Your Family and Friends are Collateral: Microfinance and the Social

Microcredit is part of a global push for financial inclusion that brings banking services, and especially debt, to the world’s poor. These loans are framed by the development industry as highly regulated and deeply social, and the wider banking system thinks of them as distinct from conventional borrowing. For conventional debt, some sort of asset or physical collateral (things like a house, car, or waged job) is usually pledged to the bank to establish creditworthiness. If the borrower does not pay, the bank simply seizes the asset to cover the losses on the loan. Microcredit relies on mutually guaranteed “solidarity loans” backed by the social ties of groups of borrowers, instead of property, for collateral. As microcredit has grown into a broad suite of financial products, it has been critiqued for its role in commoditizing the social ties of borrowers, most famously women.

When global-development organizations, such as the Grameen Bank in Bangladesh, discovered that women rarely had assets they could use to collateralize a loan, microcredit programs substituted social collateral—an asset women were thought to have in abundance. My research on microfinance programs in Paraguay focused on a local nongovernmental organization that lent small sums, usually less that $100, to groups of fifteen to twenty-five neighbors who repaid in collective installments over three to four months. By mutually guaranteeing one another’s loans and applying peer pressure to group members who fell behind on their payments, women achieved remarkable repayment rates while microfinance fulfilled its stated mission of so-called financial inclusion.

Development organizations are reconceptualizing forms of social embeddedness that have long been the focus of anthropological and substantivist approaches to economic life as a resource. New financial systems have been created through lending that converts family, friends, and neighbors into collateral. Often the effects are chilling (see Elyachar 2005; Karim 2011). Much of the critical vocabulary used by anthropologists to describe how microfinance banks on the social networks of the poor focused on these programs as (1) extractive, in that they commoditize women’s social ties, and (2) coercive, in that they fundamentally alter social relations in extracting financial value from them.

My own feminist research agenda, which is sympathetic to these Polanyian critiques of anti-social capitalist markets, is confronted by microfinance programs that justify their lending schemes through banking on social ties. A common analytical thread connects microfinance programs and their outspoken critics: both rely on “the social” as the basis for interpreting the economic lives of borrowers. Put another way, both the authorizing discourse of microfinance and anthropological critique of commodification ground their respective value production on “the social.” Their respective aims are of course very different, and yet the two together make microfinance seem to be fueled—almost naturally—by women’s social ties. Both industry professionals and microfinance skeptics take social collateral as a given, and in doing so, both rely on “the social” as a tool to repackage women’s economic embeddedness, thereby converting existing social relationships into incredibly successful financial products, as well as critiques of financialization.

Neither approach, however, actually tells us very much about how social collateral is generated, and how collective debt produces its social units. Other forms of analysis are available. By returning to core theories of labor and gender, for instance Leslie Salzinger’s (2000) pathbreaking work on manufacturing sexual subjects, I was reminded to track—as only ethnography can—how certain economic practices actually create and stabilize the supposedly inherent social embeddedness of particular people, however unequally, throughout the financial system. For women who borrowed, the everyday business of managing collective money, meeting as a group, submitting to a personal credit check that was compiled for group creditworthiness, and so on, not only drew on, but actively manufactured social collateral while working to reshape what it meant to be both a woman and a borrower.

Paraguayan women enmeshed in microfinance loans faced the ongoing puzzle of how to manage a whole host of overlapping debts. My research confronted me with a series of questions about how to draw a line around the forms of collectivity and cohesion bound up in these women’s shared loans. A borrower named Viki, for instance, described the claustrophobia of being intertwined with the economic fate of her neighbors and chained to her home business. When I asked why she had given up on the little shop that she ran out of her front room, Viki first listed a series of logistical issues related to her credit to friends and family and her shame at having to chase up delinquent neighbors. Her own microfinance loan repayments, in turn, revolved around her work as a lender to her neighbors since she sold most of her inventory—mundane items ranging from diapers to charcoal to tinned tomatoes—through informal credit arrangements. More surprisingly, she concluded her story about the failure of her shop by confessing, “Well, it really was because I don’t stay. I don’t feel happy here at home (yo no me hallo acá en casa). . . . I am always going from house to house.”

Two different types of mutual obligation chafed against one another in this example. Viki thrived by going house to house to keep up with her friends, thereby cultivating the personal connections that so many microcredit schemes expect and rely on from women. But it was precisely that density of obligation that eventually broke her business. Moreover, the piles of commodities that she had built up in her store left her ambivalent, and made her feel especially unhappy at home. While investing in staple goods as inventory, Viki yearned to invest instead in domestic amenities that would make her feel more emplaced in her own house and might help her feel comfortable there. In a second frustrating twist, her business venture—the very reason for staying at home in the first place—filled her home with fragile material goods that both propelled her to cultivate connections from house to house as well as prevented her from feeling at home.

Manufacturing social collateral took a great deal of work for Viki, her neighborhood borrowing group, and ultimately her microfinance lenders. Building outward from the example of Viki’s financial labor, I suggest that anthropological critiques of commodification, by taking women’s social collateral for granted, inadvertently echo the microfinance industry’s own assumptions about women as hyper-social economic subjects. It is insufficient to simply point to an amorphous tangle of relationships as the basis of social collateral. Instead, by specifying how interdependency is generated and regulated, we gain a critical vocabulary to discuss how debt creates its social units, and with what effect.

The particular density of social collateral in Paraguay is generated through the constant and often disappointing work of joining together and tearing apart economic relationships. Analysts entirely miss the politics of interdependency when they take women’s embeddedness for granted. The gendered and gendering work of knitting and unknitting interdependencies is a crucial means through which debt and “the social” mutually constitute one another. Attention to this constant work necessarily carries implications for how anthropology theorizes finance capitalism as well as the social writ large.


Elyachar, Julia. 2005. Markets of Dispossession: NGOs, Economic Development, and the State in Cairo. Durham, N.C.: Duke University Press.

Karim, Lamia. 2011. Microfinance and Its Discontents: Women in Debt in Bangladesh. Minneapolis: University of Minnesota Press.

Salzinger, Leslie. 2000. “Manufacturing Sexual Subjects: ‘Harassment,’ Desire and Discipline in a Maquiladora Shopfloor.” Ethnography 1, no. 1: 67–92.