Fair Use: Let’s Learn about Microfinance

The prompt for this assignment asked us to teach the class about something we are interested in or passionate about. I’d like to think I’m passionate about the things I teach my students in the classroom, and so for my topic, I chose one of my favorite lessons to teach. My primary academic background is international relations; in particular, I’ve always had an academic/research interest in the Global South, transitional justice, and international development. In the past, I’ve included one class session that focuses on strategies for international development in my intro to political science or comparative politics courses. What is being done to move Global South countries out of poverty and towards sustainable development and rule of law? Obviously, there is a whole lot that you can talk about related to this, but for the purpose of this assignment, I am going to teach you about one development strategy (of many): microfinance.

What is Microfinance?

Image of Muhammad Yunus speaking and smiling with two women.
Muhammad Yunus, the economist who pioneered the practice of microfinance in Bangladesh, won a Nobel Peace Prize for it in 2006. Credit: Eric Thayer/Reuters. Source, New York Times, at this link.

Microfinance started in the early 1980s with the founding of the Grameen Bank in Bangladesh by Mohamed Yunus. Yunus founded the Bank based on the premise that, because you have to have money to make money, it is difficult for people to pull themselves out of poverty. Banks only offer loans to people with money, good credit, or collateral—things that no person in poverty has. According to Forbes:

“For the world’s poor who survive on less than $2 per day, banking services are unavailable. Without access to a safe place to store savings, the poor cannot get a loan to start a business. And without a job or collateral for a loan, no bank is willing to lend.”

Thus, Yunus developed the Grameen Bank as a nonprofit organization that gives small cash loans to people in poverty, with the intent that these individuals use the money to start a small business. Grameen Bank and manny other microfinance institutions (MFIs) promote development by providing these small cash loans (a couple hundred dollars, perhaps) to individuals. But does it work?

Image of a small green plant, sprouting up from a small pile of gold coins.
Image source: http://www.grameen-info.org/what-is-microfinance/

Benefits of Microfinance

It (Sometimes) Works. According to some studies, MFIs have the potential to reduce poverty rates. For example, a 2012 study in peer-reviewed World Development journal by Imai, Gaiha, and Thapa indicated that countries with more MFIs had lower levels of poverty indices. According to the authors,

“Taking account of the endogeneity associated with loans per capita from Microfinance Institutions (MFIs), our econometric results consistently confirm that microfinance loans per capita are significantly and negatively associated with poverty, that is, a country with a higher MFIs’ gross loan portfolio per capita tends to have lower poverty after controlling for the effects of other factors influencing it…These results suggest that microfinance not only reduces the incidence of poverty but also its depth and severity.”

Empowering to women. Many MFI loans are targeted towards women. Women in developing nations typically cannot open a commercial bank account (they represent less than 1% of all loans from commercial banks), so MFIs give women more opportunities for women-led entrepreneurship.

Builds community and wraparound services. Lastly, some MFIs can foster community solidarity and wraparound services. The Grameen model was based on the idea that loans were granted to individuals, but each individual must belong to a five-member group of other borrowers. These groups provide support and accountability for repayment. Other MFIs have diversified to provide wraparound services along with microlending, such as the provision of insurance, savings accounts, healthcare, or recreational activities.

Problems with Microfinance

Macroeconomics. Critics of MFIs accurately point out that certain macro-level problems, such as the lack of borrower education, an inefficient or corrupt national government, poor infrastructure, and weak economy all prohibit microfinance from having a positive impact on poor communities. If borrowers are uneducated on how to make the most of their loan, or corrupt government officials can’t guarantee property rights, licenses to run businesses, etc., the loan will not lead to growth. If there are no roads to transport goods to customers, the loan will not turn a profit. If there are no buyers for goods, the loan will not turn a profit. All of these macro-level problems are untouched by microfinance, and yet drastically impact the potential of microloans to be successful vehicles of development.

This photo shows an empty wallet, and quotes MFI borrower Kutaisi as saying, "I [took the picture of the] empty wallet to signify monthly expenditures, the increase of dollar rate..."
Photo taken by a MFI borrower. Image is from 2016 a synthesis report by the Smart Campaign, http://www.smartcampaign.org/
Potential for exploitation. Due to the nature of the loans (to rural areas, small amounts, etc), the loans are very expensive to manage, and so MFIs have high interest rates. Even at the Grameen Bank, interest rates can be around 20%–not very many activities will pay back at that rate and allow for growth. This means businesses must be run extremely efficiently to make a profit at all. In addition to claims of exploitation by the nonprofit MFIs, some MFIs are for-profit organizations, and according to the New York Times article, “Banks Making Big Profits from Tiny Loans,”

“Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100 percent or more.”

MFIs like these can saddle already impoverished individuals with huge amounts of debt that they are unable to pay, and are an example of exploitative banking practices disguised as “development” work.

Conclusion

Obviously, no “magic bullet” to eliminating poverty exists. Proponents of MFIs often expound the benefits of microfinance while ignoring the harm it can have in a community when it is not done responsibly or paired with other wraparound services or other development efforts. Conversely, those opposed to MFIs often only focus on the examples of predatory institutions, and ignore the real, positive changes that microfinance can have in the life of an individual in poverty.

Fair Use of Copyrighted Materials

According to the US Code on Fair Use:

“The fair use of a copyrighted work… for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include: the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; the nature of the copyrighted work; the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and the effect of the use upon the potential market for or value of the copyrighted work.”

The copyrighted materials I used in this short lesson include:

  1. Photograph from the New York Times
  2. Quotation from a Forbes article
  3. Quotation from a scholarly journal
  4. Images from two non-profit websites

I contend that all of these materials I used in this lesson were used “fairly,” or in accordance with Fair Use laws because they meet these four criteria outlined above (and below).

1. Purpose and character. All of the materials I used meet this first requirement; they are used for a nonprofit, educational purpose. I would also argue that the use of all of these materials represents “transformative” use of the materials. According to Appendix A in our required readings,

“Cases have reinforced the notion that for a use to be considered “transformative,” it need not—as, in fact, it usually does not—entail a literal modification or revision of the original material. Instead, it is crucial that it has put that material in a new context where it performs a new function. Thus, the reproduction of an image to illustrate the argument of a scholarly article could qualify.”

All of the images and quotations that I have used do represent a “transformation” of the original piece of copyrighted material, since I am using them for a different purpose/function. My work will be the subject of review or commentary by my instructor and classmates in ED 654, making it transformative.

2. Nature of the copyrighted work. Factual works are more likely than creative works to be protected under “fair use,” and so I think that the quotations I used are “safer” than the images/photograph. However, I think both the quotations and the images still meet this test of factuality. (I would probably be most concerned about the photograph from the NY Times, since it is definitely more of a creative work- I’d be curious to hear other Nousion-ites thoughts as to whether or not they think the photograph I used meets the criteria for “fair use.”)

3. Amount and substantiality of copyrighted work. I did not use the entire work of any of these materials; for example, the NY Times photograph is one image in a 7-image photography gallery on microfinance. Similarly, the quotations are short excerpts, and I only used what I needed. I also did not use the “heart” of any of these works.

4. Effect on real/potential market value. My use of these copyrighted materials will not prevent others from purchasing or accessing the work. All of the materials that I used, except for the scholarly journal, are free for my readers to access if they follow the links I have provided. To ensure that I did not harm the market value of the scholarly journal, I provided the DOI link instead of posting a link directly to the PDF. If our class was meeting within Blackboard or another password protected LMS, I would’ve been able to post the journal’s PDF, because everyone who would be able to access the article would already have access through UAF library.

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