A critical study of financial inclusion policies in Brazil

Over the past several decades, powerful international organizations, especially the World Bank and the United Nations, have provided analytical and programmatic support for anti-poverty, pro-development approaches based on financial tools. The political advocacy for financial inclusion (FI) is based on the idea that expanding the access of poor and/or socially-excluded people to the formal banking system would give them the means for building wealth and income. Many contributions to the academic literature on FI pointed out these programs’ limitations and inconsistencies. This thesis contributes to the critical re-evaluation of FI by undertaking a thorough, mixed-methods examination of the case of Brazil. Drawing on the literature on financialization, we conceptualize the FI of lower-income households as unfolding in institutional environments moulded by structural power asymmetries. A lender-borrower relation, when it arises out of other asymmetric relations becomes asymmetric itself, and thus can deepen the borrower’s state of precariousness rather than eliminating it. This thesis thus has the principal goal of investigating the power asymmetries in the lender-borrower relation in Brazil, from different angles. Using a combination of historical, qualitative and quantitative methods, this study shows first how the provision of financial products to an enlarged base of the population is a central variable to modern accumulation regimes, which therefore explains the protection given by the state apparatus to the interests of financiers to the detriment of the interests of borrowers - and therefore the nature of that supply. Second, it explains the process of mass absorption of financial products offered under disadvantageous conditions by vulnerable workers. We argue that in times of increased economic prosperity, a series of consumption and financial norms form the basis for the social legitimation of credit use. And when those cultural institutions underlying credit demand in times of greater prosperity are associated with the strong instability faced by low income populations in the labour market - translated into weak employment bonds, low wage levels and low state protection - the result is the formation of debt cycles.