Microfinance has a part to play in fighting terrorism

27 August 2015

A couple of weeks ago I visited our FINCA project and its clients in Nicaragua. Traveling with me was Matthew Glynn, a fine UK journalist from The Independent. We met with a number of clients who had started and grown businesses with the help of FINCA microloans.

On his return, Matthew wrote a feature piece for the Independent and a shorter piece for the London Evening Standard. In the Independent he quoted me giving my views on the role of microfinance in tackling terrorism:

“I heard someone say the other day, ‘Let’s be clear, we’re not going to fight terrorism by helping poor people with microfinance’. Well, guess what, we are, and it’s the only way we’re going to do it.

“We ignore at our peril the social ills of countries like Pakistan and Afghanistan where there is high youth unemployment and people may give their kids to a madrassa and a radical imam otherwise they might starve to death. … So how can we combat that? We have to give the family an alternative, maybe an opportunity to access microfinance – the ability to start and run their own business.

“It’s not going to be the only solution… but business, done in a responsible way and done as a social enterprise, is the solution to many of the major ills in the world, including poverty and terrorism.”

This is an accurate quote and I stand by it. I’d also like to take this opportunity to add that this is a truth that stands for any country: young people and parents must have economic opportunity or the risk of social unrest rises. In its extreme, unrest can spill into terrorism when the plight of the hopeless is used by those who would purposely do harm to others.

The first two responses I received in the wake of Matt’s two articles were, first, someone desiring to partner with FINCA for microinsurance, and second, a tweet from a former FINCA intern (El Salvador, circa 1995)-turned-microfinance-sceptic Dean Karlan, a professor at Yale, asking: “Does this really capture your view? Microcredit to fight terrorism?” We went back and forth a few times; me defending my position, he his. But this got me thinking. Perhaps it’s time I put my views on this issue right out there. So that’s what I’m doing now. I want to emphasize these are my personal views, not those of my organization.

I absolutely believe that business, done in a responsible way, is a credible alternative to delivering up your kids to being radicalized. And, for the record, I don’t accept the wide-spread premise that almost all terrorists are middle class and college educated. I’ve spent more than 40 years with people in some of the world’s poorest and most volatile places on earth and I can tell you, all the academics in the world won’t convince me to ignore what I’ve seen with my own eyes.

Many suicide bombers are brain-washed as children in madrassas by radical Imams who source poor, uneducated kids delivered to them by their impoverished parents because they can’t feed them. This is a fact. So, no, I don’t agree with author Alan Krueger et al that most terrorists are well-educated.

My albeit-short exchange with Dean on Twitter reminded me of a meeting a number of us from international NGOs had with a representative of the Bush State Department in the wake of 9/11. “Don’t think that this event had anything to do with the fact that the majority of the people of Afghanistan live in poverty, or that this means we will be ramping up spending on economic development in poor countries as a result,” he lectured us. The implication was the only way to fight Al Qaeda was with military force.

I remember thinking, groan, what a totally foolish and ignorant view! Well, we all know how that worked out. After billions spent in Afghanistan, the Taliban has regrouped and reconquered huge swaths of the country. The security situation has made much of the economic development work totally impossible. FINCA has managed to hang on there, where 90% of our clients are women supporting their families through small business efforts.

I also remembered working in Somalia with my FINCA partner, John Hatch, on a credit program for rice farmers in the Shebelle River Valley. The last trip John and I took there was just before the Barre regime collapsed, plunging the country into chaos and setting the stage for the country’s takeover by Al Shabaab, an Al Qaeda affiliate. To me, the absence of economic opportunities resulting from Somalia’s descent into ‘Failed State’ status was definitely a factor in the rise of terrorism.

I am not alone in this line of thinking. Here is a video of a very powerful TED talk by a courageous young Somali social entrepreneur named Mohamed Ali. He describes how terrorist groups seek out and recruit small-town, uneducated, unemployed young people with no prospects and no opportunities – and turns them into suicide bombers. And discusses entrepreneurship as a viable solution.

Mohamed is the Executive Director of the Iftiin Foundation, an organization that builds and supports young entrepreneurs to encourage a culture of change and innovation in Somalia and other post-conflict countries. He has a law degree from Boston College Law School. Mohamed works and lives in Somalia. He was born there, so he knows the country and the people. So if you can’t take my word for it, then take his instead.

Perhaps in the West we have a desire to overcomplicate things because we don’t have a reference point. Most of us have never experienced real hunger, real fear, real hopelessness. Most of us have never even seen people who are suffering from these things because we’ve never visited their countries – they’re ‘too dangerous’. That means, in order to make sense of the senseless, we resort to statistical and academic gymnastics.

Perhaps, if we tried harder to listen, learn and put a human face on the young suicide bomber, we’d begin to accept that the need to survive with dignity can drive people to embrace even the most senseless of options: terrorism.

If we could bring ourselves to accept that alleviating hunger, fear and hopelessness play a major role in the terrorism recruitment advertising package then we could start to see the enormous value of offering opportunity, support, hope and yes, microfinance, as part of the solution.

Rupert Scofield

Rupert


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There are 8 comments on “Microfinance has a part to play in fighting terrorism”:


  • Bob Price on August 28th, 2015 at 2:25 pm said:

    Couldn’t agree with you more Rupert. Be it in Karachi, San Pedro Sula or Baltimore, lack of economic opportunity (and the inequality that it creates) is the root cause of most human misery. Microfinance alone isn’t enough, but it’s part of the solution. Thanks for taking the fight to the skeptics.


  • Qasim on August 28th, 2015 at 7:07 pm said:

    This is an absolute relevant saying as unemployment is the major cause of terrorism but finca or other micro finance banks or institutions creating jobs for unemployed people.


  • Qasim on August 28th, 2015 at 7:07 pm said:

    This is an absolute relevant saying as unemployment is the major cause of terrorism but finca or other micro finance banks or institutions creating jobs for unemployed people.


  • GRAZIOSI ASCANIO on August 29th, 2015 at 10:17 am said:

    The title of the discussion intrigued me a lot and I clicked the line to know the original one and my first reaction has been that the former could be acceptable while the latter isn’t at all and I do say why. The tile of the discussion has a question mark and I congratulate Yehdega because it has arisen some doubts and open up for commenting .

    My answer is YES and NO. I do agree – but not entirely – on condition to add “sustainable”. I disagree for many reasons and here a couple of them: firstly, commentators should refrain to call in cause microfinance to explain whatsoever social phenomenon and this clarify my position on the partly agreement; secondly, a theory and a discipline isn’t (ir)responsible but the way people put it into practice are responsible for.
    By the way, I discussed in my Paper “MICRIFINANCE & POVERTY, Give people a job and not a loan” https://independent.academia.edu/AscanioGraziosi/Papers why and how microfinance has been launched as tool to fight poverty.

    Adam Smith when proposed the theory of capitalism didn’t encourage insatiable and greedy capitalists but along with economists put in plain words the idea.
    Unfortunately the promoters of microfinance fail to provide practitioners with the correct use of credit, which can’t solve poverty problems and this situation inaugurated an easy way to credit, which has been responsible for many financial implosions and even suicides.

    Financial leverage is important and sometime a necessary condition to start-up and growth business, of course, on condition that it is sustainable for the lender and affordable for the borrower.
    There is much more to say even from the relationship between capitalism and microfinance and other issues between the lines of the articles and I think that commentators will come forward.
    Owner, 2015 MICROFINANCE PRACTICE


  • GRAZIOSI ASCANIO on August 29th, 2015 at 10:17 am said:

    The title of the discussion intrigued me a lot and I clicked the line to know the original one and my first reaction has been that the former could be acceptable while the latter isn’t at all and I do say why. The tile of the discussion has a question mark and I congratulate Yehdega because it has arisen some doubts and open up for commenting .

    My answer is YES and NO. I do agree – but not entirely – on condition to add “sustainable”. I disagree for many reasons and here a couple of them: firstly, commentators should refrain to call in cause microfinance to explain whatsoever social phenomenon and this clarify my position on the partly agreement; secondly, a theory and a discipline isn’t (ir)responsible but the way people put it into practice are responsible for.
    By the way, I discussed in my Paper “MICRIFINANCE & POVERTY, Give people a job and not a loan” https://independent.academia.edu/AscanioGraziosi/Papers why and how microfinance has been launched as tool to fight poverty.

    Adam Smith when proposed the theory of capitalism didn’t encourage insatiable and greedy capitalists but along with economists put in plain words the idea.
    Unfortunately the promoters of microfinance fail to provide practitioners with the correct use of credit, which can’t solve poverty problems and this situation inaugurated an easy way to credit, which has been responsible for many financial implosions and even suicides.

    Financial leverage is important and sometime a necessary condition to start-up and growth business, of course, on condition that it is sustainable for the lender and affordable for the borrower.
    There is much more to say even from the relationship between capitalism and microfinance and other issues between the lines of the articles and I think that commentators will come forward.
    Owner, 2015 MICROFINANCE PRACTICE


  • mohamed sesay on August 30th, 2015 at 4:21 pm said:

    I do agree that microfinance has a positive part to play in reducing terrorism. However, it’s one of many social and economic interventions that can sustainably make a measurable difference. Microfinance on the economic end may motivate 20% of the village population to rise above the temptation of terrorism but what about the other 80%. It takes other interventions such as education, health, economic opportunity after education, safety and security, and mentoring channels to substantially reduce the other 80%.

    The good thing is that microfinance has the ability and potential to find innovative synergies with all the other intervention areas mentioned above. Microfinance can fund and build schools;it can help pay school fees; it can create economic opportunities; it can provide cover for the unanticipated such as health and other emergencies; it can provide opportunities to build bathrooms for your community; it can work with nurses to open rural clinics; it can create social groups and also give you access to complete a basic home structure–things that boost your sense of security. These social groups can also serve as a platform for information dissemination and mentoring. Microfinance and digital financial services can also reduce the financial inclusion gap and improve access to financial services.

    These are all areas of intervention that can reduce the interest and temptation that guides youths and adults towards terrorism. ‘Pure’ Microfinance has a positive role to play in all these areas as touched on in the above paragraph. BUT, it has a LARGER potential role to play when coupled with digital financial services, social, and other economic interventions.

    Microfinance should spread its wings towards social interventions in these areas susceptible to terrorism. The success will be matched with the effort.


  • Hugh Sinclair (@MFHeretic) on September 2nd, 2015 at 3:28 am said:

    I am skeptical of the claims regarding microfinance reducing terrorism. However, the Guardian just published a related piece entitled “If you really want to fight terrorism, start by fighting child poverty”
    http://www.theguardian.com/global-development-professionals-network/2015/aug/21/terror-groups-africa-recruit-children-from-kibera-mathare-slum-poverty?CMP=share_btn_tw
    This is obviously of relevance in your recent spat with Dean Karlan. I have been an advocate for microfinance banks adhering to anti child-labour policies for some time. However, I was unable to find any information on your website about protecting the rights of children, and in particular, about Finca MFIs only lending to clients who adhere to local child labour legislation. Your broad claim, if I may paraphrase it, is that microfinance reduces poverty and poverty leads to terrorism. This article focuses upon children. I wonder if you could clarify a number of questions:
    1) Does Finca (or rather, it’s MFIs) have a policy about not lending to micro-enterprises engaged in the illegal use of child labour? If so, could you describe the policy.
    2) What verification do you perform to detect illegal child labour?
    3) What action is taken in the case that a Finca client is engaged in the illegal use of child labour? How common are such cases?
    4) Beyond the isolated crime of illegal use of child labour, does Finca have policies that the micro-enterprises it funds must obey other local laws?

    In the case that Finca does not have a policy on preventing locally prohibited child labour among its clients, I have a final question:

    5) What other local laws does Finca not obey?

    A major drawback of child labour is that it restricts the child’s ability to attend school. Microfinance is directed at the informal sector, where the vast majority of child labour occurs. Therefore, it is at least conceivable that Finca is financing enterprises that engage in child labour. Beyond the ethical implications of this, child labour is simply illegal in all countries that signed the UN Declaration of the Rights of the Child – which includes every one of your MFIs. Unless you have some formal exemption from this law, I assume that Finca MFIs are bound by local laws, and therefore not permitted to lend to micro-enterprises that engage in such activities. This seems an apt opportunity to explain how you do this.

    Were Finca to be engaged in financing activities that use illegal child labour, this would imply that not only are you engaged in illegal activities (an awkward admission for a US based NGO), but according to this article, that you may be financing the precise activities that may lead to terrorism.


  • Cristian Shoemaker on September 3rd, 2015 at 4:46 am said:

    Thanks for speaking out Rupert and sharing real insights gained through being there, on the ground, listening and learning. Perspective matters, glad you are sharing yours.


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