South Africa's Post-Apartheid Microcredit-Driven Calamity

Although once universally lauded in international development community circles as a ‘magic bullet', in recent years the concept of microcredit has been increasingly recognised as having had a number of seriously adverse impacts in precisely those countries, regions and localities wherein it has gained the strongest foothold. This paper argues that the microcredit model in South Africa provides one of the most vivid examples of this revised understanding. I argue that microcredit has been one of the most calamitous financial sector interventions impressed upon post-apartheid South African governments by the international development community. Adherence to the ‘anti-developmental' microcredit model has manifestly added considerable impetus to the ongoing and widely recognised trends pushing South Africa's economic structure in the direction of further de-industrialisation, informalisation, disconnectedness and primitivisation. Needed progress towards greater trust, equality, solidarity, reciprocity, mutual support and social justice in post-apartheid South Africa has been undermined and blocked by the increasingly Wall Street-style operations of those financial institutions providing microcredit to South Africa's poor. I compare this adverse performance to a stylised benchmark local financial model that I call the ‘developmental' local financial model, a financial model that proved to be a major factor in post-war European and Asian local economic development successes. Overall, my contention is that microcredit should more accurately be viewed as South Africa's own sub-prime-style disaster which, like the original US version, has mainly served to benefit a tiny financial elite working within and around the microcredit sector, whilst simultaneously destroying many of the most important pillars of the economy and society