Cash Pumps for the Poor: Can Microphilanthropism help with Poverty Alleviation?

Cash pumps for the poor?

Cash pumps for the poor?


The discourse on poverty alleviation naturally meanders into charity and philanthropy. Two types of charitable behaviour- philanthropy and microphilanthropy- have stemmed from a lot of development rhetoric calling to action the First World countries and communities on their “responsibility” towards the “less developed”, the “poor” in the Global South, and have the mushroomed into a full-fledged aid industry. It is replete with buzzwords (Cornwall and Brock 2005), PR schematics, lobbyists and stellar high-paid executives (Goldman 2009), and all else that is corporatesque. But there are two serious issues with associating the goal of poverty eradication to capitalist ideologies: one comes from likening the poor to consumers, and another comes from the need for consistent “ethical consumerism” versus a flaky loyalty to microphilanthropy that is susceptible to changing preferences and personal situations. These are addressed below.


The Poor As Consumers

The appeal of likening the poor to consumers (Prahlad 2006) under this capitalist framework, often comes from the ideology of making fortunes at the bottom of the pyramid (BoP) using the economies-of-scale justification. But there are two risks to the application of this ideology:

  1. Two important realities are missing in the ideology. The first is the misconception on what the poor actually want versus what they’re expected to want (Banerjee and Duflo 2011).  The second is the lack of surety in being able to use the economies-of-scale principle because of the mistaken assumption that being in the same economic bracket means the poor all want the same things (see the TED talks by Jacqueline Novogratz, Stewart Brand, Paul Collier, Esther Duflo). So implementing this ideology can have counterproductive outcomes, and hasty withdrawals could result, thereby leaving half-baked outcomes where interventions were made. This mass generalization for the poor raises the question of how one can liken the poor to consumers without doing the kind of market research that goes into products and services for people in higher economic brackets.
  2. When it comes to the poor getting credit, it is mostly as high risk borrowers on high interest, making debt profitable for microfinance companies. This in turn raises issues on regulating the microfinance industry or the risk of it becoming the new subprime industry (watch ‘Who Profits From Poverty?’ by The #GlobalPOV Project). Given the precarious economic crunch that the poor are in, a complete overhaul of the lending mechanisms is necessary to be able to genuinely serve their goals, which cannot be done with the goals of quick returns and the large profit margins endorsed today. Consider that Stiglitz pointed out that a 0% economic growth rate is actually reasonable but the minute the number falls below 3%, panic ensues in banking circles (watch Stiglitz talk at The Asia Society). A genuine adherence to the goals and preferences of the poor is comprehensively outlined in the works by Muhammad Yunus on microfinance and social capitalism, and echoed by others. For example, Mohini Malhotra and Richard Harris explain that when lending to the poor for housing, interventions will benefit the poor if designed to keep in mind that the poor prefer building incrementally rather than making bulk purchases.


But even if one takes the poor-as-consumers bottomline seriously, then it must be accompanied by larger considerations, and actions:

“‘Give a man a fish and you will feed him for a day, teach him how to fish and you will feed him for a lifetime’. Do the poor really not know how to fish? And what good is it to be taught to fish if the rights to fish are owned by powerful landlords, and the river is polluted by upstream tyrants? And what good is it to be taught to fish if one has to sell one’s fish to princely monopolies that command unfair prices?” (Ananya Roy, The #GlobalPOV Project)

Therefore, the overhaul has to be systemic. Ananya Roy takes from Yunus’ discussions on the work by BRAC (known formerly as the Bangladesh Rehabilitation Assistance Committee and then the Bangladesh Rural Advancement Committee) that aims to help the poor “find a foothold in local, national, and international economy” by “removing the trap of sheer survival and subsistence” and “transforming the entire economy in which the poor must trade” (watch ‘Who Profits From Poverty?’ by The #GlobalPOV Project). Specifically with respect to the issue of the environment in which the poor trade, Roy draws attention to the criminalizing of innovations that are made by the poor. This action leaves their businesses in a lurch because of their lack of competitive advantage compared to those who have the resources necessary to formalize their R&D work and IP rights.



The second issue with the ‘globalization of charity’ is that of microphilanthropism. A popular idea is that consumerism can result in the contribution of money or other tangibles to the poor communities worldwide. But as Roy (watch ‘Can We Shop To End Poverty?’ by The #GlobalPOV Project) points out, there are two problems with this ideology:

  1. “Fair trade” is an expensive privilege. It is currently the prerogative of consumers who do not have to worry about making ends meet. But the largest consumer market- and therefore the fate of consumerism for fair trade products- lies in the prosperous economies of Brazil, China, and India, where “fair trade has barely made an appearance”. Therefore, the largest markets do not reflect the “fair trade” ethic, and even within the First World “fair trade” is not universally incorporated in consumer goods markets.
  2. It is difficult to justify reducing the impacts of consumption on poverty to a product label, given the fact that a lot of the product production and trading processes are rife with labour exploitation in terms of both wages and living/working conditions. Instead, Roy calls for a focus on the life history of a commodity that would prescribe the removal of labour exploitation from the production equation.


Essentially Roy supports the case for ethical consumerism over microphilanthropism. The latter is deemed incapable of achieving poverty alleviation because personal donations are subject to individuals’ changing situations and preferences. And while “the poor” focus on necessities versus amenities and luxuries, it does not mean that they do not require significant sums of money flowing in consistently. Roy aptly said that poverty cannot be eradicated “by acting on thin loyalty towards the world’s poor”, and given the inconsistency of microphilanthropism, it is beneficial to focus on improving the working conditions and raising the wages of the poor rather than to feed them inconsistent sums of cash.


“Poverty is not the lack of a pair of shoes, poverty is not the lack of a microdonation, poverty is not the lack of a cow. Poverty is the violence of disempowerment. Poverty is the deprivation produced by systematic exploitation. Poverty is the long history of disinvestment in the communities of the marginalized.” (Ananya Roy, The #GlobalPOV Project)




One thought on “Cash Pumps for the Poor: Can Microphilanthropism help with Poverty Alleviation?

  1. Pingback: Loans & Debt versus Social Capitalism | Transnational Planning

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