Worship is essentially categorized into two sections: worship through financial/material means and physical/bodily worship. This categorization does not mean they are totally unrelated; in many ways, they are interconnected. For example, the daily prayers that we perform with our bodies certainly have material aspects, like time and place. As a matter of fact, the inner and outer conditions that are required for a proper prayer (like cleanliness, washing, dressing, etc.) are also related to the material world, too.

Alms is a kind of fiscal worship, but it also requires one to labor in a job or be physically present in the marketplace, so as to achieve a certain degree of wealth from which to give charity. The Hajj, the Muslim pilgrimage to the holy lands of Mecca and Medina, is a financial worship, in one aspect, and a physical form of worship, in another: a Muslim has to be financially able to afford the travel to the holy lands, where he or she has to endure physical difficulties, like the long trip and certain rituals, like circumambulation around the Ka’ba, standing vigil all day, etc. Fasting, too, may be considered within this frame. Four of the five essential principles of Islam have a considerable association with the material world as well as the spiritual one.

In today’s world, it is important to contribute to good religious services by alms, charity, and donations. But such financial contributions do not absolve one from other forms of worship and good work that need to be performed physically. For example, Abu Bakr had been among the well-to-do of Mecca when he met the Prophet. Bu he spent all his wealth for the sake of Islam and he had nothing to leave behind when he died. He also physically participated in the emigration to Medina and he also fought in many battles.

Financial worship may be more important at certain times. But, this is not an absolute truth. It varies depending on time, place, and the respective conditions of people.

We can assess the issue from two perspectives: 1) Giving less or more charity depending on wealth; 2) giving within certain parameters. There exists a distorted and incorrect understanding among some believers. They say: “My financial situation is not high enough, I do not own a fortune; so, I am not obliged to observe any financial worship.” No; this thought is absolutely wrong. Every single person is obliged to observe his or her responsibilities within the capacity bestowed upon him or her by God Almighty. However much or little one earns, believers should always seek God’s good pleasure by giving in charity as much as they can, for God considers sincerity, rather than the amount given. In the words of Bediuzzaman, “An ounce of sincere worship may sometimes be superior to the one that weighs pounds but is not practiced in sincerity.” As a consequence, every single person is obliged to mobilize on the divine path to God’s contentment.

It is very difficult for a person to both give away in charity and maintain his or her sincerity. Those who can manage this will surely be rewarded beyond measure. If one can overcome the welfare and comfort that come with wealth, can avoid ostentation, and can keep their sincerity and connection with God strong, their rewards will surely be abundant in proportion to the difficulties they face.

The second aspect of the matter relates to the parameters and guidelines for such donations. There are certain minimum degrees for financial obligations in charity. In the case of Islam, for instance, it is compulsory for wealthy Muslims to give a minimum of 2.5 per cent of their annual wealth in charity. There are other rules for wealth in gold, silver, commercial goods, crops, etc.

But we have to remember that these are minimum figures and many lofty goals and good services cannot be attained through merely giving these minimums. Therefore, every single individual should work hard to donate beyond the minimum amount of obligatory alms. We wholeheartedly believe that whatever is given today in the name of God will be multiplied by the thousands in the next life. Yes, everybody is obliged to serve on the way to God with his or her self and goods. But there are no limiting criteria; everything is relative.

Even if we gave away all we own on the path to God, we should still see it as a very minor sacrifice when compared to the ideal we have been wishing to construct.

Homo economicus

Pioneered by Adam Smith, one of the founders of capitalism, the idea of homo-economicus is used as a base to construct theories on consumption and investment. In his famous book The Wealth of Nations, Adam Smith emphasizes the importance of self interest in human behaviors and describes the self-interest as the key driver of social prosperity. An economic agent has been constructed as a representative one which typifies the economic behavior of a typical person in the society and it is assumed that this agent systematically behaves rationally when deciding on any issue, especially the economic issues. If we define rationality, from the economics standpoint, as an act that aims for the maximum possible degree of acquirements with given limited resources, this constructed agent will be rational by behaving in favor of his/her own self-interest, hence he/she will always be optimizing.

Are we really rational?

In fact, the core belief in the idea of homo-economicus that homo-sapiens, the wise man, acts selfishly is a realistic assumption as self-interest is an important part of the innate human nature and an important intrinsic motive. We always want the best for ourselves and this motive is not exactly greed, but an intrinsic motivation to behave on one’s interest. But, it is also true that not everyone is rational in the society and not all behaviors are considered rational in an economic sense. To test whether the individuals make rational choices or not, Nobel Laureate Daniel Kahneman and Amos Tversky conducted numerous experiments to test the human rationality and they reached this conclusion that human behaviors are not as rational as predicted by the homo-economicus assumption, instead they found that depending on how the question is framed or how things are measured people can make different choices. Also, they observed that not all behaviors are utility maximizing, sometimes people act altruistically, and sometimes people have the tendency to stay in the status quo. An interesting result of their experiment is that, when people make decisions, they emotionally value losses twice as much as they value an equivalent gain. In an experiment, they ask the subjects the following question:

Would you accept this gamble?
– 50% chance to win $150
– 50% chance to lose $100

They realized that, even though the expected value of gain in the above gamble (50% x $150= $75) is higher than the expected value of loss (50% x $100= $50), there are fewer takers of the gamble. Instead of showing their other experiment results, we can easily look at some of the marketing tricks to have an idea about the irrational choices we make in our daily life.
In a marketing strategy called Decoy marketing, marketers observe a boost in their sales of an expensive offer when they offer a similar item that is inferior in quality but about the same price of the expensive item. In his book Predictably Irrational Don Areily conducts an experiment using magazine subscription offers where subjects were offered two alternative subscription choices to The Economist magazine, one print only subscription (the inferior option which serves to make the combined offer look like a better value) and one internet and print subscription and they observe huge jump in sales due to the decoying effect.

In another experiment in Predictably Irrational, the author shows that people would walk 15 minutes to save $7 on an $18 item but wouldn’t take the same 15-minute trip to save the same amount on a $455 item. In fact, it is the same amount of savings, and a rational person is expected to behave consistently at each case.

The current financial turmoil is a typical example for how people can make irrational decisions. Currently, the world is experiencing a catastrophic financial and economic meltdown started at the subprime mortgage markets in United States and spread out to other financial markets. Some people claim that the irrational behavior of sophisticated investors was the root cause of the recent meltdown. To get a better understanding of the issue, we need to look at the balance of greed and fear in the investors’ behavior. While greed leads to overconfidence in the economy and excessive risk taking, the fear in the market leads to inactivity in the market and excessive aversion to risk. When investors make a decision about whether buying a stock, bond or any sophisticated security, they are expected to evaluate the expected reward versus the risk of possible expected loss. As predicted in Kahneman and Tversky study, the wisdom in the Wall Street is that “Fear always trumps greed.” Neuroscientists describe the situation when greed dominates the fear as a “moral meltdown,” and this is the situation where human brain loses control of reward and loss comparison and completely ignores risks. Take the trading in collateralized debt obligations (CDOs) which was perceived as one of major problems that leads to the recent financial crises. Since the security was rated excellent by the rating agencies and all losses were insured by AIG insurance company, the investors observed too much reward opportunities while no weight was given to the risk of a collapse in the market. That is the point when greed dominates fear in the market and fear fails to balance greed in the normal investor’s brain. In the aftermath of the financial collapse, what we see right now is just the opposite of what was the case in the buildup of the financial bubble. Now, both investors and bankers are in a mode of excessive fear where negative news significantly decrease the stock prices and instead of providing credit to the markets, investors sit on a huge pile of cash.

If the excessive greed and overconfidence in the economy results in catastrophic events, should we ask investors to be less greedy? According to the Adam Smith, all humans have sympathy for the rich and famous. We can even find this in Holy Scriptures as well. There is always a sympathy for, and envy of, the rich. Hence, asking people to act against their innate nature may not be a wise decision but we should also keep in mind that this inherent human tendency can lead to moral corruption in the society. What we need is the balance of fear and greed in our behaviors and if one dominates the other, there will be misery for the whole.

Devrim Bulut holds a PhD degree in economics. Having taught at several universities in the United States for the last 5 years, he conducts research on market irrationality.

Every blessing of God is an opportunity given to human beings that calls for a corresponding responsibility.

Health is a blessing that should be used to fast, to pray, and to strive on God’s path so that one can express gratitude for this blessing. If a person gives this gratitude, God will return that body in the next world for eternity and without flaw, and with all its potential revealed.

Intelligence is one of God’s favors. If the horizon of one’s mind has been enlightened by the lights of revelation, and he is therefore distanced from inappropriate things and makes decisions according to the true path, intelligence is a source of inspiration. If he uses the blessing of his mind appropriately and introduces Truth to those who have strayed, he is giving the mind its due. On the contrary, if he only uses intelligence for worldly or evil tasks, he is being ungrateful for that blessing.

Power of expression is one of the greatest blessings that God has given humanity—so much so, that the name of the Qur’anic chapter where this is explained is called Rahman (Mercy). Al-Rahman is one of the Exalted Names of God. Some of the manifestations of God’s Mercy are giving means of subsistence in a broad circle to everyone even if they are not believers, and nourishing creation with various blessings, including human’s power of expression. This ability makes them eligible to be an addressee to God. They may understand God’s words and at the same time express their thoughts to Him. God says, “Come, pray to Me and bow in My presence.” Then they can say, “praise be to God” and with faithful and obedient devotion they can stand in God’s presence. In one sense, this is understanding God and speaking with Him. One of the Successors (the generation after the Companions of the Prophet) said, “If a person who reads the Qur’an says that he spoke with God, it would not be a lie.” Therefore one who says, “praise be to God” can be considered to have spoken with God.

The prayers that believers recite every day actually reflect a conversation with God:

You are the Most Beneficent and the Most Compassionate: You first gave me consciousness and then the ability to express this consciousness. This is a manifestation of Your Mercy.

You are the Master of the Day of Judgment: I am preparing for that day within the framework of Your commands.

I serve only You and I seek help only from You: I do so in order not to be smashed under the weight of servanthood.

Most people probably never really ponder the prayers in this way, but if they were to reflect, the prayers allow them to rise to a very honorable station.

If a person went and spoke with a head of state, he would talk about it everywhere; he would find an opportunity in every environment to mention that conversation. Therefore, if a person views talking with a head of state as this important and mentions it everywhere, then he should think deeply about what it means to have the privilege of addressing God.

A sacred saying from the Prophet (hadith qudsi) is stated as follows:

“I share the recitation with my servant in prayer; half belongs to Me and half to him and what My servant wants will be given to him. When the servant says, ‘Praise be to God, the Cherisher and Sustainer of the worlds,’ Exalted and Glorious God says, ‘My servant praised Me!’ When he says, ‘Most Glorious, Most Merciful,’ God says, ‘My servant glorified Me.’

“When he says, ‘Master of the Day of Judgment,’ God says, ‘My servant exalted Me.’ When he says, ‘You do we worship and Your aid we seek,’ God commends him: ‘This is a pledge between Me and My servant. I gave him what he wanted.’

When the servant says, ‘Show us the straight way, the way of those on whom You have bestowed Your grace, Those whose portion is not wrath, and who go not astray,’ God says, ‘This belongs to My servant and he has been given what he wants.’”

In recitation, the chapter al-Fatiha is divided between the servant and God—some is spoken by the servant, and some is answered by God. In a sense, this is nothing other than a conversation with God. Consequently, the power of expression is a great blessing from God, and its greatest right is to praise God, who honored human beings with the power of expression.

Like a town crier, we must speak of our Lord, who gave us the capability of expression, everywhere we go. If you give a crier a little money, he will promote his wares from morning till evening in the marketplace. Salesmen do the same thing; they go to houses, fawn on people and try to sell their goods. In the end, what they will sell is one or two pots and pans. In the same way, Heaven will be given to us for doing very easy tasks. We are in a position to be made worthy of seeing God’s Beauty by using, in the best way, the power of expression bestowed upon us by God. Even if no one remained on earth to hear us, then we have the responsibility to climb the mountains to the skies and live for the excitement of talking of God to the jinn and demons. As a friend of truth said, even if one is imprisoned and there is no one around, then he should try and teach the demons about God to fulfill his responsibility.

The subject is the importance of a person returning a favor given by God by making the best use of the ability bestowed. Only by means of this kind of reciprocation can gratitude for that blessing be fully shown. God will continue bestowing that blessing here and in the next world. If a person only gives the right of property, but does not give the right of his mind, health, or power of expression, then he still will have been ungrateful. If a person cannot speak, he has a pen. If he does not give the due of the pen, then he will have shown ingratitude before God. If one who has strong mental abilities does not use them for God, then he will have been unjust. Whatever God has given a person should be used on the path of God to teach others about Him.

If a person does not give gratitude for his other blessings, but only gives financial aid when his financial situation is favorable, then at least he has performed a large part of his responsibility. If he gives help beyond the alms tax, financial aid is a serious sacrifice, and voluntary acts and altruism within this framework is great, because it is the virtue of giving for God’s sake. In fact, our Prophet said, “Generosity is like a tree. Its roots are in Heaven and its branches have hung down to this world. Whoever lives under that tree and behaves generously, sooner or later he will hold on to one of the branches and rise to Heaven where the tree’s roots are.” It can be understood from this that a generous person, even if he is a sinner—God willing—will eventually enter Heaven. If a sinner does not deny God, and he is generous, it is said that he will enter Heaven. Saying, “A stingy person is closer to Hell,” our Master used an expression of warning for miserliness. We can infer that since generosity is one of God’s attributes, He will not put a person with that attribute into Hell.

Attributes are very important; people must give what is due to the attributes God blessed them with. In this way, one’s work should be arranged according to God’s blessings. Worldly tasks should not be forgotten and neglected. Regardless of where he is, a believer should always be at the forefront of those living in his own time. Doing this, he will always be avant-garde—but while doing this, he should put his life in order and never neglect God’s rights. In short, a believer should use all the abilities God has bestowed upon him, and use them in such a way that he has given those blessings their due.

What is microfinance?

As defined by the Consultative Group to Assist the Poor (CGAP), microfinance is “the supply of loans, savings, and other basic financial services to the poor.”¹ Muhammad Yunus provides a much more detailed definition of microfinance to ensure its distinction from other kinds of credit. He gives the goal of microfinance credit as “creating self-employment for income-generating activities and housing for the poor, as opposed to consumption.”² Microfinance, as a concept, was first introduced in the late 1970s by Yunus in Bangladesh through Grameen Bank. To ensure the utilization of the idle capacity of skills among the poor, microfinance credits typically offer tiny loans to individuals ranging from $40–$50 to a couple of thousand dollars. The borrowers are asked to repay the loans within a brief period in order to secure future loans. According to Gary Gardner, worldwide the average microcredit size is $1,026.³ The credits usually come with a fairly high interest rate. At the lower end, we see annual interest rates of 20–30%; at the higher end, the rate can go as high as 60–70% per annum in certain cases.

The need for microfinance

Microfinance addresses, it appears, a moral necessity more than anything else. By empowering the poor through credit extension, this innovative idea of microfinance tackles a serious drawback of the contemporary economic system, that is, the exclusion of the poor from the financial system. The working of modern economies prevents people without assets from securing loans in commercial banks. The rationale is simple; the poor person does not have savings, assets for collateral, or a credit profile. For the lender, the risks associated with the loaned-out credit are disproportionately high in relation to the profit in the ongoing interest rates; the expense of conducting the high-risk financing of businesses run by poor people exceeds the potential returns. Yet, for underutilized or idle economic capacity to be realized, an economic agent needs to assume the risk associated with extending credit to people on low incomes.

Traditionally, poor people have developed informal mechanisms to address their credit needs, such as securing loans from their family networks. Yet, these mechanisms cannot always provide the amount and flexibility needed in dire economic conditions such as an emergency. According to some accounts, there are around 7,000 “microlenders,” or microfinance institutions (MFIs), worldwide reaching out to more than 100 million borrowers.⁴ How did these institutions emerge? The answer is high interest rates. As mentioned above, there are many financial actors lending at rates well above current interest rates because of the higher default risk. Based on this new financing system, new business models developed throughout the world demonstrating that poor people did not necessarily mean risk-prone investment. An interesting aspect of microfinance is the predominance of women as borrowers rather than men. Almost 90% of actual borrowers are women, a fact attributed to the better “repayment performance” of women. This is a deliberate policy on the part of microcredit programs. This reliable repayment performance coupled with women’s tendency to invest the additional income to the benefit of the family⁵ ensures the achievement of several positive outcomes which will be discussed in the following section.

The success of microfinance to date

Microfinancing theory has two broad goals. One of them is the realization of long-term economic development in less developed countries. Investigating and measuring the accomplishment of this goal is beyond the scope of this article; instead, I will focus on the second goal and the level of its achievement in order to evaluate the concept. The second goal, which is improvement in the daily lives of poor people, is also more directly related to the lives of individuals and may give us a better idea about the benefits of microfinancing. If the institution of microfinancing targets poor people and their economic prospects, then we should be able to see tangible evidence of improvement in that area. Proponents of the idea postulate that microfinancing benefits the immediate borrowers economically, but also has wider implications for the household as a whole. The eradication of poverty is one of the celebrated successes of microfinancing at the individual level. According to Littlefield et al., the project has recorded significant improvement in the earnings of microfinancing borrowers as opposed to non-borrowers. For example, in Bolivia two thirds of borrowers experienced an increase in their income. Similarly, in Indonesia the increase in income was about 13% for borrowers and a mere 3% for non-borrowers.6 Various studies demonstrate that among borrowers of microfinance loans about 50% have actually risen above the poverty threshold, an important statistic by any measure.⁷

Another success of the microfinancing program has been the improvement in children’s education. According to the research, education is one of the areas where we can observe the spillover effects of the increased income; extra income is likely to be spent on the education of children. In Bangladesh, the educational achievement of children aged from 11–14 years (whose families took microfinance loans) has doubled to surpass the control group (the children of non-borrowers) by almost 80%. A different study finds that in 1996 the schooling rate among the daughters of borrowers was almost 100% as opposed 60% among the children of non-borrowers; similarly among boys, 81% of the children of microfinancing borrowers went to school as compared to 54% of the rest.⁸ In health care, Littlefield et al. also report noteworthy improvement in immunization, breast-feeding practices, and rehydration therapy for children with diarrhea in countries like Ghana, Bolivia, and Bangladesh.⁹ According to recent literature on economic development, better educational and health care opportunities as part of human development initiatives underlie the new, long-term economic development process. In this regard, it is important to recognize the great potential that microfinance can offer for the future of developing countries.¹⁰

Drawbacks of microfinance

Nonetheless, microfinancing raises important questions with respect to its application and the heavy burden it places on the borrowers. Microfinancing particularly faces two urgent issues undermining its popularity worldwide. The first of these issues concerns microfinance institutions (MFIs). In recent years, MFIs have begun to experience financial difficulties, in particular, high delinquency rates. In contrast to the high repayment rates of the early period of microfinancing, MFIs are having increasing difficulty in sustaining their financial solvency. The early 2000s saw Grameen Bank experiencing serious repayment problems; 19% of its overall loans are one year overdue and about 10% are delinquent as defined by the bank itself. In a similar vein, Nimal Fernando, a consultant for CGAP (Consultative Group to Assist the Poor), reports liquidity and delinquency problems Asian MFIs faced in the 1990s and 2000s.¹¹ Because of high interest rates, borrowers fail to pay off the principal of the loan, and the accumulating interest. Taking the necessary steps to ensure financial sustainability of MFIs, however, comes with a trade-off; the borrowers will have to confront tighter measures on their loans in the form of higher interest rates, shorter due dates for repayment, or limited uses for the loan.¹²

The second problem facing microfinancing surfaced in the form of increased commercialization. MFIs have increasingly gained a commercial nature with investment banks obtaining a larger share of the microcredit sector. The justification for commercialization of microfinance is that increased capital allows financing to reach a larger pool of poor borrowers, enabling them to engage in a wider spectrum of economic activities. No doubt the increased pool of available funds has contributed to the increase in the number of borrowers in the last decade or so. However, this new interest in microfinancing poses problems in addition to its advantages. The surge in commercialization is in large part due to the potential for high returns in the sector. Higher returns for MFIs come at the expense of the poor borrowers across the world in the form of higher interest rates. This outcome is intimately related to the delinquency rates of MFIs. Higher interest rates imply lower repayment performance and longer repayment terms.¹³ The commercialization of microfinance is exemplified by the recent case of Compartamos, a microfinance institution in Mexico. In the words of Jonathan Lewis, “Compartamos is without question an impressive…bottom line success story, a veritable poster child for commercializing microfinance.”¹⁴ But this focus on the lender’s “bottom line” has not proved to be a guarantee of success or satisfaction for the borrower, as we shall see.

Both of these problems, the lack of financial sustainability of MFIs and the commercialization of microfinancing, point to a serious issue at the very foundation of microfinancing: interest-based credits. As we know too well from the current financial and economic crisis, an uncontrolled interest-based economic system is likely to harm the poor rather than the rich who actually own the financial assets. The major burden of “saving” the economic system falls on the shoulders of lower economic groups. Interest-based microfinancing, seen in this light, has a negative effect on the microfinancing system in two ways. Firstly, borrowers try to catch up with interest payments while at the same time putting in an effort to make the best use of the limited amount of credit. As Businessweek put it, the loans from MFIs rival traditional “pawnshops and loan sharks.”¹⁵ In the case of Compartamos, for example, the effective interest rate paid by the borrowers goes as high as 100% annually. Unable to run their business as expected, borrowers defer payment of their loans, which results in higher interest payments. Particularly in a crisis environment, low business volumes are more likely to cause delays in repayments and increases in interest rates, a vicious cycle harmful for the poor. Under such circumstances, the possibility of added economic value is minimized.

Secondly, the interest-based mechanics of microfinancing, and by association its commercialization, have become an effective mechanism for integrating the poor into the global financial system. “Unbankable” until the 1970s, the poor have now been made de facto captives of the financial system. Although the original idea was to help the poor in ways unexplored so far and to make microfinancing “a tool of nonprofit economic development,”¹⁶ neither of these goals has been realized in the long term because of the heavy interest burden of microfinance formulation. In a slight reformulation, the question of the high interest rates is not whether they prevent microloans from working, but rather how they affect the working of the system. What happens is that the loans obtained by borrowers are directed to more urgent uses to “smooth consumption” in the short term, instead of being invested in potentially profitable business activities, which is stated as the chief goal of the microfinancing system. High interest rates change the pattern of loan consumption by borrowers; high interest rates preclude the chances of profitable entrepreneurial activity. Even if the loan is employed for business purposes, at the time of repayment the profits cannot match the interest¹⁷ and this eventually leads to the use of loans for consumption needs.

Conclusion

The contemporary capitalist global economic system has benefits and harms in proportion to the individual’s wealth, usually favoring the rich over the poor. Microfinance began with the hope of offering a helping hand to those outside and on the margins of the global economic system. The goal is an exalted one, suggesting respect and increased economic opportunity for the poor. Yet, the practice of microfinance seems to set it far from its moral foundations. Increased commercialization accompanied by exorbitant interest rates only reinforces the working of the global economic system to benefit the wealthier and harm the poor. Unless the fundamentals of microfinancing are transformed to not-for-profit bases, in the long term we may see this potentially valuable institution simply withering away to another form of aggressive capitalism. I would like to conclude with a quotation from Bediüzzaman Said Nursi pointing to two fundamental problems of our contemporary society:

… [T]he following two attitudes or approaches are the causes of all revolutions and social upheavals, as well as the root of all moral failings: … “I do not care if others die of hunger so long as my stomach is full,” and “You must bear the costs of my ease-you must work so that I may eat.”¹⁸

Microfinancing in its current formulation stands strangely where these two problems meet. On the one hand, it is an effort at minimizing the suffering of others by the extension of finance opportunities. On the other hand, those others carry the burden of this help, making the wealthy wealthier. In this regard, Bediüzzaman’s statement is intimately related to the way microfinancing, a potentially valuable initiative in itself, has become an instrument of the rich used against the poor through its dependence on commercialization and interest.

A. Kadir Yildirim is a PhD candidate in political science at the Ohio State University. He can be reached at yildirim.10@osu.edu.

Notes

1. Consultative Group to Assist the Poor (CGAP) website, http://www.cgap.org, accessed 12/26/2008.
2. Muhammad Yunus, 2007, “What is Microcredit?”
3. Gary Gardner, 2008, “Microfinance Surging,” Worldwatch Institute.
4. Daniel Pearl and Michael M. Phillips, November 27, 2001, “Grameen Bank, Which Pioneered Loans For the Poor, Has Hit a Repayment Snag,” Wall Street Journal; Gary Gardner, 2008, “Microfinance Surging,” Worldwatch Institute.
5. Elizabeth Littlefield, Jonathan Morduch, and Syed Hashemi, 2003, “Is Microfinance an Effective strategy to reach the Millennium Development Goals?” Consultative Group to Assist the Poor (CGAP), p. 7
6. Ibid, p. 3.
7. See “Role of Microcredit in Poverty Alleviation,” 2005, First Quarterly Report of State Bank of Pakistan, 2004–2005 for data on India; see Global Development Research Center’s “Data Snapshots on Microfinance,” http://www.gdrc.org/icm/index.html, accessed 02/07/2009 for data on Bangladesh.
8. A.M.R. Chowdhury and A. Bhuiya, 2001, “Do Poverty Alleviation Programmes Reduce Inequity in Health: Lessons from Bangladesh,” in Poverty Inequity and Health, ed. D. Leon and G. Walt (Oxford: Oxford UP).
9. Ibid, p. 6.
10. See World Development Report 2006 by World Bank; and, A.Kadir Yildirim, 2008, “Economic Development via Human Development,” The Fountain, Issue 62 (March–April).
11. Pearl and Phillips, “Grameen Bank, Which Pioneered Loans For the Poor, Has Hit a Repayment Snag”; Nimal A. Fernando, 2008, “Managing Microfinance Risks: Some Observations and Suggestions,” Asian Development Bank.
12. Viktor Berglind and Arizo Karimi, 2007, “Repayment Performance in Microfinance: A Theoretical Analysis,” University Essay from Uppsala University.
13. Ibid, p. 11;
14. Lewis’ study on the case of Compartamos is instructive on the benefits of commercialization for MFIs. Jonathan C. Lewis, 2007, “What Would Leland Stanford Do?” Microcredit Enterprises.
15. Businessweek, December 13, 2007, “The Ugly Side of Microfinancing.”
16. Ibid.
17. See James Surowiecki, “What Microloans Miss,” The New Yorker, 17 March 2008 for a discussion on the impact of high interest rates in microfinancing industry.
18. Bediüzzaman Said Nursi, The Words, New Jersey: Tughra Books, 2005, The Twenty-fifth Word, p. 427.

Greed is a very powerful feeling in human beings; if not restrained, it is very harmful. Expressing his deep longing for times when most of the crimes we know today “only existed in the dictionary,” Gulen is in a sense pointing to this sickness of greed of today when he praises “the auspicious people of those days” who “were exceptionally contented with what they possessed, stayed away from what was forbidden, and fixed on what was lawful, and they pursued a life in justice.” Greed for more property, greed for more wealth, territory, welfare, comfort, and pleasure can only be subdued by contentment.

The Aral Sea is another victim of greed. The communist regime, which wanted to transform the whole of Uzbekistan into a huge field of cotton, diverted the rivers that fed this, once the fourth biggest inland sea in the world, into deserts. The regime was successful in that Uzbekistan really became the largest cotton producer of the world; but the cost was high. Timur Ceylan analyzes a very serious ecological problem in Asia as the Aral Sea is dying before the world’s eyes.

Three articles in this edition are dedicated to topics concerning women in the context of Islam. Fulya Celik deals with the enormous change in the lives of women that took place following the advent of Islam. Stressing an analysis of the social conditions before and after Islam, she mainly discusses how Qur’anic principles restored the universal human rights women were denied before and even today. Eren Tatari deals with her experience of the dress code of Islam for women. Drawing attention to Christian nuns and icons of Virgin Mary as well as the Jewish dress code for women, she underlines the fact that covering one’s body is in the nature of being human and Islam was not the first to enjoin it. And finally, Asli Sancar narrates her journey into discovering a role model for women, a journey which started in the US, continued in Turkey for decades, and was crowned back in the US with her award-winning book: Ottoman Women: Myth and Reality.

Other developments supported this trend, the most important being:

The invention of the silicon chip (1958-59). Subsequent improvements have so miniaturized computer components and compressed data that data transmission is now practically instantaneous. When combined with Web browsers, search engines, and the Internet, access to financial and other data can be exploited to its full potential. The U.S. Congress’ approval of Internet commerce and the falling prices of home computers and phone calls was a boon for transnational corporations (TNCs). Now they can micromanage their far-flung operations, direct money to the best economic opportunity, avoid taxes and financial losses, cripple unions and labor gains, skirt environmental legislation, and find other “creative” ways to increase profits.

The deregulation of financial capital (1973). This was signaled by abandoning the Bretton Woods system of fixed currency exchange rates, which had been maintained by America since 1944 and supported by its adherence to the gold standard, in favor of letting the market determine a currency’s value. Now that governments could no longer control the outflow of national currency, TNCs were free to move it as they wished.

Breaking the large banks’ and insurance companies’ monopoly on providing financial loans. With the rise of the bond market in the late 1960s, securitization of home mortgages in the 1970s, and “junk bonds” and the securitization of the international debt market in the 1980s, the current phase of globalization quickly blossomed.

These developments opened once-closed markets to millions of individual investors and mutual fund managers whose first concern is profit. As a result: “Not only can investors now buy and sell stocks and bonds from all over the world, not only can they now do that buying and selling from their home computers, but Internet brokerage sites are now giving them-for free-the information and analytical tools to make those trades, without ever having to call a broker. The more people do that, the more they will demand more information and analyses about different economies and companies, and the more easily they will move their money around, punishing the bad performers and rewarding the good ones.”¹

The underlying philosophy of increasing profits meshed nicely with a firm belief in social Darwinism. Developing and then applying “economic” Darwinism was a logical outgrowth. Just as individuals and species survive by adapting and becoming stronger, so companies survive by means of rapid adaptation.

This can take the form of corporate mergers or understandings, paying lower wages to and providing few if any benefits for overseas workers, and justifying everything in terms of increased efficiency. A new vocabulary has emerged for such activities: downsizing, outsourcing, streamlining, business restructuring or re-engineering, cost rationalization, retrenchment, redundancy, rationalization, risk minimization, profit alignment …

Benefits and Drawbacks

Those who dream of vast legions of Chinese consumers assert that globalization will make China a more open society. First, they say, Beijing’s official monopoly on information will end because foreign and local investors must have access to the Internet. Internal dissident groups can use it to contact sympathizers and publicize their causes at home and abroad.² Second, as China is drawn further into the world community, Beijing will have to adhere to international business law and treaties on workers’ rights, working conditions, fair payment, and so on. It also will have to adjust to globalization’s driving economic philosophy of neo-liberalization, which means liberalizing the economy, privatizing state-owned businesses and utilities, opening the financial and banking sectors, establishing transparency and accountability, and providing accurate financial data. Supposedly, such reforms will counteract China’s tendency to put politics and ideology above all other concerns. Third, those Chinese who work with foreign investors will learn about democracy, individuality, personal responsibility, human rights, governmental accountability, and how people in other countries actually live. In addition, foreign investment will open up new opportunities for Chinese entrepreneurs and those who want to improve their lives. They might even be paid above the normal hourly or daily wage, and thus can send money home to help their families.

Such arguments can be applied to many developing countries with only slight variations. These arguments sound great and really do have some merit, but reality sometimes does not conform to theoretical expectations. The following examples are by no means confined to the countries mentioned.

In Mexico, economic development is concentrated in Mexico City and along the northern border with America. The agricultural sector is largely ignored, despite the large numbers of people involved in it. Looking for debt relief, foreign investment, and entrance into the North American Free Trade Association (NAFTA), the government gutted Article 27 of its constitution, which made all communal land belonging to indigenous communities off-limits to foreigners and TNCs. It had to do this because America and Canada want access to Mexico’s untapped wealth, most of which is under indigenous-held land. The result was the Zapatista uprising on January 1, 1994, which continues to enjoy wide support, and a host of problems that drove the 71-year old ruling party from power in 2000.

In northern Thailand, villagers untouched by Bangkok’s modernization and development can see how their urban counterparts live thanks to television. Hoping to reap some of the benefits, some families sell their daughters to Bangkok’s brothels. Large sectors of Thai society and the government silently support this, finding an easy way out of this moral dilemma by saying that it is the girls’ karma. The result is an out-of-control AIDS epidemic and a booming sex-tourism business based upon the unbelievable exploitation of young women. Neighboring Cambodia has the same problem, while many Russian women see prostitution as the key to the good life.

In Ecuador, Amazonian Indian tribes and other affected peoples sued Texaco in an American court (1993) to force it to clean up the contamination it left behind. Texaco, which no longer operates in Ecuador, dumped “4.3 million gallons per day of toxic oil waste water over a period of 20 years … [but] claims the dumping caused no appreciable damage.” It also left behind more than 300 open waste pits contaminated with heavy metals and other carcinogenic compounds. “In their lawsuit, the plaintiffs cite a wave of deadly cancers, skin lesions, birth defects and other abnormalities among the areas indigenous peoples, and massive die-offs of plants, crops, and animals from air and groundwater pollution as well as poisonous “black rain.” In some villages near polluted water sources, the rate of cancer is 100 times higher than the historical norm.” The case has yet to be resolved.³ There are similar problems with Shell in Nigeria, Nike in Indonesia, Union Carbide in India, and Rio Tinto in Papua New Guinea.

Areas of Concern

Agriculture. The Green Revolution of the 1960s globalized agriculture and introduced the concept of “cash crops.” It also brought the promise of higher crop yields, reduced malnutrition, and rural development. However, along with it came traditional crop varieties and farmers displaced by agribusiness and hard-currency-earning cash cops, expensive imported fertilizers and pesticides, increased land distribution inequity, foreign corporate patenting of seeds and crop strains developed by local farmers over the centuries, and the diversion of financial and natural resources to agribusiness.

All of this undermined local agriculture, a devastating blow to indigenous farmers. Even worse, the Food and Agriculture Organization says that about 75 percent of all plant species have become extinct. In more than 80 of the 154 countries surveyed in 1995, this loss was attributed to “the spread of modern, commercial agriculture and the introduction of new varieties of crops.”⁴

Medicine. On February 1, 2001, America threatened to complain to the World Trade Organization about Brazil’s national and highly successful AIDS treatment program. By producing local and cheap generic drugs and delivering them for free, Brazil has halved its AIDS victims’ death rates and substantially reduced treatment costs. On April 19, 2001, after a protracted battle in South African courts, several pharmaceutical TNCs dropped their quest to block the South African government’s plan to import cheap generic drugs to treat its AIDS victims. Cilpa, an Indian company that produces cheap generic drugs for AIDS victims, routinely faces pressure from pharmaceutical companies and their governments to cease and desist.

In each case, the charge is the same: violation of the intellectual property and patent rights held by Western pharmaceutical companies. That these same companies are among the richest in the world, and that their clients are among the poorest countries in the world, is rarely mentioned. Prices have been reduced as a result of such negative publicity, but many victims in Asia and Africa still cannot afford the medicine they need to survive.

In the Amazon, researchers have discovered many plants and herbs with medicinal value from the indigenous peoples. However, most of them sell the data to the large pharmaceutical companies and both become rich. The Amazon’s people do not benefit; in fact, their situation deteriorates as even more TNCs descend upon them.

National Sovereignty. The rise of 24-hour computerized and almost instantaneous financial transactions and currency speculation makes it hard to know who is in control. Governments face an impossible situation: “Central banks and elected governments [are] regularly compelled to choose between [their obligations to domestic economies and the new force of the global market] … This was often a ‘no win’ choice for political leaders since yielding to the market’s idea of ‘sound economic policy’ frequently required them to depress their own economies, increasing unemployment or cutting social spending.”⁵

George Soros, perhaps the best known of all individual and institutional currency speculators, has humbled governments with this strategy. Working together, they humiliated the Bank of England in 1992 and destroyed Europe’s Exchange Rate Mechanism in 1993. Malaysian Prime Minister Mohamad blames Soros for the Asian economic crisis of 1997-98. No individual currency speculator can do much on his or her own, but when big players like Soros begin to move, others jump on the bandwagon. The results show who is really in charge of a nation’s economy and, to a certain extent, social policy.

Structural adjustment programs (SAPs) are another controversial matter. In the 1980s, America began tying its aid to World Bank and IMF economic prescriptions and reforms (reducing inflation, promoting exports, meeting debt-payment schedules, and decreasing budget deficits) and to facilitating increased American trade and investment.

However, they generally entail “severe reductions in government spending and employment, higher interest rates, currency devaluation, lower real wages, sale of government enterprises, reduced tariffs, and liberalization of foreign investment regulations…. But while government balance sheets may improve, SAPs have failed to establish a base for sustainable, balanced economic development … [and] have bankrupted local industries, increased dependency on food imports, gutted social services, and fostered a widening gap between rich and poor.”⁶

In addition, they tend to keep poor countries in debt, for new loans are needed to pay off existing debts and to qualify for future loans. Despite this, they remain the usual “cure” for countries seeking international financial aid and investment. This could change if anti-SAP protests continue, and if demands that lending institutions become more transparent and make allowances for social policies succeed.

Political Development and Human Rights. Decades of Western investment in oil-rich Middle Eastern and resource-rich African countries appears to have strengthened dictators of all persuasions. Instead of supporting human and religious rights in Chinese-occupied Tibet and Sinkiang, not to mention in China itself, American business interests persuaded Washing-ton to grant China permanent normal trade relations on September 19, 2000. Thus, China’s violations of human, labor, and religious rights no longer has to concern the American business community. Unfortunately, this seems to be the rule rather than the exception.

Conclusion

Global capitalism, based upon unfettered consumerism and the idea that continued profits through continued growth leads to ultimate happiness, now runs the world’s economy: “The culture-ideology of consumerism is the set of beliefs and practices that persuades people that consumption far beyond the satisfaction of physical needs is, literally, at the center of meaningful existence and that the best organized societies are those that place consumer satisfaction at the center of all their major institutions.”⁷

If this is true, human unhappiness is sure to increase. Poor people viewing the “real” lives of the rich through foreign television programs or movies see a lifestyle and possessions forever beyond their rich. Workers face constant job insecurity. Rural migrants in cities have their hopes dashed when they cannot find jobs. The media report the rise of sweat-shop and child labor, environmental devastation, a loss of corporate accountability and responsibility to their home bases, a hollowing of hard-won labor gains by threats of relocating overseas, and declining taxes as TNCs juggle their books.

Even those who benefit cannot feel secure. Their job might be outsourced in the interest of higher profits, abolished by corporate streamlining, or lost because they cannot acquire new skills fast enough. Shareholder dissatisfaction can destroy their companies, and job-related demands upon their time can make a normal family life and friendships impossible.

In sum: “Given their narrow premise, market economists never attempted to calculate all of the collateral damage that could also be attributed to the liberalization of finance-the capital investments destroyed when viable factories were abruptly abandoned, the economic output lost when economies grew more slowly, the public welfare costs from rising unemployment or declining wages, the instability for companies and nations caused by the sifting money values.”⁸

Economic globalization does have its good and bad points. But its emphasis on always-increasing profits as the way to ultimate happiness and meaning in our lives is misguided, for how can what is transient give lasting satisfaction? It has nothing to offer those who fall behind but dreams that will be fulfilled “sometime in the future.” And one day they will demand the fulfillment of those dreams…

Footnotes

1. Thomas L Friedman, The Lexus and the Olive Tree: Understanding Globalization (New York: Anchor, 2000), 71.
2. China’s first “cyber-dissident” was tried in Shanghai on December 4, 1998, “on charges of subversion for having given the addresses of 30,000 Chinese computer users to VIP Reference, a journal that Chinese dissidents publish in the United States.”
3. Ibid., 68.
4. Cristobal Bonifaz and Joseph C. Kohn, “Amazon Tribal Leaders Blast U.S. Judge For Blocking Texaco Pollution Case,” 31 May 2001. Online at: www.amazonwatch.org.
5. The State of the World’s Plant Genetic Resources for Food and Agriculture, Chapter 1: “The State of Diversity,” (Leipzig: 1996). Online at: http://web.icppgr.fao.org/ wrlmap_e.htm.
6. William Greider. One World, Ready or Not (New York: Simon & Schuster, 1997), 242.
7. Carol Welch and Jason Oringer, “Structural Adjust-ment Programs,” Foreign Policy In Focus, vol. 3, 3 (Apr. 1998). Online at: www.foreignpolicy-infocus.org/briefs/ vol3/v3n3sap.html.
8. Leslie Sklair, The Transnational Capital Class (Oxford, UK: Blackwell, 2001), 4-5. 8 Greider, One World, 250.

Other References

• Bales, Kevin. Disposable People: New Slavery in the Global Economy. Berkeley and Los Angeles: University of California, 2000.
• Barnet, Richard J. and John Cavanagh, Global Dreams: Imperial Corporations and the New World Order. New York: Touchstone, 1995.
• Korten, David C. When Corporations Rule the World. 2d ed.
• Bloomfield, CT: Kumarian Press, 2001. Madeley, John.
• Big Business, Poor People: The Impact of Transnational Corporations on the World’s Poor. New York: Zed Books, 2000.

The media proclaims globalization’s advantages and disadvantages. Money flows from international lending institutions and TNCs to developing countries. Children receive an education, parents have better job opportunities, families benefit from improved medical care, and local farmers and industrialists can sell to an ever-expanding market. Countries begin to develop and climb out of debt, the quality of life improves, and children imagine a better future.

There are certain drawbacks, however. Those affected negatively sometimes seek refuge in intense nationalism or religious fundamentalism. Closer economic integration brings financial uncertainty and trans-border problems. Remember the Asian financial crisis of 1997-98? Over time, borrowed money can strangle a poor country, as in Africa. Development projects change people’s lives-and not always for the better, as illustrated by Mexico’s on-going Zapatista rebellion. National development policies can affect a region’s climate and, in the case of China with its huge population and rapid industrialization at the expense of its environment, the global climate.

Globalization has even changed our concept of time. Never has “time is money” been so accurate. Time has become an asset to be exploited, no longer a luxury to be enjoyed. Everyone wants to manage it better, to control it so that the hoped-for benefits will be attained. Now people say that the world is no longer divided between the haves and the have-nots, but between the fast and the slow.

The growing access to and use of antibiotics has spawned new drug-resistant bacteria, which means that antibiotics are becoming less effective. Moreover, some nations and groups are exploiting the wide availability of the experts’ increasing medical and technological knowledge of bacteria to produce biological weapons. Without religion’s assertions that all life is equally valuable and sacred, and that we must work together to uplift everyone, one day such weapons might be used.

To understand the advantages and disadvantages of such interconnectivity, we must analyze its impact upon our selves and our lives. This is one of the purposes of reflection and self-criticism, for these practices show us where we fit in. Many people use these tools to pursue corporate, political, national, or personal interests, whereas many others use them to pursue interfaith dialogue in the hope that tolerance, understanding, acceptance, and cooperation will spread around the world.

But the real value of reflection and self-criticism lies in helping us relate to existence and the Divine, as well as to nature and others, so that we may prepare for our own resurrection and eternal life. Once we understand that such issues remain relevant, regardless of time or place, we realize that religion was not invented by “primitive” people to explain what they could not understand.

We hope that you enjoy this issue and, as always, look forward to your comments.