About the MJC

Mutualist journal club

Saturday, August 21, 2010


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

"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.

I always understood a Kiva loan was more of a gift, and if repaid would likely be reinvested in another venture. I had no idea that participants could be arrested for non-payment. The MF organization should pay the fines and consider it part of doing business in the third world.

"Since the creditor voluntarily places his wealth at risk, he has no inherent right to use force to recover it."

Wage garnishment is necessary to protect women and children but I don't think it should be employed for student loans, or tax debts.
Thanks for the comment rctlfy. I agree that garnishment could be justified in the case of child support and alimony.

If you're interested in more discussion of mutualist issues, please check out Kevin Carson's writings at the Center For a Stateless Society.
Post a Comment

<< Home


November 2005   December 2005   January 2006   February 2006   March 2006   May 2006   July 2006   October 2006   November 2006   December 2006   January 2007   February 2007   March 2007   April 2007   May 2007   June 2007   October 2007   November 2007   January 2008   September 2008   October 2008   December 2008   April 2009   June 2009   August 2009   February 2010   March 2010   June 2010   July 2010   August 2010   September 2010   October 2010   November 2010   February 2011   March 2011   February 2013   March 2013   December 2013  

Mutualist Blog:  Free Market Anti-Capitalism Locations of visitors to this page

This page is powered by Blogger. Isn't yours?