-win solution: people overcome poverty, and microfinance institutions make money from interest. If only it were so simple.

Jason Hickel, an anthropologist at the London School of Economics and a microcredit dissident, argues that the idea of microcredit is very resilient and dwells like zombies refusing to die because, “It assures us that we – the rich world – can [fight] poverty in the global South without any cost to us, and without any threat to existing arrangements of political and economic power.”

Because the concept sounds easy, we hold on to it, but it’s not realistic.