‘Freedom from Poverty is Not for Free’: Rural Development and the Microfinance Crisis in Andhra Pradesh, India

Within neoliberal development discourse, the poor are represented as entrepreneurial subjects for whom integration into formalized financial systems can facilitate their escape from poverty. This paper examines how the 2010 microfinance crisis in Andhra Pradesh reveals significant fault lines that underlie this narrative. It argues that the crisis of microfinance in Andhra Pradesh needs to be placed within the context of severe agrarian dislocations stemming from the impact of trade liberalization, drought cycles and a transformation of rural social relations. The contradictions are most strikingly represented in increasing rural differentiation and a generalized crisis of social reproduction among land-poor farmers and landless labourers. A massive influx of microfinance – driven by both state-operated programmes and private-sector institutions leveraged with cross-border financial flows – found a ready clientele among various agrarian classes seeking to bolster consumption and roll over debt in conditions of significant uncertainty and distress. Yet in banking on this vulnerability, microfinance institutions socialized the contradictions of rural Andhra Pradesh and have ultimately been thrown into limbo through the unleashing of political and social forces unforeseen in neoliberal narratives of agrarian change.