Microfinance in a developed welfare state: A hybrid technology for the governance of the outcast

Microfinance in a developed welfare state – A hybrid technology for the governance of the outcast

Ester Barinaga

This is the pre-published version.

For the final version, see:

Barinaga, Ester. 2014. “Micro-finance in a developed welfare state: A hybrid technology for the government of the outcast.” Geoforum, 51:27-36.

Although microfinance is often thought of as a tool to address poverty in developing countries, it is also being introduced in a number of countries in the developed world. The paper presents a qualitative study of the first year of the introduction of microfinance to address vulnerable groups in Sweden. Savings banks and nonprofit organisations collaborated in the introduction of microfinance as microcredit for micro-enterprise. The paper argues that the rationalities behind actors’ participation in microfinance differed, with banks adopting a market rationality and nonprofits mainly a rationality of community empowerment. In line with a governmentality approach, the paper argues that the neoliberal market rationality dominating microcredit for micro-enterprise colonises the space of the communitarian aspect by turning the social into the personal. The paper’s qualitative approach complements a governmentality analysis by highlighting the everyday resistance to the neoliberal financialisation of inclusion efforts.

Keywords: microfinance, governmentality, resistance, ethnicity.

1. Introduc=onThe awarding of the Nobel Peace Prize to Mohammed Yunus in 2006 generated worldwide

recognition of the potential impact of microfinance in efforts to diminish poverty and improve democracy in societies around the world. Although Yunus and his Grameen Bank operate in developing economies such as Bangladesh, the legitimacy provided by the Nobel award gave force to initiatives aiming at introducing microfinance in economies that differ substantially from the previous applications (see Bhatt and Tang, 2001; Wijkström and Sjöblom, 2009). The ‘Yunus-effect’ has meant that, from the US to Spain and Sweden, microfinance is promoted as a key intervention for improving the lives of socio-economically vulnerable individuals (Rogaly, 1996), including those in the Western world (Bruhn-Leon, 2012; Silver et al., 2009).

Within the field of financial inclusion policies (Barr, 2005; Buckland and Thibault, 2005; Caskey, 2008), proponents point to the positive effects of asset-building policies, such as microcredits for micro-enterprise, on individual and family lives as well as on the health of the communities in which they live (Anderson et al., 2003; Bynner, 2001; Servon, 1996). Yet, in the midst of a world economic crisis precipitated by the financial markets, critics cite the risk of over-indebtness faced by loan-takers and households that rank among the most socially, economically and politically vulnerable (Bateman, 2010; González, 2008). Indeed, critical scholars classify microfinance solutions within a broadening neoliberal process of financialisation (Sugden, 2009), by which market rationality, tools of calculation and financial practices are being extended to national and international economies (Epstein, 2005; Rankin, 2001. For a comprehensive overview, see Hulme and Arun, 2009).

Governmentality scholars take the critique of the increased financialisation of economies a step further, arguing that financialisation shapes not only firms’ behaviour but also the intimate space of people’s individual lives (Hall, 2011). Finance becomes a code of self and citizenship in the conduct of everyday life (Martin, 2002). Aitken extends this critique to microfinance when he argues that “microfinance seeks a certain financialisation by encouraging poor populations to establish formal connections to mainstream credit practices and cultivating a kind of financial agency among the very poor” (Aitken, 2010:229). Although microfinance is advocated as a tool for the financial inclusion of the marginalised and poor, these scholars argue that it also serves to legitimise forms of neoliberal globalisation (Weber, 2004), and that its advocates are often oblivious to the ideological dimensions of social change (Rankin, 2001). When this critique is applied to microfinance initiatives in developed economies, not only do we find no evidence that financial capital constraints are a significant barrier to small-firm creation (Bates et al., 2011), but critical students have also found that microfinance lending actually reinforces economic, social and cultural marginalisation (Howells, 2000; Jurik, 2006).

To help nuance the debate about microfinance in developed welfare states, the paper presents a qualitative study of the first year of the introduction of microfinance in Sweden by well-established savings banks in collaboration with nonprofit organisations to address vulnerable groups such as ex-convicts, former drug-addicts and people of immigrant background.1 Is microfinance being introduced and implemented in the West as part of a broader neoliberal trend that extends power for governing the poor well beyond the state? If so, how are these efforts received by the governed poor? Findings suggest that the mere introduction of the notion of microfinance already introduces a financialised government rationality along with new financial techniques for managing the ‘deserving poor’, a process that reformulates social exclusion as a personal matter. While these facilitate establishing a new institutional arrangement for governing the outcast, thus supporting governmentality scholars’ thesis of the extension of the power of the State well beyond its limits to include other economic and social actors (Rose and Miller, 2002), the process has not occurred without resistance. First, whereas some of

Microfinance in a developed welfare state E. Barinaga

21 For confidentiality reasons, the organisations and individuals studied have been made anonymous.

the participating nonprofits complied to the neoliberal demand to financialise their target populations, other nonprofits taking part in the introduction of microfinance responded to the increased financialisation of social exclusion by reintroducing ethnicity, and thus pointed back to the social origins of exclusion. Second, individuals addressed by the microfinance initiative resisted everyday efforts to financialise their agency. These findings call for a reassessment of current governmentality studies. Their narrow focus on policy documents and programmatic texts tends to forget the struggles and conflicts that go on in everyday life (Maclean, 2013), as they take for granted a complete subjectivation of the target of government. Yet, as findings show and Foucault stressed, the other retains her capacity to act (Foucault, 1982), opening a space for conflict and resistance and for returning to the social what was given to the individual. Further, as the paper describes a rare example of the translation of a financial invention originated in developing countries into the developed world, it offers an empirical contribution by presenting one way in which such a translation process has gone about. The article concludes by bringing these critical insights to bear in the design of policies that take into consideration the ideological dimension of social change and thus complement microfinance programs in the West.

2. Governmentality: Power beyond the StateThe last 20 years have seen a burgeoning literature denouncing the advance of neoliberalism as a

rationality permeating contemporary efforts to govern economies and societies. Research about topics as diverse as the role of private security contractors in Darfur (Leander and van Munster, 2007), education in the UK (Shore and Wright, 1999; Beck, 1999), and criminal regulation (Braithwaite, 2000), all point towards the increasing momentum of decentralised practices for the government of populations.

Such literature is extensively inspired by Foucault’s notion of governmentality, which refers to the rationality guiding efforts towards the government of conduct as well as the forms of knowledge, procedures and mechanisms used in those efforts. The concept refers not only to the public sphere of State government – police state, liberal or neoliberal government (Foucault, 2007) – , but involves, more significantly, the private sphere of micro-power relations – such as the parent-child relation, population-medicine, individual-public (Foucault, 2008).

The study of governmentality distinguishes three aspects. The first aspect concerns the political rationality framing, justifying and legitimating all procedures, arrangements, and distinctions put to work for the government of conduct (Rose and Miller, 1992). This element links government to modes of thought, corroborating Foucault’s argument of the reciprocal constitution of forms of power and forms of knowledge (Lemke, 2001).

The second aspect describes governmental technologies, conceived as “the complex of mundane programmes, calculations, techniques, apparatuses, documents and procedures through which authorities seek to embody and give effect to governmental ambitions” (Rose and Miller, 1992:175). Prompted by neoliberal restructuring of the state through decentralisation and privatisation, it is argued, these apparatuses and programmes have led to the emergence of new institutional arrangements that engage in the act of governing outside and beyond the state, somewhere in the interstices between society and the state. More particularly, the restructuring of the state has resulted in the growth of the voluntary sector, which is increasingly taking over the provision of social services and responsibility for community building. As such, the third sector is being referred to as the “shadow state” (Mitchell, 2001; Wolch, 1990).

The third and final element considered by governmentality studies relates to questions of self-formation (Dean, 1995), highlighting the close connection between political rationalities and processes of subjectification in contemporary forms of exercising power. That is, the problem of government is


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to be located not only at the general level of the government of others, but also at the micro-level of self-control, of the government of the self by the self (Lemke, 2001). This shift of location has moralising consequences at the individual level, for it is the individual that is put under pressure to discipline herself, to take responsibility for her own social and economic standing (Rose, 1999). In this way, the rise of neoliberalism has transformed social issues into personal ones.

Although most discussions of this kind start from the point of view of examining how the form of the state is changing in parallel with changing socio-economic and cultural conditions, some have highlighted the appearance of new forms of government connected to the rearticulation of civil society that comes along with the rise of neoliberal rationality (Lemke, 2007; Hardt and Negri, 2000). In this regard, governmentality scholars point out that “rather than less government, neoliberalism represents a new modality of government predicated on interventions to create the organisational and subjective conditions for entrepreneurship” (Hart, 2004:92). Policies to promote financial inclusion in general, and microfinance in particular, are studied as cases in point in articulating the neoliberal process of individualising responsibility (for an overview of the literature on financial literacy and the rationality guiding such efforts, see Kozup and Hogarth, 2008). Advocated by its proponents as a technique for financial empowerment of socio-economically vulnerable individuals, microfinance is questioned by critical scholars on various grounds. First, they cite the “ambivalence between empowerment and a neoliberal dumping of responsibility” (Maclean, 2013:456); second, they are concerned about the co-optation of NGOs “to serve hegemonic development agendas” (Townsend et al., 2004: 871); finally, they worry about specifying the object of government as entrepreneurial, thus ignoring the structural inequalities that restrict the outcome of individual action (Herbert-Cheshire, 2000; Larner, 2000).

This paper positions itself within this line of critique, as it describes the rationality and technologies put in place by an innovative institutional arrangement in a developed welfare state – one in which private, civil society and state actors collaborate in the government of the outcast. Yet, it takes the governmentality approach a step further by complementing the broader analysis of rationalities and technologies that is customary within governmentality studies (Hart, 2004) with a qualitative study of how those rationalities and government technologies are received – and resisted (for examples see Maclean, 2013, Young, 2010) – by certain civil society organisations as well as by those individuals targeted by the microfinance initiative. Finally, looking at the introduction of microfinance within the Swedish welfare state, the article highlights the ingenious ways that financial innovations developed in particular (economically developing) contexts are adapted to radically different national welfare contexts.

3. Method In August 2008, together with four other researchers, we set out to study the emergence of the

field of microfinance in Sweden. This entailed a study of the actors and the institutional arrangement taking form as the notion of microfinance was being introduced and spread in Sweden, as well as the power struggles involved in the emergence of the new institutional arrangement. Paying attention to how the microfinance programme took hold while rendering visible its instabilities, messiness and struggles demanded a combination of traditional discursive analysis with ethnographic-inspired qualitative methods (McKee, 2009).

To this end, from August 2008 to August 2009, we used a variety of fieldwork techniques to follow the introduction of microfinance in Sweden by a savings bank in collaboration with nonprofit organisations. First, 20 in-depth unstructured interviews (Spradley, 1979) with key informants, ranging from a half-hour to two and a half hours were carried out with potential loan-takers (seven interviews), representatives of the two nonprofit organisations (eight), and the project leader within the sphere of


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the savings banks (five). Whereas interviews were carried on all those responsible for introducing microfinance in the particular nonprofit organisations, selection of potential loan-takers to interview was the result of the nonprofits’ recommendations, the interviewee’s time availability, and how far they had come in their contacts with the bank. Topics discussed varied depending on the relation of the interviewee to the microfinance initiative. For those involved in the introduction of microfinance, interviews typically began with contextual information about the organisations for which they worked, after which we discussed the trajectory of how the organisations became involved in the microfinance initiative, as well as the work that was currently being done. In the case of potential loan-takers, interviews began with information about how they came in contact with the microfinance initiative. From that first question, and depending on the pattern of interaction that had been established, we moved into their personal life situations.

In addition, we conducted fieldwork at a number of sites, ranging from the bank’s headquarters to the classrooms of the nonprofit organisations. Formal events included all-day conferences on the possibilities of microfinance solutions in Sweden, workshops for training future coaches, board meetings for the microfinance initiative during which negotiations were carried out between representatives for the savings bank and the prospective nonprofits, meetings between coaches and potential loan-takers, as well as courses for the potential loan-takers. Less formal occasions ranged from half days spent in the headquarters of the nonprofit to walks with the project leader responsible for the introduction of microfinance within the sphere of savings banks.

Finally, we gathered an immense quantity of written material from websites, e-mail, official presentations, newspaper’s clips, brochures, booklets and reports, applications for European funds, meeting minutes, flyers, course descriptions, and a varied array of other texts.

To analyse the daunting amount of empirical material, and for the purpose of this article, I took an inductive approach to the field in line with the explorative and grounded theory approach of the study (Glaser and Strauss, 1967). The varied nature of qualitative material generated throughout the study (from in-depth interviews, ethnographic fieldnotes, formal reports and websites) guaranteed the strength and reliability of the analytical findings as the multiple sources of evidence converged, complementing and adding nuance to each other. Methodological pluralism aims at avoiding potential bias introduced by researcher and informants, thus generating a richer and more sophisticated understanding of the process under study (Brewer and Hunter, 1989; Polkinghorne, 1983).

4. SeFng: Introducing microfinance solu=ons in SwedenRuled by stricter financial regulations than commercial banks, savings banks further differ from

commercial banks in their focus on retail banking as well as their local and regional embeddedness. In Sweden, savings banks are value-driven financial institutions committed to developing their local community. Whether sponsoring cultural and sport activities, providing economic help to nonprofit associations, supporting mentorship programs for youths, or funding studies for particular regional programs, they are ‘a bank for the community’. That is to say, for savings banks, social engagement goes naturally along more traditional commercial interests. It is within this mixed logic of value-driven commercial business that microfinance was introduced in Sweden.

The Swedish Association of Savings Banks, whose mission is to “promote thrift […] and thus contribute to the development of the local community and to a sustainable economy” launched, in the autumn of 2008, a one-year project to introduce microfinance among its member banks. The initial project was to work with a savings bank and a nonprofit to test the ideas and methods behind microfinance. The Savings Bank of Sörmland was to become the first savings bank in Sweden to introduce microfinance to its product portfolio. Forum for Entrepreneurs from Ethnic Minorities (FEEM), a small organisation which mission was “to mobilise and promote entrepreneurship among


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women from ethnic minorities”2 as well as “to reduce unemployment among [them],” became the pilot nonprofit.

Alongside establishing the first microfinance collaboration between a particular savings bank and a specific nonprofit (FEEM), the project leader from the Swedish Association of Savings Banks also initiated a steering group formed from representatives of the Savings Bank of Sörmland, FEEM, as well as other nonprofit organisations that were seriously considering introducing microfinance to work with their target groups. These groups included ex-convicts and former drug-addicts. Within this setting, and in the midst of one of the worst financial and economic world crises ever, the banker, the thief and the immigrant woman met every second month to discuss the form microfinance should take in Sweden as well as to negotiate potential collaborations.

After only six months had passed, a second nonprofit, Basta, was fully engaged in a collaboration with the Savings Bank of Sörmland. Basta’s mission was to “rehabilitate people that [had] been outside the labour market for a prolonged period of time due to drug-addiction and/or criminality.” Basta had traditionally worked with former drug-addicts and ex-convicts, involving them in employment training programs. Yet, in the previous year, answering an explicit demand from the municipality of Södertälje, it had started to include refugees that had recently been granted a residence permit in those same programmes. It was with this group that Basta started its collaboration in the microfinance project in February 2009, which consisted mainly in developing and holding courses for potential loan-takers.

That both FEEM and Basta – the two pilot nonprofits in the microfinance initiative – explicitly addressed people of immigrant background was not a mere coincidence. While targeting women in the developing world has become a mainstream practice, in Sweden, microfinance initially set out to focus on people of non-Swedish ethnic backgrounds. This shows a recognition on the part of those involved in the microfinance initiative of the extent to which Sweden’s institutional arrangements and its wider social order are organised along the Swede / non-Swede ethnic line, placing people of immigrant background in a subordinate position. Offering microfinance to women, as is the practice in the developing world, would have implied offering “worse” loans – loans with higher interest rates and stricter financial demands – to women by the fact of being women, thus openly reproducing gender inequality in a country with a long and lively feminist tradition (see for example, Hirdman, 2007). Of course, there were some voices that suggested that demanding higher interest rates from loan-takers with a different ethnic background was prejudicial, and these objections were expressed at a conference on microfinance in Sweden organised by the Swedish Association of Savings Banks in May 2009. Yet, this critique was quickly dismissed by partners in the microfinance initiative and by the representative from the European Microfinance Network (EMN). The arguments put forward referred to the higher risk involved in this type of loan as well as the need to attract investors in order to expand access to capital to fund the growth of the microfinance sector. Or, as the EMN writes in its latest Newsletter “in order to create an impact consistent with the growing degree of social and financial exclusion, we need to be able to produce a sufficient dimension of scale; for this […] we need to increase the number of our clients, beneficiaries and actors” (EMN, 2013).

Since then, microfinance is relentlessly expanding throughout Sweden: ALMI, the public agency for stimulating economic growth offers microcredit for microenterprises; the ethnical bank Ekonbanken as well as two savings banks do actively work with microfinance while a third savings bank one is working at introducing it. More significantly, and indicative of a general government policy of


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2 Although the expression ‘ethnic minorities’ (etniska minoriteter) is used in Sweden to refer to its five officially recognised historical cultural minorities (Sami, Jews, Gipsies, Swedish Finns, and Tornedal Finns), FEEM makes use of it to avoid using the more negatively loaded term ‘immigrant’ (invandrare) as it is clear from its choice of target group.

promoting labour market-based integration programs, Jazmin Nkoya, FEEM’s founder and managing director, has been appointed to the board of the Swedish Employment Agency in January 2010.

It needs to be explained that for legal reasons, the structure of microfinance in Sweden (and in developed countries in general) differs from that used in developing countries, in that loans cannot be granted to solidarity groups. That is, whereas much (not all) microfinance in the developing world is characterised by the use of solidarity groups, in the developed world, and Sweden in particular, micro-loans are individually based. Further, and more relevant to the focus of this article, whereas the dominant microfinance operational model in the West is a linkeage-banking model, in which nonprofit organisations team up with financial providers, the dominant model in the developing world is the MFI model, in which nonprofits offer also the financial resources (Bending et al., 2012). Yet, so far there was only one actor in Europe working that way, ADIE in France. However, other features are shared across countries at different stages of development: (1) loans are granted to micro-entrepreneurs, (2) who lack collateral, (3) specifically, to support micro-enterprises and thus to generate self-employment. That is, (4) microfinance is used as an instrument to reach out to financially and socially excluded groups.

5. The ra=onali=es of agents when introducing microfinance in SwedenThe variety of agents involved in the introduction of microfinance brought a diversity of

rationalities to the initiative. While the financial actors promoted a market-like rationality that emphasised individual responsibility and product standardisation, the nonprofit actors emphasised community and mobilisation of a categorically bounded group. This resulted in conflicting rationalities among the agents involved. Microcredit for micro-enterprise emerged as a technology that potentially bridged the differing logics.

5.1. Governing: The bank’s totalising ra=onality

The objective of the initiative as stated by the bank was to reach ‘outsiders’, defined as individuals ‘outside the labour market and with no relation to the banking system’. Several characteristics are worth highlighting in such a definition of the target group, for they give us a clue to the rationality guiding the savings banks. Indeed, they give us a view of the extent to which the bank has been enrolled in a particular governance arrangement.

First, it is an economic definition of ‘outsiderness’. More precisely, it defines outsiderness along the labour order. Outsiderness means to have been outside the labour market for a prolonged period and having little, if any, probability of getting a job. That is, outsiderness implies ‘not being able to earn one’s living’ and thus, being dependent on social welfare benefits to care for oneself and one’s family. Outsiderness is thus a position that puts additional stresses on an already strained welfare system. Against this framing of the object of government, microfinance is presented as a technology to “break the cycle of dependence created by previous programmes of government intervention” (Herbert-Chesire, 2000:204)

The project’s success shouldn’t be measured in number of micro-loans granted, but rather in number of new companies started as well as number of persons that no longer depend on social welfare benefits. Even if some of the participants do not become self-employed, the project may have helped them move into paid employment or into further studies.

(Steering group, meeting minutes, October 29, 2008)


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Microfinance was addressed at people who were economically dependent on welfare benefits. The objective was to transform them into economically independent people, regardless of the form of their independence. By specifying the target of government in this way, the bank is siding with a larger welfare apparatus, and can be seen as part of the neoliberal process of restructuring the welfare state (Larner, 2000).

The second characteristic of the objective set by the microfinance initiative in Sweden was its focus on ‘outsiderness’ per se, without considering its causes. Being situated at the margins was taken as a fact, regardless of the causes that led the particular individual to the periphery. That is, the initiative intended to address the effects of outsiderness, rather than its causes.

As a consequence – and this was the third characteristic of the rationality guiding the introduction of microfinance by Swedish savings banks – reference to ethnicity, gender, class or any other social boundary at the root of socio-economic inequality was consciously avoided. The following quote is exemplary:

It is important that this project is not only for persons of foreign background, but also for other persons outside society. It shouldn’t be perceived as if a particular group is being given special treatment – this is important for the reputation of the whole project.

(Steering group, meeting minutes, October 29, 2008)

Either from the fear of being pointed out as ethnically biased, or from the recognition of the risk of reproducing ethnicity as a criterion organising socio-economic relations, the banks behind the initiative sought to find an all-inclusive vocabulary and work model. As a result, the central boundary demarcating the group to be addressed by the microfinance initiative from the group that could not be addressed became the distinction between the “bankable” and the “non-bankable”, thus turning the economic/labour-market definition of outsiderness into a financial one. That is, financial factors such as lack of personal capital, insufficient security to qualify for a bank-loan or having accrued debts determined eligibility for a micro-loan. This way of qualifying the target of microfinance emphasises an individual’s (financial) situation while disregarding the structural constraints that led the individual to that situation.

Fourth and last, since the focus was on outsiderness as an effect, since reference to ethnicity as a structural boundary was to be avoided, a diverse set of people at the margins of society was lumped together in the steering group. The bank argued that regardless of how they had arrived at the margins of society, the situations of ex-convicts, former drug-addicts, immigrant women, and newly arrived refugees could all be improved using the same technology: microfinance. In a more recent development, unemployed youth has also been included in the list of outsiders. The following quote clearly illustrates this perspective. Talking about dealing with ex-convicts, former drug-addicts and immigrant women, the project leader of the initiative argued:

Even if the problem leading to outsiderness is different, the solution to the problem is the same!

(Linda, April 20, 2009)

The microfinance initiative led by the Swedish Association of Savings Banks thus came to encompass multiple sources of outsiderness. The initiative acted as if the reasons leading the various


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groups to outsiderness could be ignored when it dealt with the problem. As a consequence, the initiative strained for standardisation in dealing with outsiderness, a view that would shape the techniques developed to deal with the particular individuals involved.

Underlying the bank’s rationality, there is a theory that views social change as occurring by means of the financial inclusion of individuals. In such a theory, the boundary of ethnicity (or any other boundary constraining access to the labour and financial markets) is only indirectly relevant for microfinance in the West. Hierarchical ethnic socio-economic relations are not addressed directly, not even indirectly discussed, since the lack of social power, whatever its cause, is always to be addressed by means of the same method. Even if ethnicity (gender, class, or a past of drug-addiction) is implicitly suggested as the source of socio-economic outsiderness, outsiderness is being tackled in the same individualised, financial manner regardless the structural barriers shaping any particular individual’s predicament.

It is in this sense that it can be claimed that the rationality governing the introduction of microfinance by Swedish savings banks is totalising – it is a question of addressing all alike, of including all marginal groups into an economy of self-provision, of using financial methods to govern individual conduct. This confirms the fear expressed by governmentality scholars about the use of the language and rationality of self-responsibility and entrepreneurship to “justify a form of social action that is directed less at dismantling the structural inequalities of society and more at changing the response of those who suffer from them most” (Herbert-Chesire, 2000: 210; see also Dean, 1995). In sum, this approach is totalising in three senses: it aims at all marginal groups; it is standardised across the groups; and, self-provision and entrepreneurship are the panacea for the socio-economic inclusion of all outsiders.

5.2. Resis=ng: The nonprofit’s categorical ra=onality

Now, by definition, the bank had no relationship to groups of outsiders since, as we have seen, those groups are ‘non-bankable’. Hence, how was the bank to access such groups and make them ‘bankable’? How could outsiders, without regard to the reason that led to such a condition, be approached and selected for participating in the microfinance project? Given the focus of the first year of the introduction of microfinance on people of immigrant background, it was precisely at this stage that the ethnic boundary entered the scene.

To access outsiders, the savings bank went through nonprofit organisations that worked directly with vulnerable groups. These organisations do define themselves in terms of the boundary that marginalises their particular target group. Accordingly, KRIS (Criminals Revenge on Society) highlighted criminality as the boundary defining the population they served; Basta and Dagöholm stressed the drug-addiction boundary that demarcated their membership; and, more relevant to this article, FEEM defined itself as a nonprofit for “women entrepreneurs from ethnic minorities.” Gender and ethnicity were the two boundaries defining FEEM and delimiting its target group.

More precisely, FEEM made ethnicity the guiding principle organising their work. A quote from Jazmin Nkoya, FEEM’s founder and managing director, is telling in this respect:

As an immigrant woman, if you are lucky you may have some contacts among fellow-countrymen. But one has absolutely no contacts within majority society. One speaks the language badly, and has no job. This is why we work the way we do.

(Conference on Microfinance in Sweden, May 12, 2009)


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A direct consequence of selecting outsiders through organisations that define themselves and their members along ethnicity is that it reintroduces the very boundary that the bank eluded. Whereas the bank’s totalising market rationality ignored social categorisations, using ethnically defined organisations rooted the initiative inside the very boundaries the bank hoped to avoid. This effect can be seen in the nonprofit organisation’s efforts to prove its worth along with the efficacy of the microfinance method; individual entrepreneurs became interesting not because of their situation at the margins of society, but rather because of their immigrant background. The case of Afiya is illustrative.

Afiya was an Iraqi woman who had moved to Sweden twenty years earlier and had been employed ever since. For the previous 3 to 4 years, she had entertained the idea of opening her own café, when the opportunity arose of buying a small news- and food-stand in the train station of a nearby village. When Afiya contacted FEEM, she had her business idea well developed, was well integrated into Swedish society, and had been economically independent for the last 20 years. As Afiya explained, she contacted FEEM because she had read about the possibility for immigrant women to get more advantageous loan conditions by getting a micro-loan. Afiya sat with FEEM for a week and completed a business plan. Only then did she go to visit the bank, accompanied by representatives from FEEM. FEEM presented Afiya as “the first immigrant woman” to obtain a micro-loan through them.

Interestingly, Afiya was never an outsider in the strict economic sense of the term. As a single mother of three she had been able to provide for herself and her children for 20 years, working either as an interpreter, teaching Arabic to children in day-care, or in the restaurant sector. Yet, FEEM presented her as a potential micro-loan taker because she was an “immigrant woman with a business idea”3. That is, ethnicity and gender became the boundaries that defined outsiderness once the selection of the potential micro-loan recipient went through organisations that used those boundaries to define their target group. So doing, FEEM placed ethnicity and gender “at the centre of discussion, thereby countering the ways in which such matters are marginalised in supposed mainstream debate” (Afshar and Maynard, 1994:1) and, in our case, were silenced by the bank. In other words, the totalising dimension that guided the banks in their efforts to introduce microfinance, the financial boundary that separated “bankable” and “non-bankable” and redefined vulnerability along financial criteria was forced to intersect the ethnic boundary that the bank had deliberately ignored.

A second point of tension between these two types of logic was that whereas the bank individualised its approach to the outsider, the nonprofit specifically considered structural dimensions related to inequality and alienation. The nonprofit considered the lack of contacts with the established society, poor command of the country’s language and the society’s generalised perception of the ethnic other as inferior as contributing factors to placing an individual at the margins of society. As a result, whereas the bank typically thought of microfinance as a product to offer to individuals, a microcredit for micro-enterprise, the nonprofit thought of microfinance as a long-term process that much reflected Freire’s idea of ‘conscientization’ (Freire, 2010/1970). In that process, the actual microcredit was but one step. Other steps included mobilising women, raising group awareness, coaching in groups, as well as development of the business idea, assessment of the potential entrepreneur and her idea, microcredit lending and long-term continued support. In other words, for the nonprofit organisation, microfinance represented a technique for raising consciousness and building community among the ethnically defined group. Or, as they explained, they regarded “entrepreneurship as a process with microcredit as a tool” – a process through which they aimed at both empowering the individual woman of immigrant background and organising and mobilising the group of “women entrepreneurs from ethnic minorities.”


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3 Fieldnotes, Inauguration conference for the Microfinance Institute in Mariefred, Sweden. September 9, 2009.

5.3. Conflic=ng ra=onali=es

As we have seen, the bank argued for the introduction of microfinance based on a rationality that totalised the target group and standardised their dealing with each individual entrepreneur. FEEM, however, acted based upon a target group defined by means of widely recognised social categories – such as gender and ethnicity.

These are, as it were, two seemingly opposing rationalities. “For the bank it was central to present this group as a market niche”, as Linda, the leader of the initiative at the Swedish Association of Savings Banks, put it, “to think in terms of clients”, and, as the director of the Savings Bank of Sörmland admitted “of developing our business”. The nonprofit, on the other hand, was attempting to “effect structural change”, for which they considered it necessary “to have a network”, and “to collaborate concerning immigrant women’s entrepreneurial initiatives”, as Jazmin, FEEM’s founder and managing director, expressed it.

The bank regarded microfinance as a tool to reach a new market niche – thus their permanent question: “how do we reach people without a relationship to the banking system?” The nonprofit considered microfinance as a process through which to empower individuals and build community. The first rationality emphasised individual responsibility in becoming integrated in the labour market and thus, in society. The second highlighted the need to change the social categories that shape agents’ perceptions of the marginalised group, thereby reproducing inequality and alienation. For the first rationality, empowerment meant individual financial inclusion because it “heightens an individual’s capacity to act in his or her behalf, regardless of any structural constraints which restrict the outcome of that action” (Herbert-Cheshire, 2000:209); for the second rationality, empowerment was the outcome of a process of becoming aware of the constraints limiting one’s action. The implicit theory of change for the banks involved individual financial inclusion, using existing financial and management tools to change individual life circumstances. For the nonprofit, however, the theory of change implied the identification, mobilisation and ‘conscientization’ of a categorically defined group. The scale of change imagined by the first rationality was individual; for the second, it included women as a group and their awareness of ethnicity as a boundary that organises wider power relations Accordingly, in the first perspective, microfinance was simply a product, a means of offering financial inclusion to the individual, whereas for the second, it was a larger process of building community within the categorically identified group as well as of empowering subjectivities. In sum, the first view espoused a market-like rationality, whereas the second endorsed a community-empowerment one.

And yet, despite the discordance between the two rationalities, the introduction of microfinance appeared to open a space for them to establish a dialogue and negotiate collaboration. The name of that space was “microcredit for micro-enterprise.” By juxtaposing commercial and social goals, microfinance appeared to be a technology that could satisfy the conflicting demands of both rationalities. The question for us is, did both rationalities have an equal say in how microfinance was introduced in Sweden? Or, did one rationality end up dominating the other? And, if this occurred, how did the actors belonging to the subordinated rationality relate to the domination of the first? Answering these questions will help us nuance the critique of microfinance made by governmentality scholars.

6. Who is a worthy loan-‐taker? Financialisa=on of the “deserving poor”A good observation point to see the interplay between these two rationalities is to examine the

moment when a potential loan-taker is deemed worthy of credit. This moment provides evidence of the criteria used by the nonprofit to deem a potential loan-taker ready for presentation to the bank. At this point, the bank, in turn, mobilises a whole set of techniques for evaluating the worthiness of the potential loan-taker and her business idea. The conflict of rationalities is felt more acutely if the


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evaluations of the potential loan-taker made by the bank and the nonprofit diverge, thus exposing their different views regarding the problem that led the individual to the margins of society, as well as their different definitions of competence. Such was the case of the second and third loan-takers presented by FEEM to the bank.

Ann was a woman of Swedish descent who had returned to Sweden after 32 years living in Naples, Italy, where she had been maintaining herself by designing, working as a silversmith, and selling matching jewellery for dogs and their owners. Family reasons forced her to return to Sweden, and she intended to make her living in the same way. Yet, she first needed some initial start-up capital. Grace was a woman from sub-Saharan Africa who had lived in Sweden for the previous 10 years. For the past three years she had been importing crafts from Africa, selling some of them privately and stocking some with the view of opening a shop that specialised in African products. After working collaboratively on their ideas and developing a business plan for each, FEEM decided that both were ready to go to the bank. The bank officer, however, considered that both businesses were too underdeveloped and both ideas too uncertain. Within fifteen minutes of the women’s arrival to the bank office, the bank officer had rejected both women’s application for a micro-loan.

What is interesting in this conflict are the arguments used by both parties for the worthiness of the potential loan-takers as well as the accusations they threw at each other. When the bank officer asked for a more detailed marketing plan as well as a detailed list of customers and their turnover, the nonprofit argued that “if you want to find weaknesses in an idea, you are always able to do so”, and that “it [was] a power game”. Where the bank saw an underdeveloped business idea, the nonprofit saw a “narrow-minded bank system who [couldn’t] think outside the box”; if the bank lacked confidence in a potential entrepreneur, the nonprofit argued, “the bank used a different language, and expected everybody to adapt to it”. While the bank made its analysis at the individual level of the potential entrepreneur and her idea, the nonprofit moved its discussion to the structural level, not only with respect to the bank system but also to Swedish society in general. As Jazmin sarcastically put it after the incident, “I love Sweden, there is no new thinking here. They are so conservative.”

The exchange between Linda, the person responsible for introducing microfinance within the sphere of savings banks, and Jazmin, FEEM’s founder and managing director, summarises their different analysis of the potential and difficulties of introducing microfinance to work with vulnerable groups in Sweden. It took place at a joint workshop a few days after the incident just described:

Linda. […] what we can learn from this is that we need to improve our communication to the bank. What is their first question? What are their key concepts? We need to learn the bank’s language.

Jazmin. No. The bank must learn our language!

(Fieldnotes, Meeting on November 3, 2008)

However, since the bank always had the last word as to who was to receive a microcredit, some of the nonprofits involved tried to adapt their language and tools to those used by the bank. This was most apparent when a second nonprofit organisation, Basta, was taken on board the microfinance initiative in February 2009. This nonprofit organised its work with potential loan-takers around a training course they all had to undertake before they could be presented to the bank. The course content and the identity of the guest lecturers reveal the extent to which the nonprofit had assimilated the importance of mastering the tools and language of the bank. And along with them, its very rationality.


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Over a period of six weeks, for five days a week, seven hours a day, course leaders, participants and guest lecturers in the Basta course discussed marketing strategies, developed business plans, identified customers and competitors, estimated revenues, played with budgets, learned to read balance-sheets and profit-and-loss accounts, set prices, and went through established book-keeping practices. Guest speakers came from internationally renowned accounting firms, researchers specialised on entrepreneurship, consultants to start-up firms, insurance firms, and the State Insurance Agency. All emphasised the importance of following established business practices and using established business models, of embracing accounting laws and paying due taxes, and gave a range of advice on how to write a compelling business plan.

In other words, the management and financial tools used by the bank to evaluate the worthiness of a potential loan-taker, tools such as business plans, market analysis, balance sheets and budgets, were mobilised by the nonprofit Basta during the entire course to shape the ideas and entrepreneurial behaviour of the course participants. It is in this sense that Basta adopted the tools of calculation and financial practices of the bank to direct the behaviour of their target group, encouraging them to establish formal connections with established credit institutions and cultivating a sort of financial behaviour among them (for another example, see Finlayson, 2009). Each week, they were asked to present how far they had progressed in developing their business plans, in refining their market analysis, in contacting potential customers, in thinking through their budgets, and in implementing their action plans. Not unlike the way confession has been used by pastoral powers to govern the conduct of the people (Foucault, 1998), the financial and management tools of the banks were now used by the nonprofit as techniques for governing the conduct of the marginalised other. The nonprofit used market analysis, action plans and balance sheets to initiate course participants into the entrepreneurial, competitive and market driven conduct of “the neoliberal subject who is willing to take on the risks of market participation and responsibility for their own welfare in a way that is associated with empowerment and autonomy” (Maclean, 2013: 457). That is, business plans, market analysis, and budgets allowed the second nonprofit (Basta) to closely supervise the behaviour of the individual deemed an outsider, extending the technologies of the bank into the nonprofit’s assessment of the docile conformance of the ethnic other to neoliberal market and financial rules (see Sotiropoulos et al., 2012)

7. Resistance to the financialisa=on of the “deserving poor”This tight supervision of conduct on the part of the second nonprofit contrasted with the actual

intentions and actions of course participants. Of the eight participants in the Basta course, only two were seriously considering starting their own businesses. The first was already operating his own business within the building sector – only informally; that is, without reporting to authorities or paying due taxes. That meant he already had all the equipment and machinery necessary to carry out his own business. As a result, he didn’t need and never intended to apply for a microcredit. The second course participant had already started the process of registering his company, discussing his plans with a lawyer and negotiating with an accounting firm even before he enrolled in the course. The remainder of the course participants were there while looking for other jobs, as “a way of getting another course title to add to the many I have already accumulated [in Sweden]”, as one of the course participants sarcastically expressed it.

Although none of the course participants ever applied for a microcredit, the course was considered a success by the Savings Bank, the project leader at the Swedish Association of Saving Banks, and the nonprofit itself, to such an extent that Basta has established microfinance as part of its


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way of working, and the Savings Bank has agreed to collaborate on a long-term basis with the nonprofit.

That is, microfinance was not evaluated in terms of the number of microcredits granted. Something else was at play here. The introduction of microfinance was informed by a neoliberal rationality and operationalised with recourse to a set of management and financial techniques that resulted in disciplining and strengthening individuals’ entrepreneurial and financial behaviour. The process enforced a morality of self-reliance, of abiding with tax-laws, of continuous calculation of costs and losses. That is, introducing microfinance in Sweden to work with vulnerable groups went through imbuing a certain way of thinking and a particular mode of conduct into each and every individual. To paraphrase Foucault, it is a matter of constituting “something like a milieu of life, existence, and work” for the deserving poor (Foucault, 2007:30). The operationalisation of microfinace (with its implicit market logic) by Basta focused on the transformation of the selves of the deserving poor so that they manage their own conduct in conformity with the financial calculations of the banks. It enforced a morality based on the marketplace, the individual efforts of the entrepreneur, and the recognition of individual worth by means of management and financial tools.

Such is the key innovation of microfinance in a developed welfare state. It links the calculative and financial capacities of banks to the government of individual conduct and social life. Microcredits for micro-enterprise were used by the Basta (and indirectly by the bank) as a machinery of surveillance and regulation of personal conduct of society’s most vulnerable groups. The outsider was redefined as a potential loan-taker, a coming entrepreneur, after which it was possible for the bank to govern the individual entrepreneur through the mediation of the nonprofit.

Yet, neither the conduct of the nonprofit nor that of the potential loan-taker went unquestioned. The neoliberal financialisation of social exclusion was resisted in various ways. First, as we saw above in the case of Afiya, certain nonprofits (such as FEEM) selected participants and presented loan-takers based upon their ethnic background, thereby reintroducing the very boundary the market-like logic had sought to ignore. While, as it has often been argued by governmentality scholars and the case shows, neoliberalism transforms social issues into personal ones, with its insistence on ethnicity, the nonprofit reemphasised the social origins of individual exclusion.

Second, FEEM reformulated the requirement to learn the language and methods of the bank as being another example of colonialist thinking on the part of the bank. The events that took place following the different evaluation of the two potential loan-takers by the bank and the nonprofit will serve as an example.

In response to the different evaluations the two loan-takers had received from FEEM and from the bank loan officer, Linda suggested to FEEM the establishment of a person as a loan officer within the nonprofit, an individual who understood banks but was not constrained by their thinking. Jazmin took the suggestion as a sign of control and lack of trust, and immediately accused Linda of “thinking like a white woman”. An accusation of this kind evoked a colonialist desire (on the part of the bank and Linda) to perpetuate the extant balance of power in which, as FEEM saw it, the bank defined the rules and language of the game and FEEM could only accept them and learn to play along. “Thinking like a white woman” enabled FEEM to distinguish between the neoliberal control, as exercised through the bank’s totalising rationality and the community-empowerment promoted by the nonprofit’s categorical logic. Suggesting ethnicity as constitutive of modern forms of power, FEEM conjured itself into existence to oppose the powerless position (both economic and social) offered to ethnic others. Invoking whiteness as a category that is privileged, silenced and taken for granted, FEEM challenged that ethnicity is a kind of minority experience, thereby questioning dominant social values and resisting the basis of the social hierarchy that seeks to govern them (see Afshar and Maynard, 1994).


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The third and final form of resistance visible here came not from the nonprofit FEEM, but from the particular individuals targeted by Basta’s microfinance course, the individual outsiders, the potential loan-takers. For a majority of them, as we have seen, participation in the course was based less on a genuine desire to start one’s own business or actually apply for a microcredit than on a strategy to create time and space for themselves to continue a search for traditional employment. The course setting was approached by the participants as extended time to continue pursuing their own inclusion strategies. While this evidences course participants as individuals’ taking responsibility for their own welfare, it is also an act of individual resistance to the effort of the microfinance initiative to shape their agency according to a neoliberal financial logic that would judge their entrepreneurial behaviour. In other words, neoliberal efforts to govern the conduct of the outcast provoke unique modes of resistance. To the entrepreneurial subjectivity predicated by neoliberalism, individual participants responded with an increased zeal to enter the existing labour market. Paradoxically, it is in this sense that the Savings Bank of Sörmland, the Swedish Association of Savings Banks and the nonprofit Basta deemed the microfinance initiative a success. Resistance had been successfully contained within the neoliberal individualisation of responsibility.

8. Discussion: Microfinance, a space of government and struggleThe introduction of microfinance in a developed welfare state such as Sweden by well-established

savings banks in collaboration with nonprofit organisations and welfare agencies serves as the empirical case from which to discuss, first, the rationality followed by these new governing arrangements; second, the techniques of government mobilised in the new arrangements; and, third, the everyday resistance of the governed (both the nonprofit and the particular individuals addressed).

The case: microfinance is being framed in Sweden as a way to work with “individuals that have been outside the labour market for a prolonged period of time”4. Framed within the rhetoric of encouraging entrepreneurship and self-employment, microfinance was introduced as especially well suited for working with ex-convicts, former drug-addicts and immigrant women – vulnerable groups facing high obstacles in trying to gain access to paid employment. The initiative started by focusing on one of these groups: women of immigrant background. These efforts took the form of a collaboration between a regional savings bank and local civil society organisations.

The analysis demonstrated that the introduction of microfinance in Sweden adopted the neoliberal language and methods of entrepreneurship, supporting a rationality of self-sufficiency for long-term recipients of social welfare benefits (for a similar argument in the developing world, see Sugden, 2009). The target groups for the initiative were groups lacking in social power, that is, with few choices and little control over their lives, leading them to being excluded from the labour market and into social welfare dependency. The introduction of microfinance by savings banks in Sweden highlights micro-enterprise lending as a way out of welfare dependency. This rationality is totalising in that it addresses all those outside the labour market alike, regardless of the cause of their lack of social power (a history of criminality or drug-addiction, or an immigrant background). By doing this, such rationality ignores the socio-structural causes of inequality and marginalisation, thus turning social problems into personal issues.

As a consequence, the techniques employed in microfinance for governing the outcast parallel the increasing neoliberal financialisation of economies and societies (Aitken, 2010; Epstein, 2005; Martin, 2002). Among the technologies used by nonprofits to train, coach and work with the long-term


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4 Fieldnotes, Inauguration conference for the Microfinance Institute in Mariefred, Sweden. September 9, 2009. Also in fieldnotes, conference Microfinance in Sweden, organised by the Swedish Association of Savings Banks, May 12, 2009. See also Sjöblom, L. and Wijkström, F. 2009.

unemployed were business plans, market analysis, business pitches, and budgets. These are standardised management and financial techniques imposed without regard to the circumstances of the particular individual, whether this be an ex-convict, a former drug-addict, or an immigrant woman.

The table below summarises the conflicting rationalities espoused by the actors involved in the introduction of microfinance in Sweden, a conflict underlying a dynamic of government and resistance.

------------------------------ Insert Table 1 here ------------------------------

The introduction of microfinance in the West to work with vulnerable groups incorporates neoliberal attempts to regulate the conduct of the outcast through the mantra of individual responsibility. Ignoring the structural causes that led the particular individual to a situation at the margins of society, the introduction of microfinance in the West allows governments and nonprofits to mobilise the financial and management tools used by banks to regulate the conduct of those whose conduct had been beyond reach because of their situation at the margins of society. They were “non-bankable” and microfinance seeks to transform them into “bankable” persons, thus opening the possibility to regulate their conduct through the means traditionally used by banks. That is, microfinance is emerging as a new arrangement supporting the government of the outcast, and extending the act of governing beyond the state to include banks and nonprofit organisations.

While some nonprofit organisations complied to the government efforts of the bank, some collaborating nonprofits resisted the bank’s totalising rationality by emphasising the categorical logic that led the poor person to the social margins (see also Battilana and Dorado, 2010). These nonprofit organisations defined their target group through categorical boundaries, such as gender and ethnicity, thus reintroducing the very social boundaries ignored by the totalising financial logic. Drawing attention to the category “immigrant women” reminded those actors leading the microfinance initiative that the origin of exclusion is social (based on ethnicity and gender), and not personal.

This is one of the contributions of this article. A qualitative study of the introduction of microfinance in Sweden permits us to observe the ways in which the increased financialisation of societies in general and social exclusion in particular is resisted in everyday life. This calls for a more nuanced approach in current governmentality studies. Scholars inclined to the governmentality approach tend to emphasise the extent to which neoliberal agendas frame policy as well as increasingly organise our economies and societies. However, as their empirical material overwhelmingly comes from analysis of policy documents, these studies tend to ignore the everyday reception of such policies. The article identified three forms of everyday resistance: two by the nonprofit participating in the microfinance initiative, and one carried out by the particular individuals aimed at by microfinance. The first was a determined reintroduction of ethnicity, the categorical boundary that the bank deliberately ignored. The second was evocation of colonialist guilt as part of refusing the financialised language of the bank. Finally, potential individual loan-takers took advantage of the space opened up by microfinance to continue playing in a non-financialised space. Further research is needed concerning the development of the dynamics of resistance to government in everyday life.

Without ignoring the potential of microfinance in strategies for self-employment and thus its value for individual self-esteem, this paper argues that overlooking the structural roots of inequality risks inserting microfinance in developed welfare states within the dominant market logic, thus reproducing and perpetuating the social boundaries that led the individual to the margins of society. Acknowledging mundane acts of resistance helps us to understand the ideological dimension of social change and thus


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to inform policy-making. Policy-makers need to take a socio-structural approach that (1) develops typologies for distinguishing between different socio-economic subordinated groups; (2) brings vulnerable groups to collective awareness of their lack of social power thus enabling their resistance to extant social structures; and (3) recognises the dialectical relationship between the material and ideological dimensions of social change (for a similar policy analysis, see Rankin, 2001; Williams et al., 2012). Let by themselves, microfinance initiatives in developed welfare states risk neglecting the ideological and cultural politics of social change.

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Table 1

Introduc=on of microfinance in Sweden – Conflic=ng ra=onali=esIntroduc=on of microfinance in Sweden – Conflic=ng ra=onali=esIntroduc=on of microfinance in Sweden – Conflic=ng ra=onali=es

Savings Bank Non-‐profit

Ra=onality

Conscious avoidance of ethnicity. Totalising dimension.

Market rationality.

Potential loan-taker selected through ethnically organised non-profits. Ethnicity reintroduced. Categorical dimension.

Community rationality.

Implicit theory of change

Change goes through financial inclusion of socio-economic vulnerable individuals.

It does not address the social structures that lead to individual exclusion. Instead, each individual must take responsibility of her situation by means of a financialised and entrepreneurial behaviour.

Change goes through raising awareness of ethnic subordination and through community building.

It employs a politics of identity by which ethnicity is focused as the social structure in need of change.

Responsibility for social and economic inclusion

Individual responsibility. Each person is responsible for her own integration, and thus for her situation at the margins.

Institutional responsibility. The institutions that make up society as well as the prevailing discourse/image of the ‘immigrant other’ are at the root of poverty and alienation.

Defini=on of worthiness

Based on business plans with emphasis on return on investment.

Ethnically identified individuals obtaining a bank loan, independent of their former life circumstances; e.g. Afiya.

Technique of government

Control of the non-profit’s conduct by the bank – as a prerequisite of collaboration.

Non-profit’s tight supervision of the individual’s conduct through financial and management instruments such as business plans, market plans, list of customers, budgets, etc.

Resists the bank’s specification of individual responsibility by reintroducing ethnicity as a structural boundary shaping individual life circumstances.


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Microfinance in a developed welfare state: A hybrid technology for the governance of the outcast

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