Requiem for Microcredit: The Demise of a Romantic Ideal

This article discusses the potential and limits of microcredit in countries of the North by examining the Canadian experience of this distinctive form of lending.

The paper draws on insights from economic analysis to show why debtors may shy away from this source of credit. It states that:

• Debtors may find that direct and indirect costs of peer-lending exceed benefits;
• Microcredit failed to stimulate the development of very small businesses because debtors rejected its core lending technology –the peer-supported loan;
• Although peer lending carries a romantic appeal, lived experience of peer-supported lending may be fraught with tension;
• Peer debtors manage complex relationships that require them to police and to be policed by their peers.

The article concludes that the promotion of large scale microenterprise is largely a matter of ideology, which serves as a palliative for local disinvestment, growing insecurity of labor markets and shift from social insurance to private insurance in an era of global economic integration.