Introduction

It is not that money is “just” a relationship. It is that all that we are, as social beings, is “just relationships.” These relationships include our moneys.

—BILL MAURER, HOW WOULD YOU LIKE TO PAY?

I first heard about microfinance when I was about sixteen years old. I had recently become interested in HIV and AIDS, by then a clear global crisis. This was the early 2000s; an estimated five million people were infected by the virus in 2004 alone. Treatments were technically available but often priced out of reach. While I was completing high school, over three million people died of AIDS.

I began volunteering with my local Planned Parenthood in Olympia, Washington, and, with the help of an energetic mentor, learned about movements to expand access to HIV treatment both in the United States and internationally. I was desperate to learn more about the broader world, how and why it functioned as it did, or more specifically how and why it could be so acutely, unjustly, dysfunctional. I read Mountains Beyond Mountains, Tracy Kidder’s chronicle of Paul Farmer’s health care efforts, Stephanie Nolen’s writing about HIV in Africa, novels set in Cape Town and Nairobi; I followed the impressive activism of South Africa’s Treatment Action Campaign. My mentor suggested that if I was interested in “global issues” I read something else, too: Banker to the Poor, by a Bangladeshi economist named Muhammad Yunus.

I had never heard of Yunus, or microcredit, the term he used to describe lending small amounts of money to poor women, a way to help them become self-sufficient. Yunus insisted that microcredit could end poverty. By giving women just a few dollars, they could start small businesses, then use those profits to take care of themselves and their families. Focusing on women would not only bring one of the most marginalized groups into the economy. Thanks to their sense of duty as caregivers, their success would also mean the success of their children, their communities. Yunus also argued they were more responsible than men, more likely to use the money well and repay on time. Through something as simple as a small loan, Yunus argued that gender equality could be achieved, economies and neighborhoods strengthened. My mentor, a staunch feminist, insisted that this was an idea that was changing the world.

She seemed to be right. Within a few years, Muhammad Yunus and the Grameen Bank he set up would share the Nobel Peace Prize “for their efforts to create economic and social development from below.” In 2010 alone, it was estimated that over two hundred million families were impacted by a microfinance loan. I began to notice the word “microcredit” everywhere: in newspaper headlines, in fundraising pleas from the international organizations I had recently become interested in, who now promised to give loans alongside health care so that the women they worked with could become economically independent. Throughout the early 2000s, microfinance seemed to be everywhere, even if mentioned only briefly: in college economics and international relations courses, by presidents,* at rock concerts, in interviews with celebrities,† at my family’s summer BBQs (the only time I heard any economic development program, let alone an international one, mentioned at such a gathering).

And then, suddenly, around the year 2010, I stopped hearing so much about microfinance. It was as if the program that had promised to uplift millions had quietly died.

Microfinance remained an afterthought until I moved to Sierra Leone, West Africa, in 2015, when I took a job with a health organization just as the country was emerging from the largest Ebola outbreak in world history. A couple of years into my stay, while talking with a colleague about her previous job at a Sierra Leonean legal aid organization called AdvocAid, she mentioned that AdvocAid had documented women being taken to the police and to prison for failure to pay their microfinance loans. She explained that the law in Sierra Leone enabled this because it penalizes debtors of all kinds, allowing for criminal cases to be pursued against them.

I have a vivid memory of how surprised I felt: of course, that women were finding themselves entangled in the criminal justice system for small unpaid debts. But also: that microfinance still existed, that people—many people, according to my colleague—were still taking out these loans, which, from my American viewpoint, formed by reading the news and conversations with academics and people who worked in international NGOs based back home, had fallen far out of favor. I remember saying something to the effect of, “I kind of forgot about microfinance!” My colleague, appropriately, snapped back, “Go ask anyone here, many people take it.”

Later that afternoon, I walked across the street to the fruit and vegetable vendor I often bought cabbage, mangoes, pineapple, and coriander from, asking her if she knew of anyone who had taken out such a loan. She, too, looked at me like I was an idiot. “Yes. I’ve taken out many. Many! Every few months. In fact, I have a few right now.” I asked her whether she had ever heard of anyone going to the police when they couldn’t pay back. She hesitated. She insisted she had never had a problem herself but had heard of other women who had, those who, as she put it, “weren’t very careful.” Back at the office, I asked a colleague whether he knew anyone who had taken out microfinance loans. “Yes!” he said. “My wife!”

Somehow, I had missed all of this, apparently blind to the circumstances around me. I had only paid attention to one side of the equation: those who designed and funded and talked up the astounding promises of new anti-poverty programs like microcredit. I had completely ignored the other side: the people who experienced those programs in their day-to-day lives, who lived with them long after books and celebrity campaigns promoted them. I wanted to know more. To understand how and why microfinance became so popular in the West, how its narrative changed—why it is I suddenly stopped hearing about the tiny loans—and how these changes continued to impact the lives of borrowers around the world, long after so many of us had forgotten about Muhammad Yunus’s promise that they would end poverty.

* * *

Microfinance, in its current form, came into being in the 1970s and 1980s, as “international development” transformed from a concept whose programs were designed and dominated by government wonks, to a booming global industry. Microfinance would not have been so successful were it not for the rise of this industry. And international development—now a broad umbrella term used to describe a tangle of programs and policies generally meant to make a country more economically prosperous—would not have felt so tangible to people in relatively wealthy countries—people like me—were it not for microfinance. To understand how and why Sierra Leone seemed blanketed in loans, I realized I would need to start not in the streets of Sierra Leone, but the halls of institutions like USAID and the World Bank.

I spoke with dozens of people who worked in the “early days” of modern international development and microfinance: with policymakers, bankers and investors, lawyers, academics, former Peace Corps volunteers, and consumer rights advocates. In total, I interviewed over 350 people for this book, from Sierra Leonean tomato sellers to USAID staffers. While I had email correspondence with Muhammad Yunus, who is now in his mideighties, he did not respond to several requests for an interview, although I did have extensive interviews with several people who worked closely with him. (In my research I learned that my mentor, the woman who had first given me Banker to the Poor when I was sixteen, had, for a time, run RESULTS, an organization that, as we’ll see, was essential to the popularity of Muhammad Yunus in the United States and globally.) I read his published books, including his PhD dissertation. In one email, Yunus suggested that, because memories and recollections can be unreliable, I focus on documents instead, which I have done wherever possible, combing through old microfinance manuals, the Sierra Leone national archives, newsletters and policy notes that date back decades, as well as histories of debt, international development, feminist movements, and trade and economic development in West Africa and elsewhere, among others.‡

As I dug into the history of microfinance, I realized that, in many ways, this was as much an American story as it was a Sierra Leonean or Bangladeshi one, with American policymakers, activists, feminists, and funders helping to create the conditions for my fruit and vegetable vendor, and those two hundred million other families, to take out a microfinance loan. To learn about the history of microfinance, I needed to learn about the history of American economic policy, both at home and abroad, to reconsider how we understand and explain our own approach to poverty and inequality, and what the American government, American institutions, and Americans themselves think we should do about it. I wanted to know what it was about these tiny loans that so interested Peace Corps volunteers and USAID staffers and, later, Silicon Valley investors and philanthropists, wanted to know how their viewpoints and experiences shaped one of the most lasting and impactful foreign interventions of the last fifty years, one that has morphed into a multibillion-dollar industry. What were they reading, who were they talking to, what was the political discourse at the time that made an idea like microfinance feel simultaneously exciting and new, something many advocates felt like only they could truly understand and believe in, and at the same time obvious, even inevitable, an idea that major Western institutions would come to back? It will be easy to criticize this book for being too deeply rooted in a Western, particularly American perspective, but that is the point. This viewpoint has, in many ways, affected the lives of millions of people borrowing small amounts of money, millions of people trying to get by. (In the same breath, as you’ll see in these pages, in many other ways it hasn’t changed the main texture of their lives, just some of their particularities.)

My aim was not to cover every actor or historic moment in microfinance, to expose those who make money off the for-profit aspect of the industry, or even to argue whether microfinance works or doesn’t—as we’ll see, determining if a loan is “successful” becomes very complicated when you actually talk to people taking on the debt. Those who know the history of microfinance well will no doubt complain that I missed many people and events in this book, and that is absolutely true. Microfinance is so broad, stretching far back into history and with a wide geographical reach, that it would be immensely difficult to capture everything. My goal was broader: to explore how different people and different ideas in different parts of the world influence one another, often in ways they are unaware of, and to examine the lasting, sometimes unintended imprint of that influence.

Mostly, I wanted to know how women themselves understand these loans. So, in the summer of 2019, by this time having moved back to the United States and having fully transitioned to journalism, I returned to Sierra Leone. I started by interviewing the staff at AdvocAid, the Sierra Leonean legal aid organization my colleague had worked with, which helped women who were taken to police stations and jails because of unpaid debt. I pored through years of data they had collected. I followed their paralegals to court cases and women’s prisons across the country. Through AdvocAid, and just by hanging around police stations and market stalls, I met women who were awaiting trial or in jail for unpaid debts or other petty crimes, or those who had already been in prison for unpaid debts, sometimes for years, often without an official trial. To make sure I was understanding the breadth of the problem, I also attended court cases and interviewed prisoners independently from AdvocAid (visits were sometimes facilitated by the Legal Aid Board, a government body). I interviewed judges, lawyers, police officers, legal advocates, journalists, and whatever microfinance staff would speak to me, mostly loan officers and mid-level managers. I spent weeks at the Sierra Leone national archives learning about the history of debt and small-scale trade in the country.

And I spoke to as many women who had taken out microfinance loans as possible. I wanted to know so much more, not just about entanglements with the legal system but about how the debts functioned in the local economy and their lives. I went to markets across the country, asking what must have seemed like inane questions to fruit vendors and sellers of used clothes. Where do you get money for business? How much do you sell this T-shirt for? Why did you set that price? How did you decide which microfinance company to borrow from? Where did you borrow from before? How do you use money? Where do those mangoes even come from? I spoke to over a hundred market women that summer. The majority had taken out microfinance loans. Their experiences varied widely, but all were built on hope, a series of “ifs.” If I had money; if I had a bigger business; if I had a fixed location to sell my wares from, rather than my house; if I could buy goods from China and bring them directly here; if I could buy cheaply from rural areas to sell in town. If, then life would be better.

For some of the women, the ifs had borne out. Out of the hundred I interviewed, I met three who said with certainty that they had been able to expand their businesses thanks to a microfinance loan—several others said more substantial help came from family or political connections, or conceded they succeeded because they already had a steady business, with the loan just offering a cherry on top. Of the three changed by microfinance, one had a particularly dramatic story. She said the only reason she was able to leave her husband, who became abusive after he learned she was HIV positive, was the freedom a microfinance loan offered. She used the money to start a successful fish business, eventually remarried, and by the time we met had enough money to comfortably take care of herself and her kids. The second successful woman sold plastic jewelry in the country’s main market and took out a $60 loan to expand the wares on her table, facilitating more sales. The third was an incredibly elegant woman, who gave off the scent of a newly opened perfume bottle; she had bundled together multiple microfinance loans to buy a plane ticket to China, bringing back suitcases full of beauty supplies to sell out of a hair salon in Sierra Leone’s capital, Freetown. (I later learned that she not only had several microfinance loans but also loans from a commercial bank, and even, she said, a credit card—the first businesswoman I met who had one.)

But I met many more women who complained about the loans. That they were too small to do anything substantial with, that the repayments were too high and came too fast or that they ate into their profits, essentially nullifying any business growth. I noticed that these women were visibly poorer than the ones who said they were successful, with clothes worn thin and stalls that were less impressive. To help make payments, many had taken out multiple loans, one to pay off another, from multiple sources: different microfinance companies, their husbands’ bosses at work, another trader—a balancing act that seemed at once to be working, in that they were staying above water, but was also immensely stressful. Every single one was clear-eyed about the risks of debt. They had seen friends go to jail, neighbors or family members who had left their homes and communities when they could not pay off a loan. But they also described tangible benefits. Not of launching successful businesses that propelled them out of poverty, as Muhammad Yunus promised, but more basic wins like covering school fees and annual rent. Many of the women said they were “managing,” a word used in Krio to suggest they were getting by, but only just.

I could not outline the story of one hundred women in these pages. Instead, I decided to focus on two groups of borrowers who might help me, and hopefully you, learn a little bit about how microfinance functions in a place like Sierra Leone. Their stories, which take place over several years, are interspersed here, in between a history of modern microfinance.

One of the groups is in Freetown, a sprawling city of just over one million people on the Atlantic coast, and another in Koidu, Kono, the largest town in the country’s diamond district, a rural area in Sierra Leone’s lush eastern hills. The Freetown women live in Two Taps, a poor but not acutely impoverished neighborhood hidden beneath some of the city’s most spectacular pockets of wealth. The houses here are sturdy, some people have jobs, many of the women I met are married, have TVs, and send their kids to private school. Yet sewage still flows through the streets and corrugated iron roofs still leak with each monthslong rainy season. In Kono, I met a group of women in Old Post, a neighborhood on the outskirts of town, in the shadow of one of the city’s largest mines. These women are considerably poorer than those in Freetown. Only a few are married, none have TVs, and all send their children to free government schools. By following these two groups of women over several years—one relatively rich by Sierra Leonean standards, although poor by any other comparison, another deeply impoverished—I hoped to better understand how microfinance works, or doesn’t, in one of the poorest countries in the world.

A few comments on wording: This is a work of nonfiction. However, certain names have been changed. In these pages, I use the terms “nonprofit” and “NGOs” to describe private organizations that officially function outside the government. The ones I refer to here are often, but not always, based in or have offices in America and Europe, with programs focused on poorer countries; for reasons we’ll go into, these organizations dominate narratives, economies, basic services, and government policy in places like Sierra Leone. I use these terms interchangeably, even though sometimes nonprofits do make a profit or have a profit-making arm and even though “Non-Governmental Organizations” often work on government-affiliated programs, shape government policy, and rely on government funding. I interchangeably use the terms “microcredit” and “microfinance” to describe small loans given to poor people with the stated intention that they will use them for business. “Microcredit” was primarily used in the early days of such programs, with “microfinance” becoming more prominent after 2005 or so. Although they are deeply flawed, reductive, and limited, I use the terms “developed countries” and “developing countries” to denote countries that are currently wealthier and those that are currently poorer, primarily because these are terms used by those I interviewed and in the books and documents I reviewed. Sometimes, I talk about “the West” as a shorthand for these relatively wealthy countries, namely Canada, the United States, and Western Europe. I use “international development” to denote policies and programs that broadly attempt to set a country and its citizens on a “wealthier” trajectory. When citing interest rates for microfinance loans, I indicate whether the rate is for the length of the loan or an annualized interest rate (although as we’ll see, loans are often extended if a borrower is late, which can push up the interest rate). To calculate dollar amounts for the Sierra Leonean chapters, I used a ten-thousand-to-one leone to dollar conversion, given that the exchange rate fluctuated greatly over the period of reporting (2019–2022).

Finally, a note on the tempo of the women’s stories: Because the women you’ll meet here, even the relatively wealthy ones, are impoverished by international standards, their lives are not full of movement and action. Bound by societal expectations, childcare, the need to tend to little stalls of goods they’ve set up in their living rooms, and—most important—without money to go anywhere or a job to go to, they are largely confined to their homes and neighborhoods. They find ways to pass each day by trading stories and dreams and memories from porches and plastic chairs. While many aspects of their experiences are immensely stressful, their minds busy and their internal lives complicated and expansive, their ability to move around—whether to buy groceries at the local market, visit their daughter down the road, or see their family hundreds of miles away—is severely limited by their circumstances. While Western narratives are dominated by action, drama, and tension, the women I met are characterized by long periods of waiting, punctuated by moments of hope and planning and violence and fear. I urge you to set aside your expectations of a neat traditional narrative, and allow yourself to enter, very briefly, their worlds. If nothing else, I hope this book encourages readers to be humble enough to recognize the limits of their knowledge and curious enough to explore, openheartedly, that which they don’t know.



CHAPTER 1. Twenty-Seven Dollars to Forty-Two Women

In 1992, Muhammad Yunus, an economist from Bangladesh, was about to become famous. His rising recognition was helped when Bill Clinton, then governor of Arkansas and a prominent presidential hopeful, told Rolling Stone that year: “Muhammad Yunus should be given a Nobel Prize.”

Yunus and Clinton had met several years before, in the mid-1980s; a friend of Bill’s wife Hillary had made the initial connection. Clinton, whose presidential campaign hinged on reforming—and later gutting—welfare, was on the lookout for alternatives to an economic system that many voters felt was rigged, a feeling that had become particularly acute during the early ’90s recession. (Famously, his unofficial 1992 campaign slogan was “It’s the Economy, Stupid.”) In their meeting, Clinton and Yunus found they had a lot in common. Clinton was “blown away” by Yunus’s commitment to promoting “independence, not dependence,” to making “enterprise work.” They agreed that a reliance on the free market to create jobs and solve poverty was better “than creating a bureaucracy to hire a bunch of full-time people to give somebody a check.” Clinton hoped to empower America’s “dependent” communities—which he called “economic basket cases,” where income only came “from the government or from drugs”—by using, among other things, “a different sort of banking system,” such as the one that Yunus had set up.

At the time of the Rolling Stone interview, Muhammad Yunus had already gained recognition among philanthropists, people working in international aid, and the occasional banker interested in doing good. The Grameen Bank, which Yunus had founded a decade before, had already been funded by the World Bank and the Ford Foundation, the second-largest private foundation in the United States. Yunus had even been invited to speak to the U.S. Congress.

But outside of special committees and niche finance and international development circles, few people had heard of Grameen or Yunus or his concept of microcredit. One of the journalists interviewing Clinton remarked that he seemed to be one of the only people who knew of the guy.

That was about to change. The world was on the cusp of learning the same story that Yunus told Bill and Hillary Clinton, the World Bank, the Ford Foundation, and American statesmen: how a few dollars, lent to a few women, could change the world.

It went something like this.


Copyright © 2024 by Mara Kardas-Nelson