Mutualist journal club

"No Pago" Confronts Microfinance in Nicaragua | North American Congress on Latin America

I was skimming through Kiva's loans, and saw a notice about Nicaragua's "I won't pay" movement. As described in the above article, many poor people have taken micro-finance (MF) loans that they are unable to repay. They have attacked MF offices and won a "repayment moratorium" in the legislature.

It seems that the basic problem -- and the spark that set off the movement -- is that in Nicaragua, people get arrested for failure to repay their loans. The above article linked to another, with this description of the situation:

In late June, Pro Credit arrested six people with overdue debts in Jalapa. Other regulated financing entities did the same and through legal collection rulings started expropriating the debtors’ loan collateral, often houses and land. This action is required of financing agencies regulated by the Banking Law: if they have an arrears portfolio, they have to do something about it. The law states that a collector has to visit the person with the overdue debt within seven days and then get a judge to execute a sentence within 72 hours. Failure to do so results in a fine by the Superintendence of Banks.

Since these protesters are being faced with arrest (I don't how long it takes to release them), I think that their disruption and vandalism may be justified.

Anyway, the issue of forcible debt collection is something that I rarely see addressed by libertarians. If anything, libertarians seem to take the conservative position of wanting to make bankruptcy harder. I am rather liberal regarding bankruptcy, though I think we should eliminate all of that complicated litigation and place strict limits on how debts may be collected by force.

Since the creditor voluntarily places his wealth at risk, he has no inherent right to use force to recover it. Repayment should me mainly enforced by a reputation system. I am opposed to involuntary wage garnishments by creditors, which amounts to a slavery contract. I am opposed to involuntary bankruptcy. Confiscation of personal property should be limited to property that was explicitly granted as collateral (in which case, the debtor effectively sold it). Confiscation of corporate property is fine, since it is already detached from the owner.