Social Collateral: Women and Microfinance in Paraguay’s Smuggling Economy

Social Collateral

Social Collateral

Women and Microfinance in Paraguay’s Smuggling Economy

Caroline E. Schuster

UNIVERSITY OF CALIFORNIA PRESS

University of California Press, one of the most distinguished university presses in the United States, enriches lives around the world by advancing scholarship in the humanities, social sciences, and natural sciences. Its activities are supported by the UC Press Foundation and by philanthropic contributions from individuals and institutions. For more information, visit www.ucpress.edu.

University of California Press

Oakland, California

© 2015 by The Regents of the University of California

Library of Congress Cataloging-in-Publication Data

Schuster, Caroline E., author.

    Social collateral : women and microfinance in Paraguay’s smuggling economy / Caroline E. Schuster.

        p.    cm.

    Includes bibliographical references and index.

ISBN 978-0-520-28704-4 (cloth, alk. paper) —

ISBN 978-0-520-28705-1 (pbk., alk. paper) —

ISBN 978-0-520-96220-0 (electronic)

    1. Microfinance—Paraguay.    2. Microfinance—Social aspects—Paraguay.    3. Businesswomen—Paraguay.    4. Women-owned business enterprises—Economic aspects—Paraguay.    5. Smuggling—Economic aspects—Paraguay.    I. Title.

    HG178.33.P33S38    2015

    332—dc232015014471

Manufactured in the United States of America

24  23  22  21  20  19  18  17  16  15

10  9  8  7  6  5  4  3  2  1

In keeping with a commitment to support environmentally responsible and sustainable printing practices, UC Press has printed this book on Natures Natural, a fiber that contains 30% post-consumer waste and meets the minimum requirements of ANSI/NISO Z39.48-1992 (R 1997) (Permanence of Paper).

Contents

List of Illustrations

Acknowledgments

Introduction

PART ONE. REGULATORY FORMS

1. Entrepreneurship

2. Liability

PART TWO. LIFE CYLES OF LOANS

3. Creditworthiness

4. Repayment

5. Renewal

Conclusion

Notes

Works Cited

Index

Illustrations

1. Ña Fabiana’s patio

2. Ciudad del Este branch office of Fundación Paraguaya

3. Parachutes over Pto. Pte. Stroessner. Invaders? No, duty-free zone.

4. Credit counselor at Fundación Paraguaya

5. Paraguay Land Company deed

6. Payment receipts and account books

7. Collecting payments

8. Loan portfolio performance board

9. Paraguay’s whitewashing law

10. Despensas, or small neighborhood shops

11. Credit advertised with the slogan We don’t look at Informconf

12. Receipt marked Paid filed in account books of a Committee of Women Entrepreneurs

Acknowledgments

This book would not be possible without the ongoing collaboration and friendship of many people in Paraguay whose lives and livelihoods are described here, most of whom do not appear by name. Since 2006 they have contributed their support, care, and intellectual generosity during my trips to Asunción and Ciudad del Este. I would especially like to thank Martín Burt and the dedicated staff at Fundación Paraguaya. Martín’s enthusiastic support of my research gave me a crucial window onto the microcredit world. His staff at the Asunción head office was incredibly warm and welcoming. I would also like to acknowledge the deep debt I owe to the NGO workers at Fundación Paraguaya in its Ciudad del Este branch. Most have since left for other careers in the financial services industry; I wish them best of luck in their new jobs. While our discussions of microfinance were memorable, the best times were spent juggling tereré in the car, sipping Brahma beer at office parties, and watching the Paraguayan selección nacional hurtle toward the quarter finals of the South Africa World Cup. It was wonderful sharing many laughs alongside loan documents and comité meetings.

Along with the staff of Fundación Paraguaya, I would like to thank the borrowers, activists, friends, and neighbors of the neighborhood I call Ciudad Jardín. Their tutorials in plant husbandry, community bake sales, and neighborhood organizing inspired my thinking about social obligation. I was captivated by their vibrant projects, which kept drawing me back to the neighborhood. And importantly, my life in Ciudad del Este was profoundly influenced by the serendipity of coming to live with Modesta, Lucia, and the whole family—a happy accident that made my time there joyful. Thanks to Carmen and Ana for lots of laughs. Juan and Luz, our friendship is a blessing.

I owe much to Christine Folch, Gustavo Setrini, John Tofik Karam, Kregg Hetherington, Fernando Rabossi, Jennifer Tucker, and Juan Carlos Cristaldo for lively discussions during fieldwork in Paraguay. Putting Paraguay on the research map has always been something of a puzzle, and I am immensely grateful to find myself in such good company while undertaking that task. Directora Adelina Pusineri and Vicedirectora Raquel Zalazar at the Museo Etnográfico Adrés Barbero provided excellent archival resources and institutional support for research in Asunción. I benefited also from extensive conversations with researchers working in the tri-border area, especially at the Seminário Pesquisas na Tríplice Fronteira organized by Fernando Rabossi and hosted at the UNIOESTE campus at Foz do Iguaçu in 2009. I would also like to thank Ariel Wilkis for organizing a wonderful panel on economic anthropology at the Reunión Antropológico Mercosur (RAM) in 2009. The Grupo de Estudions Sobre el Paraguay (GESP)—headed by Magui López, among others—has built exciting research collaborations, and I hope to see the network of scholars flourish.

This has been an extended writing project that I began at the University of Chicago. Jessica Cattelino has taught me—over many years—the conceptual power of anthropology. Jessica, I aspire to your analytic precision, critical stance, and intellectual generosity. And I treasure our friendship. I would also like to thank John Comaroff for his ceaseless support of this research and his constant encouragement to think boldly and write clearly. Julie Chu pushed me to unexpected places, and Alan Kolata encouraged me to puzzle over development. At the University of Chicago I would also like to thank Joe Masco, William Mazzarella, Shannon Dawdy, Judy Farquhar, Karin Knorr Cetina, and Susan Gal for their commentary and suggestions throughout. Jennifer Cole provided critical insight in her patient reading of drafty drafts of early writing. I greatly benefited from the chance to share early versions of chapters in several workshops at the University of Chicago, including the Gender and Sexuality Studies Workshop, the Law, Culture and Society Workshop, and the Money, Markets and Consumption Workshop. At the Center for the Study of Gender and Sexuality (CSGS), Linda Zerilli has been a tireless advocate of graduate student research on the politics of gender. I enjoyed being a part of the Sawyer Seminar on International Women’s Human Rights, both as a dissertation fellow and as a participant in the events and faculty seminar, at which Agnes Lugo-Ortiz, Charlotte Walker, Lauren Berlant, Leela Gandhi, Rochona Majumdar, and Tara Zahra offered helpful comments. Thanks to Gina Olson and Sarah Tuohey at the CSGS and all the participants at the Gender and Sexuality Studies Workshop for thoughtful feedback. Julia Kowalski read and commented on written versions of the argument, and I benefited from our deep discussions. Duff Morton helped me clarify the argument of the first chapter of the book. Thanks also to George Paul Meiu, Sarah Luna, Monica Mercado, Zahra Jamal, and Larisa Reznik at CSGS. Adam Sargent, Brian Horn, Betsey Brada, Ender Ricart, Erin Moore, Gabe Tusinski, Kate McHarry, Jay Sosa, Mary Leighton, Duff Morton, and Malavika Reddy have been great intellectual companions.

I would like to thank Bill Maurer for his generous commentary at two annual Institute for Money, Technology and Financial Inclusion (IMTFI) conferences. I workshopped early drafts of writing at the Irmgard Coninx Stiftung Financialization of Everyday Life roundtables chaired by Jane Guyer and Susanne Soederberg. I also benefited greatly from participation in the Futures of Finance conference in April 2012, hosted by the Institute for Public Knowledge at New York University. For my archival research on Paraguay’s financial history, I would like to thank Michael Tomz at Stanford University for a wonderful introduction to Latin American political economy. A large portion of the archival work from the Corporation for Foreign Bondholders is based on reels of digitized microfilm that Mike generously shared with me when I left for graduate work at Chicago. At the Weatherhead Center for International Affairs at Harvard University I made extensive use of Harvard’s archival sources on Latin America. Throughout, I received invaluable feedback from anonymous reviewers at several scholarly journals. The comments and critical suggestions pushed me to refine the argument and clarify my analysis.

This research was undertaken with the support of the University of Chicago Century Fellowship for graduate research, the Jacob K. Javits Fellowship from the U.S. Department of Education, and FLAS Title VI funding for Guarani language training at the IDIPAR language institute in Asunción. Field research was supported in part by the Institute for Money, Technology and Financial Inclusion at University of California, Irvine. I also received support from the Fulbright-Hayes DDRA program and the Wenner Gren Foundation to conduct fieldwork in Paraguay. I would like to acknowledge the support of the Center for the Study of Gender and Sexuality at the University of Chicago during dissertation write-up. Further fieldwork funding and research support came from the Harvard Academy for International and Area Studies.

This book really took shape while I was in research residence at the Harvard Academy for International and Area Studies in the Weatherhead Center for International Affairs. Jorge Domínguez was the intellectual center of the Harvard Academy and pushed me to find the hummable tune for the manuscript. I benefited from discussions with fellow researchers, including Jesse Driscoll, James Long, Pablo Querubin, Gabi Kruks-Wisner, Nur Amali Ibrahim, Noora Lori, Naor Ben-Yehoyada, Jeffrey Kahn, Timothy Noonan, and Kerry Chance. Lively discussions with Sohini Kar still inspire me to think through comparative analysis on financial inclusion. I owe a very special thanks to the generous scholars who reviewed portions of the book manuscript at an author’s conference symposium organized by Larry Winnie and the Harvard Academy. Julia Elyachar, Gustav Peebles, Steve Caton, Michael Chu, Diego Abente Brun, Fernando Rabossi, and Jorge Domínguez all offered a very close reading of an early draft and gave exceptionally thoughtful suggestions for revision. The early review of the manuscript draft and lively discussion at the symposium were of incalculable value. I also benefited from the support of my colleagues at the Australian National University for their feedback and suggestions at the final stages of revision. I would like to say thank you to John Cox, Simone Dennis, James Flexner, Catherine Frieman, Patrick Guiness, Christine Helliwell, Nicholas Peterson, Andy Kipnis, Francesca Merlan, Sverre Molland, Alan Rumsey, Laurajane Smith, Trang X. Ta, and Ashley Carruthers. Thank you to Shiori Shakuto for index assistance.

Reed Malcolm at University of California Press shepherded this project into book form. The manuscript benefited immensely from his feedback and critical commentary and his unflagging support for the underlying research. I would like to thank the editorial team at the Press, as well as the reviewers, including Kregg Hetherington, whose clear-sighted comments pushed me to write a better book.

I am especially indebted to my core academic (and life) support network: Alex Blanchette, Tatiana Chudakova, Kate Goldfarb, and Elayne Oliphant. They are the hive mind whose collective contribution to the writing and analysis of this project cannot be overstated. Thank you also to Peter Hepburn, interlocutor throughout the writing process. Eliza Ridgeway and Megan Kemptson have been an amazing resource in the process of writing a book that is actually nice to read and remembering to have a good time while doing it. And an enormous thank you to my family for advice, encouragement, and humor throughout. Sue Schuster and Kristen Schuster are an endless source of inspiration and joy. Thank you to my grandma Aba Schuster who printed out every email and blog post from the field. Randy, Ana-María, Tracy, Rafa, and Claudia all offered unceasing support from Davis. Timothy Hermanas deserves more recognition and gratitude than I can express here. I am so thankful for a partner who insisted that I see this project through wherever it took me, even if it meant five-thousand-mile and nine-thousand-mile commutes.

At last, a huge thank you to the women who borrowed as Committees of Women Entrepreneurs in Paraguay and who continue to be a source of inspiration and awe. I am deeply grateful for the patience and perseverance of all the women who shared their economic travails with one another and with me. They helped me see the fragile connections and enduring bonds that hold together Ciudad del Este. This book is dedicated to them.

Introduction

Ña Fabiana stacked the plastic bags full of clothes on a chair as we discussed the final items that remained from her investment the previous year. She spread out the last of her inventory: soft microfleece gloves for children and adults, brightly colored striped socks with individual toes, winter coats, and children’s turtleneck shirts. Some of the clothing had become stained in storage over the past months, though it still had its original tags. The sun shone brightly on her shaded patio and Fabi and I were in shirtsleeves,¹ though it was already late fall and Paraguay was due for a cold snap in the coming winter months. Fabi tried—mostly in vain—to persuade her neighbor that buying in advance made good economic sense. She was selling these last items at a steep discount, and she expected the prices for winter clothes would go up when the weather turned. Look at this, she said, pulling out a light jacket that she had purchased for about $20 in one of the shopping gallerias made famous by Ciudad del Este’s vibrant²—and largely duty-free—import-export economy. On the Paraguayan side of the triple frontier with Argentina and Brazil, most residents found their livelihoods bound up in some way with Ciudad del Este’s cross-border trade and special customs zone. Fabi started a sales pitch: For you, I’ll sell it at $12. I need to recover some of my investment. I need movement. The neighbor sent her daughter next door to fetch $5 to purchase a lavender-colored long-sleeved shirt with embroidered flowers around the collar. When the little girl returned with only a fraction of the money her mother scolded her and marched her back to find the correct amount.

While we waited another woman drove slowly along the dusty road on Fabi’s block of the housing settlement in the periurban outskirts of Ciudad del Este, pulling up in a small blue hatchback car and kicking up a cloud of red dust. She was selling Sawary brand jeans that she had brought from São Paulo, Brazil. Ciudad del Este’s unusually open customs regime makes this sort of business trip quite lucrative for those with the means to finance the journey and buy merchandise in bulk. Announcing that she would be willing to collect payments in installments, the woman added the duffle bag of fashionable Levanta Bum Bum body sculpting jeans to the pile of Fabi’s clothes on the table. Fabi took a few pairs into her house to try on but did not find any that fit to her liking. If you find a pair like this in my size, she said holding up a pair of jeans with zippers on the pockets, then I would be interested. Looking wistfully at the little hatchback car, driven by the saleswoman’s husband, Fabi commented, I’d really like to work like that. Not wasting time. Three years ago she had cosigned a loan to purchase a moto-bike with her husband, which they paid off in twenty-four monthly installments. However, he used it every day to drive the six kilometers to the transport business where he worked as a driver and mechanic. Fabi sold her wares mostly to neighbors, and made investments with specific buyers in mind since she had come to know the intimate details of their tastes and needs. But to expand her sales network, reliable transportation would be a tremendous asset.

Selling clothing was one of several ventures that Ña Fabiana had undertaken in recent years. And these income-generating activities overlapped intermittently with a microcredit program, among other sources of credit, which animated some of the economic movement that sustained her and her family. For several years Fabi had been the treasurer of a Committee of Women Entrepreneurs at Fundación Paraguaya, a local microfinance nongovernmental organization (NGO). During that time she had also raised decorative plants, a pursuit that she obviously enjoyed. Since I had known her, the spacious patio in front of her small two-room home had always been full of orchids, other flowers, and fruit trees (fig. 1). While she focused on flowers, Fabiana also occasionally negotiated business partnerships to expand her clothing sales, several of which ran into difficulties at the interface of credit and repayment. She had invested in merchandise to stock a neighbor’s small store but never managed to recover either profits or her original wares. At around the same time she had offered a loan to one of her wholesale suppliers in the city market. Although it had seemed like a successful business, the owner had been slow to pay her back. Despite these business troubles, her husband’s steady salary and Fabi’s various projects helped her meet all of her obligations, from bills and payments to daily expenses.

FIGURE 1. Ña Fabiana’s patio, which doubles as a plant nursery.

It had been four years since I first visited Fabi’s home in the periurban settlement,³ and there were markedly fewer terracotta pots and fewer seedlings in black plastic containers ready for sale. This was due in part to the chicken-raising venture that had occupied a few months of her attention since I had last seen her two years before—and that had unintentionally turned many of her plants into chicken feed. But, she explained, she had lost it all with the plants, unwinding her story while plucking orange blossoms from one of the few remaining trees to flavor our cold yerba mate tea. After you left I invested good money in my plants. Each one of these planters cost almost $2, and first I was selling them in front of the grocery shop, there downtown in front of Fundación Paraguaya. The investment in and prioritization of a single venture among many was made possible by her regular participation in Fundación Paraguaya’s small-scale lending targeted at women, since the movement of credit was linked to the movement of her income and labor. Fabi continued, And Abuela, the old woman from here in the settlement, she was helping me. But by October I was ill and spending all of my time at the doctor. My credit counselor for the Fundación even called and wanted me to show my plants as part of their Expo for Microenterprise, but I told her I couldn’t because I was sick and I did not want to deal with transporting all those planters. Her story of the Microenterprise Expo concluded with the NGO branch manager eventually bringing his truck to help her transport them there, but she faced the unanticipated extra expense of having to pay a driver to bring the unsold plants all the way back to settlement where she lived, which all but erased her profit. In a twist that is emblematic of the unevenness of the economic pathways of microfinance, her participation in the Expo helped get her product to market but left her waiting at the curb, as it were, when she needed to get home.

Fabi’s story looped back and forth between unexpected successes and setbacks. She said that she continued to build the flower business, even managing to work out a deal with the pharmacy next door to the microcredit office. The owners offered to let her sell her orchids every day and agreed to store them in their small warehouse overnight. But, she said, as her health deteriorated she missed a few days at the pharmacy. And while she was away a different security guard took over at the warehouse, and her arrangement for storing the plants imploded. When her health improved and she finally returned to tend her plants, she discovered that all of her stock had been thrown away, and not even the planters were left. I really felt for my plants, she said. I’m telling you about what I invested [financially], and on top of that I had my orchids. The orchids were what I felt most. Although her feeling for her plants was surely connected to her sense of place and belonging in her luscious garden and by extension in the wider neighborhood, Fabiana’s financial loss was also bound up with the gendering forms of investment that were subtly encouraged by the Committees of Women Entrepreneurs program. Her entrepreneurial risks were inextricably linked to her work—albeit fleeting—as the flower lady, as her NGO credit counselor enthusiastically described her. Despite her financial troubles, the staff considered her a poster child for the feminine entrepreneurial spirit valued by the organization.

Nã Fabiana brightened, though, when she stored away the last of her unsold winter wares and pulled me inside her house to show off the unexpected windfall from her newest venture. She had taken on work as a cook and housekeeper for the family of her husband’s daughter from a previous partnership. Her new employer sent her home with leftover food, including most recently three rabbits that Fabi was eager to make into a traditional stew. Fabiana called the younger woman Madam, or la Señora, as a mark of deference rather than by more familiar kinship terms commonly used for a stepdaughter; proximity and distance were reckoned along lines of socioeconomic class.⁴ La Señora’s husband and his brothers worked as private contractors in cross-border trade as customs dispatch agents. They made heady profits managing more or less licit transportation logistics in Ciudad del Este’s transborder commercial economy. La Señora’s husband drove an impressive late model pickup truck, and the family lived in a spacious and well-appointed compound not far from Fabiana’s neighborhood in an informal housing settlement where basic utilities and housing titles were still being negotiated with the municipality. The lucrative dispatch work was also intermittent, entrepreneurial, and opportunistic but, unlike Nã Fabiana’s flower business and clothing sales, had the potential to make staggering profits; value unspooled from the unusual regulatory regime of the Paraguayan special customs zone. If the central task for everyone, as Keith Hart (2000: 177) has argued of informal economies, was to find a reasonably durable basis for livelihood and even for accumulation, a stable core in the chaos of everyday life, then commercial society on the border offered up that stable core more readily to some than to others.

Ña Fabiana’s account of her daily economic life shared many similarities with the lives and livelihoods of low-income Paraguayan women who were clients of the grassroots microcredit NGO Fundación Paraguaya. Their financial practices open a window onto the prosaic ways that people cohabit with debt in their daily lives in Paraguay. In development studies, microcredit is told as a before-and-after narrative of financial inclusion, with a transformative arc (for better or worse) for women who borrow. From the diversity of ways that people lived on credit in Ciudad del Este, it soon became apparent to me that microcredit was not positioned in predictable or straightforward ways relative to the myriad lending and borrowing practices that were so central to commercial society in the tri-border area.⁵ The excess of credit on Paraguay’s frontier illuminates the specificities of microcredit within the credit systems of Ciudad del Este, as well as the regulatory work of credit and debt in shaping daily economic practice in a zone made famous by its long history of experimenting with nonregulation and free trade. While Fabiana’s efforts to bank on her relationships with family, friends, and neighbors had mixed results, it became clear to me from our discussions that she treated the boundaries and terms of her debts as open questions. Microfinance practices reshape notions of obligation as well as what it means to be both a woman and a borrower.

In Ciudad del Este, a city of about 350,000 on the Paraguayan side of the frontier with Argentina and Brazil, relationships of economic obligation permeate everyday life, and they seem to reach into the minutia of daily routines. Most people pay for both small and large purchases on installment plans, like the saleswoman selling stylish Sawary jeans in Ña Fabiana’s neighborhood. From buying one diaper at a time on a store tab from the local shopkeeper to paying for jeans in monthly quotas, these constant running tabs and bills—talked about locally as cuentas—are ubiquitous in Paraguay. The small scales of credit and debt emplace debt in the small scale of the everyday. The movement of credit, too, traces quotidian paths throughout the city and its outskirts. Rather than instantaneous wire transfers or mobile banking, these payment schemes are often facilitated by the work of moto-riding bill collectors who make house calls to collect cuentas. Fabiana and her neighbors make mortgage payments to a local cobrador for the land development company when he visits every month and sets up his till on the patio of a neighborhood home. These visits are of course unnecessary when credit comes from the many small local shops—often operated in homes—selling goods to neighbors and family. Foot traffic that winds through the streets of local communities suffices to service those obligations. However, even the powerful vice president of Paraguay’s private sector credit scoring company, Informconf, had to excuse himself during an interview to make a payment to a bill collector for the new flat-screen TV that he had purchased to watch the 2010 World Cup soccer matches. Circuits within commerce, to borrow the sociologist Viviana Zelizer’s term for these economic pathways,⁶ are literally carved out of the ruts and grooves of motorcycle tires and the networked cell phone discussions that flow—or more properly, bump and bounce—across the commercial economy of Ciudad del Este.

Many people in Ciudad del Este relied on the common phrase "bicycling (bicicleteando) loans to describe their relationship to credit and debt. They kept up with the never-ending payments by repaying one loan with the next. The work of pushing the pedals around, the common phrase implied, was driven by ever increasing cycles of debt. Tellingly, Fabiana thought a great deal about movement" and turnover in her merchandise. She described bicycling as an economic lifeline. However, she was less sure about whether such movement could be equated with a forward trajectory.⁷ That tension was even built into the naming conventions of the microfinance Committees of Women Entrepreneurs, which commonly took the moniker Women’s Progress or Women Advancing, even as the groups routinely found themselves grappling with payment problems and repeating cycle upon cycle of borrowing.

I first heard the term bicycling at a finance seminar run by Gustavo, vice president of Informconf. The company deals with myriad facets of the financial services world in Paraguay, from telemarketing to debt collection to credit scoring. The seminar on credit risk where Gustavo warned participants about the perennial problem of bicycling debt was attended by a cross section of financial professionals working in Paraguay’s banking sector. Standing in front of a PowerPoint presentation that depicted overindebtedness in bland charts and graphs, Gustavo brought the concept alive, his hands whirling round and round to evoke the spinning pedals of the credit bicycle. For conference-goers making use of Informconf’s data services—and navigating a financial context awash in credit—paying careful attention to the life cycles of loans, especially their rhythms and movements, was key to managing debt. Financial actors within Paraguay’s credit markets were themselves asking, Exactly what kind of economic mobility did pedaling debt imply? What sort of transactional order was sustained on the credit bicycle, and with what scope? This book considers how microcredit compared to and intersected with the multiple financial obligations that many Paraguayans pedaled on a daily basis.⁸

MICROFINANCE, VILLAGE BANKING, AND SOLIDARITY LENDING

Despite microcredit’s seeming novelty and specialized place in antipoverty development aid, Ña Fabiana’s vivid account of the omnipresence of credit and debt in Ciudad del Este underscores the fact that it was not just microcredit development projects that made use of unconventional forms of guarantee for loans. Fabiana’s installment plans, her bill collectors, and her own efforts to collect on the debts owed her by others mixed physical and social assets, contractual liability and mutual obligation. From these overlapping regimes of debt, methodologically we might ask how microcredit differs substantively from the social practices that sustained credit relationships for countless years before the global microcredit boom. How does microcredit selectively incorporate and exclude that range of economic relationships?

In practice, these many different forms of credit share a common feature that goes to the heart of microcredit’s framing and justification in global development circles and importance to anthropological theories of value: social collateral. Most formal financial institutions in Paraguay and elsewhere require some form of physical guarantee in order to secure a loan. Assets like a salary contract, property, inventory for a business, insurance, and a guarantor or cosignatory often serve as physical collateral on a bank loan. As I prepared to conduct research on microcredit loans, the differences between physical and social collateral came into view in my own financial life—from asking my mother to cosign my student loans to drawing a boundary around my household to report income on credit card applications. Social collateral does away with the income and asset requirements for borrowing by shifting what I term the social unit of debt. Rather than lent to individual borrowers and their guarantors, microcredit loans are shared among groups. Fabiana was the treasurer of her group and relied on about fifteen neighbors—some close friends and family, others strangers—to maintain her line of credit through steady collective repayment and from one credit cycle to the next. Although the specific requirements vary from organization to organization, many of these solidarity loans (préstamos solidarios), as they are referred to in the microcredit world, are for groups of ten or more women who collectively pledge to pay it back. If one woman is unable to make her weekly payment, then her group members will have to come together to pay her share or risk being penalized as a group. Penalties take the form of lowered loan ceilings in the next cycle of borrowing or, in some cases, exclusion from further borrowing altogether. Creditworthiness in the formal financial system turns in large part on the physical assets that the bank reckons to be available to collateralize the loan—subject to seizure—in the event of default.⁹ Creditworthiness in microcredit solidarity lending turns instead on social assets like peer pressure, shame, mutual support, and reciprocity to collateralize the loan. Indeed, microcredit is even thought to build social capital among members through group meetings, mutual support, and a shared path toward financial literacy.¹⁰

After the inaugural 1997 Microcredit World Summit,¹¹ where world leaders debated the promise of microcredit as a development tool, small-scale lending went from a visionary call for pro-poor financial programs to a mainstay of development policy. Indeed, later that year the merits of microcredit as foreign aid were debated on the House floor of the U.S. Congress. Within a decade, microcredit became a central pillar of international development and ultimately was the basis for the Grameen Bank’s Nobel Peace Prize in 2006. Currently, microcredit is seen by many scholars as a global comparative project analyzed by means of a series of case studies that pit communities and organizations against one another to compare results to a global model. This has become an especially powerful analytic approach made possible by large-scale randomized control trial (RCT) studies like those undertaken by the Portfolios of the Poor project and research collaborations at institutes such as the Jameel Poverty Action Lab at MIT.¹² Indeed, the Institute for Money, Technology, and Financial Inclusion (IMTFI) at the University of California, Irvine, with which I have been involved over a long period, takes such a broad and comparative view of new financial technologies in its many different manifestations globally. Researchers and policy makers fine-tune the organizational structures and methods for implementing these programs and debate the successes and failures of each case study, all of which signals the almost total incorporation of microcredit into a global development framework. My aim is not simply to add Paraguay to the list of cases. Rather, this book builds outward from the conditions of credit in a specific—and in many ways unusual—context in order to theorize social collateral and its importance to anthropological studies of value and in the wider world today.

Microcredit organizations were certainly not the first to notice that collateral requirements excluded large swaths of potential borrowers. Self-organized rotating savings and credit associations (ROSCAs) have for many decades been used by communities to gather and distribute the lump sums needed for investments in businesses but also in important life cycle events like weddings and funerals. Participants would all pitch in an agreed-upon amount, and the collective pot would rotate among members of the group for their own use. Anthropologists have been charting the contours of ROSCAs at least since the work of Clifford Geertz (1962),