For millions around the world, the violence of financial inclusion has become an ordinary part of life. Predatory lending under the guise of financial inclusion is linked to debt traps, land dispossession, collateralized social security, and worsened working and living conditions. Precarious workers are forced to take on reproductive debt as a survival strategy because they have been deprived of their means of subsistence by development-induced displacements or the slow violence associated with mounting agrarian and climate crises. In his contribution to the “Pluriverse of Peace” series, Anil Shah examines this situation.
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In five years, poverty should be a thing of the past. At least, that’s the goal the United Nations set in 2015 when it adopted the first Sustainable Development Goal (SDG). However, it does not appear that this goal will be achieved. The World Bank’s Poverty, Prosperity, and Planet Report 2024 claims that currently 44 per cent of the world’s population lives below a poverty line adequate for middle-income countries ($6.85 per person per day). The same study confirms that the number of people living below this threshold has remained nearly constant at roughly 3.8 billion since 1990. If current trends persist, eradicating poverty will require more than a century. Given the accumulating planetary crisis that is already wreaking havoc in many parts of the world, it is surely debatable whether another hundred years of economic growth is possible or even desirable. How, in this context, is the fight against poverty envisioned by international organizations, development agencies, and NGOs?
In the twenty-first century, financial inclusion has emerged as the most important international anti-poverty strategy. Allegedly, providing people with access to credit and other financial services helps them to better manage their precarious lives. The rationale goes as follows: low-income households could work their way out of poverty if they invested credit productively into small enterprises. This approach implies that poverty results, at least in part, from not owning a bank account or lacking access to mainstream financial institutions. But more than three decades after the hype around microcredit and the entrepreneurial spirits of the poor started, one must seriously question the effectiveness of this approach. After all, systematic reviews of impact assessments maintain that financial inclusion interventions have minimal and inconsistent effects on poor people’s livelihoods.
The financialization of social reproduction
Instead of understanding poverty as merely a lack of money or access to finance, critical scholars and activists have long emphasized that the demand for money and its scarcity among working-class households are rooted in the exploitative dynamics of uneven capitalist development, marked by colonial, patriarchal, and racial power relations. In the neoliberal era, those populations excluded from accessing commons or public provisioning through privatization and commodification are now offered loans and other financial services to make ends meet. Feminists have especially highlighted how this financialization of daily life only becomes possible and necessary because of a structural crisis of social reproduction. That is, a situation in which subaltern classes, and particularly women and girls, can safeguard their household’s survival only by compromising on essential living conditions, including the depletion of their own time and energy.
Today, most microfinance companies are consciously banking on this pervasive crisis of social reproduction. In the past two decades, for-profit companies have come to dominate the sector. The aggressive expansion of their business model is based on two pillars. On the one hand, they have attracted funding from institutional investors by securitizing their loan portfolios, linking poverty lending with global finance. On the other hand, they have designed customized loan products responding to the fundamental precariousness of subaltern classes. Most of the microfinance debt is not for entrepreneurial purposes. It serves to pay for food, housing, health care, education, or to repay other loans. The World Bank’s Global Findex Database confirms that most people worry about monthly expenses, medical costs, and school fees. At the same time, the need for money to support a business is only a minor concern.
Capitalist development produces precarious lives
The violence of financial inclusion is more than just a metaphor used to challenge the benevolent discourse promoted by international organizations, development agencies, and corporate finance. Rather, it is a call to shift our attention from superficial engagements with bank account ownership and credit conditions to an understanding of the dynamics of reproductive debt. Most unbanked households are not small-scale entrepreneurs, but subsistence producers and precarious wage workers. Therefore, we can only make sense of the demand for credit by engaging with their unstable and insecure working and living conditions.
I investigated the background stories of the demand for reproductive debts by drawing on interviews with migrant construction, domestic, and garment workers in Bengaluru, a major microfinance hotspot in South India. Something that runs like a red thread through these interviews was the dynamic interlocking of expropriation, exploitation, and exclusion. These workers all experienced a structural subsistence crisis, where their cumulative monthly household incomes were permanently insufficient to meet necessary expenditures.
Precarious workers are forced to take on reproductive debt as a survival strategy because they have been deprived of their means of subsistence due to development-induced displacements or the slow violence associated with the mounting agrarian and climate crises. They turn to microfinance companies because they are excluded from decent housing, public infrastructure, and effective access to government welfare schemes. And they borrow money from employers or landlords, because the wages they receive for literally building and cleaning the city, or producing commodities for the world market, are below subsistence levels. Thus, addressing the problem of poverty systematically means countering the class-based, gendered, racialized expropriation, exploitation, and exclusion of subaltern classes.
The extractive violence of reproductive debt
The violence that subaltern workers experience while in debt is closely tied to the profits recorded by microfinance companies and other financial institutions. In contrast to credit invested in productive enterprises, reproductive debts do not generate a returning flow of money. Suppose people take on a loan to pay for privatized health care, food, or housing. In that case, these investments certainly contribute to safeguarding their social reproduction – but they do not create any revenue from which the borrower can settle the debt. In other words, the rising demand for reproductive debts enfolds working-class households across the globe in chronic indebtedness vis-à-vis different creditors.
This tendency raises important questions which lie at the heart of understanding the violent nature of the financialization of social reproduction: How can lending money to poor households remain profitable if they are primarily using loans for reproductive purposes? And how can precarious laborers sustain chronic indebtedness without constantly defaulting?
In my book “The Violence of Financial Inclusion,” I identified several complementary mechanisms that help to explain how profit-oriented and financialized microfinance companies continue to extract revenue from chronically indebted households: borrowers must sell their meager belongings, such as small landholdings, livestock, and jewelry; cut back on nutrition and health care; collateralize social security programs by redirecting cash transfers to pay off debts; and juggle different types and sources of loans. Furthermore, chronic indebtedness entrenches their subordination as precarious laborers, especially when workers must pawn their future labor capacities with contractors, work overtime or multiple jobs to generate incomes by any means necessary. These strategies may temporarily ensure solvency amid chronic indebtedness. And they also ensure the profitability of commercial microfinance. At the same time, however, they exacerbate the structural subsistence crisis among subaltern classes.
Reproductive debts as an entry point for social struggles
These trends are not only visible in India. Other dynamic microfinance regions in the world, like Cambodia, South Africa, and Argentina, experience similar developments. In all these cases, predatory lending in the name of financial inclusion is associated with debt traps, land dispossession, the collateralization of social security, and a heightened precarity of working and living conditions. Moreover, these tendencies are intimately connected with the increasing financialization, authoritarian restructuring, and militarization of states and economies. The violence of financial inclusion has become an ordinary part of the lives of millions across the globe. This does not mean, however, that it is being passively accepted by the many. There are multiple ways in which chronic indebtedness is contested.
In some cases, such as the 2020-2021 peasant movement in India, the fight against chronic indebtedness is part of a broader movement against the corporatization of the agrarian economy. In other cases, such as the 2018 feminist strike in Argentina, the issue of subaltern indebtedness becomes politicized as part of a fight against the systemic creation of precarious livelihoods and violence against women and transgender individuals. This prefigures the broader struggles against austerity measures, which were initially designed to fuel neoliberalism and, more recently, the global arms race.
These examples show that the pervasiveness of reproductive debts can be strategically politicized to fight against authoritarian neoliberalism. Progressive movements, trade unions, and civil society initiatives are well advised to take the violence of reproductive debt in the name of financial inclusion seriously. As chronic indebtedness increasingly becomes a normalized condition for parts of the global working class, it can also serve as a powerful lever for mass movements addressing the root causes of global poverty.