After the Nicaraguan Non-Payment Crisis: Alternatives to Microfinance Narcissism

This article argues against microfinance narcissism' and calls for a re-politicization of the microfinance paradigm. The dominant verdict on microcredit has undergone a damning transformation, from magic bullet for poverty reduction' to cause of suicide'. Nowadays, both radical critics and mainstream voices deplore microcredit's negative impact on micro-entrepreneurs. They argue for a reorientation where credit is targeted at established small and medium-sized enterprises, particularly in rural areas. The crisis in microfinance worldwide, including burgeoning protests, are viewed as proof of the commercial derailment and/or misplaced faith in microfinance's positive social and economic impact on the poor. This article engages with this debate through a study of the Nicaraguan micro-finance crisis. It challenges existing analyses that pin the crisis on agricultural over-indebtedness, lack of due diligence, or Sandinista populist politics. Illustrating the dangers of neglecting the diverse nature of microfinance, it reveals the paradoxical outcomes of the crisis: a refocus on the urban at the expense of agricultural credit for small and medium enterprises and a consolidation of the power of national processing elites. Nicaragua's Non-Payment Movement is also shown to be both a product of elite manipulation and an expression of legitimate resistance to an industry that turns a blind eye to the manner in which markets and politics constrain clients' potential.