04/12/2015 5:06 AM AEDT | Updated 15/07/2016 12:51 PM AEST

Foreign Aid Needs To Help Them, Not Us

We need to be careful not to spruik loans schemes and other measures to increase economic activity if we are not also making the structural changes needed to make a real dent in poverty rates.

Probal Rashid via Getty Images
KATHMANDU, NEPAL - 2010/09/14: A portrait of an elderly resident in the Pashupati Bridhashram, the old peoples' home is the largest of its type in Kathmandu, home to 190 women and 130 men. (Photo by Probal Rashid/LightRocket via Getty Images)

Earlier this year Foreign Minister Julie Bishop released a booklet on women's empowerment to commemorate International Women's Day. It made mention of the Micro-enterprise Development Program MEDEP, which was partly funded by the Australian government and which has helped some poor women living in rural Nepal gain access to credit loans. The booklet also reported micro-entrepreneurship success stories from Papua New Guinea and the Comoro Islands.

While these stories are positive, we need to be careful not to spruik loans schemes and other measures to increase economic activity if we are not also making the structural changes needed to make a real dent in poverty rates. We also need to be wary of apparent success stories that give the false illusion that poverty reduction is occurring.

In Andhra Pradesh, an Indian state saturated with microfinance, dozens of borrowers suicided after not being able to repay their loans. It is not surprising that the negative side of this form of development receives little attention, as microfinancing has the backing of some big names.

US Presidential hopeful Hillary Clinton is one of many prominent women who are strong promoters of microfinancing as a successful way to lift women out of poverty. The micro-finance loans that Clinton mentions were pioneered in the 70s by Dr Muhammad Yunus, a Bangladeshi economist. Dr Yunus was confident that, through a scheme based on lending money to poor people to enable them to start businesses, poverty would be eradicated by 2030.

Dr Yunus established the non-profit Grameen Bank, which still operates to this day. It provides credit to poor people living in Bangladesh. Roughly 97 percent of its clients are women.

Microfinance schemes are often geared towards 'women's empowerment'. They have been embraced by large international agencies and private investors, as well as Washington politicians and many NGOs. They suggest that microfinance schemes in poor countries enable women to have more power and mobility within their homes and communities.

However, research has shown that the average impact of microcredit on poverty levels is zero, and dreadful stories have emerged in the past decade about the impact these schemes have had on many communities. This has raised significant questions about the impact of programs promising poor people a ladder out of poverty. There have been reports of exorbitant interest rates leading to entire villages defaulting.

Bangladeshis living in Jobra village, where the Grameen Bank first tested its microfinance model almost 40 years ago, are still deeply entrenched in poverty.

Many women have faced extreme economic and social pressure as they have struggled to repay their loans. David Roodman from the Center for Global Development, states that: "The best estimate of the average impact of microcredit on the poverty of clients is zero."

Rhetoric around empowering individual women and girls to become entrepreneurs can be a dangerous distraction from the changes that are needed. It is what feminist philosopher Nancy Fraser refers to as a neoliberal 'sleight of hand'.

We should be sceptical of any programs which suggest wealthy nations can liberate women living in abject poverty without also making fundamental changes to our current political and economic structures.

Climate change, austerity, colonialism, labour arrangements, trade agreements and immense concentrations of power and money entrench poverty and inequality. Women's equality needs to be addressed from this perspective.

It is our responsibility to ensure that our spending decisions are centred on alleviating poverty rather than promoting our national political and commercial interests.

The Greens support the allocation of aid to bilateral programs, NGOs and multilateral development programs that put people before profits. Aid programs should be transparent and accountable, both to the Australian people and to the countries that they purport to benefit. All aid programs should be required to provide adequate environmental, social and gender impact statements before they are implemented.

The poor women of the global South that microfinance schemes have failed to 'save' from poverty are entitled to a share in our planet's common resources and wealth. If we are truly serious about sharing that wealth, we need to commit to moving beyond self-congratulatory schemes that fail to address the structures that create inequality in the first place.