PREVIEWS & REVIEWS

Microcredit and Lamia Karim's 'Women in Debt in Bangladesh'

Taj Hashmi in the first part of his two-part review

A report by the Government of Bengal in the 1930s revealed that a poor peasant from Mymensingh district in eastern Bengal (Bangladesh since 1971) had told a land revenue official in 1929: 'My father, Sir, was born in debt, grew in debt and died in debt. I have inherited my father's debt and my son will inherit mine.' Following the introduction of microcredit, glorified as microfinance by its local and international promoters, if the situation has improved with regard to the lot of the rural masses in Bangladesh, especially poor women, is an important question today. Professor Lamia Karim in her Microfinance and its Discontents: Women in Debt in Bangladesh (University of Minnesota Press, Minneapolis and London, 2011) has raised and answered the question with absolute honesty and objectivity.

I have personally come across historical and contemporary data buttressing the hypothesis that although things have improved with regard to the state of perpetual indebtedness and disempowerment of rural masses in Bangladesh in the past seventy years, microcredit has not been a miracle, let alone the only factor, in improving the lot of the rural poor in the country. Microcredit, along with unaccountable NGO operation, has mostly been detrimental to the best interests of Bangladesh both at micro and macro levels. The preponderance of NGOs in the development and governance sectors and their unaccountability to governments and people in countries like Bangladesh have weakened governments, bred corruption and disempowered people. In view of this, I find the author's hypotheses, findings and thread of arguments in convergence with those of scholars having strong reservations about NGO operation and microcredit-business in the Third World.

Now to turn to the brief history of microcredit and moneylending business in Bangladesh, we know several legislative measures during the 1930s and 1940s proved to be somewhat effective in curtailing the power and privileges of the traditional moneylenders - mahajans (literally, the big men) in local parlance - in Bangladesh. Since most mahajans in the subregion belonged to various Bengali Hindu trading castes, such as Saha, Banikya and Tele; and Hindu landlords, traders and even lawyers; and Jaina (Marwari or Mero) traders from Rajasthan, the communal partition of India in 1947 further disempowered these classes.

Various historical documents corroborate the state of rural indebtedness of Bengali lower classes under the British rule. The rate of interest on small loans or microcredit during the early 20th century sometimes exceeded 100 or even 150 per cent.

The formal abolition of the 'mahajani system' in the 1940s and the subsequent government measures have not totally eliminated the predatory loan-sharks in Bangladesh. Again, the lack of creditworthiness of the poor has been a big obstacle towards economic empowerment of the poor. Dr Muhammad Yunus is said to be the pioneer of the 'unique' collateral-free microcredit system through the Grameen [rural] Bank in Bangladesh to turn the poor creditworthy in accordance with his theory that the right to credit is synonymous with human rights. Later mega NGOs like BRAC, Proshika, ASA and their smaller counterparts throughout Bangladesh adopted microcredit as a means to 'empower the rural poor' during the last thirty-odd years. Later the Grameen model became quite popular in various countries, thanks to the untiring promotion of the concept by the World Bank, IMF, the Clintons and other important personalities in the West. In 2006, Dr Yunus and his bank further came to the limelight after the award of the coveted Nobel Prize for Peace.

So far so good! However, contrary to Dr Yunus's assertions, neither collateral-free microcredit is a novelty in South Asia nor is Dr Yunus the pioneer of the concept. Collateral-free microcredit is as old as civilization. Extortionist moneylenders in Bengal have been advancing collateral-free loans to their impoverished as well as well-to-do borrowers. Interestingly, another Bengali Nobel-Laureate, poet Rabindra Nath Tagore had come up with the concept years before Dr Yunus was born. Tagore's Patishar Bank was the pioneer of collateral-free small loans to poor peasants in parts of northwestern Bengal. He introduced the concept of lending to small groups of five, which scholars believe, Dr Yunus replicated without acknowledging his debt to Tagore. Most importantly, while Tagore's loans were totally interest-free, the Grameen and its counterparts charge around thirty per cent (and even more) interest from their borrowers.

However, myths built on lies and propagandas, ignorance and blind faith are sometimes more durable, overwhelming and credible than truths. The myths and lies about microcredit and NGO operations in Bangladesh may be cited in this regard. Till the recent past, the lies, half-truths and mythical success stories about microcredit and unaccountable mega NGOs in Bangladesh had been too overpowering to allow any criticism of the institutions. I personally know of Bangladeshi critics of Grameen Bank and its founder having problems in getting jobs in the academia and development agencies within and beyond Bangladesh. The powerful Grameen-NGO lobby in Bangladesh and its more powerful promoters in Western capitals, multinationals, mega financial institutions, and donor agencies, including the World Bank and the IMF, do not entertain any adverse publicity of microcredit and NGO operation anywhere in the Third World. The way Hillary Clinton interfered into the internal affairs of Bangladesh over the removal of Dr Yunus as the Managing Director of the Grameen Bank in early 2011 may be an eye-opener in this regard.

Then again, we cannot condone the rashness of Prime Minister Hasina in removing Dr Yunus from his position at the Bank by stigmatizing him as a 'shudkhore (loan-shark) having contributed nothing towards alleviation of poverty in Bangladesh'. Surprisingly, during her first term as the Prime Minister, she glorified Yunus and Grameen Bank at the Microcredit Summit in 1997. This, however, is not inconsistent with the political culture of Bangladesh. Bangladeshis often ridicule their heroes as villains and traitors. They even did not spare Sheikh Mujibur Rahman, the founding father of the nation, who died unlamented as a villain. Some of his ardent followers and beneficiaries of yester years had no qualms about likening him to the Pharaohs. In sum, the Yunus and Mujib episodes reflect the ruthless, impulsive and unpredictable traits of Bengali character, may be inherent in the predominant peasant culture of the land. Here individuals, groups and institutions are either benign and angelic, or sinister and devilish. From the people's viewpoint, microcredit and NGO operations are either beneficial or totally detrimental to them.

In this depressing backdrop, we have reasons to be happy with Lamia Karim's book, which is refreshingly objective and reflective of her knowledge, courage and integrity. This is simply an outstanding specimen of scholarship, hard work, and above all, the author's solidarity with the poor and disempowered women of Bangladesh. This is also iconoclastic, a bold attempt to shatter the myths about microcredit's so-called contributions towards poverty alleviation and empowerment of poor rural women in Bangladesh. It is a blow to those who are pretentious about 'sending poverty to the museum by 2030' through microcredit and NGO operations in Bangladesh.

While Dr Yunus has been the main proponent of the 'museum theory', there are promoters and buyers of this absurd theory at home and abroad. With his sharing the 2006 Nobel Peace Prize with Grameen Bank, Dr Yunus and microcredit became even holier than before, albeit for a short while. The surfacing of scores of critical writings on the deceptive propaganda of the microcredit lobby following the award is heartening. Lamia Karim's work is another welcome addition to the discourse of understanding development economics, cultural anthropology, women and gender studies, and most importantly, the 'development of underdevelopment' by neo-imperialism and its collaborators in the Third World.

As I pointed out at the very outset, myths and lies at times overshadow the truth; the motivated lies and deceptions by the mighty NGO-microcredit lobby is simply too overwhelming to invalidate, especially whilst Dr Yunus received the Nobel Prize for Peace and BRAC founder Fazle Abid was knighted by the Queen. Consequently we need to discern the truth from lie, the reality from deception. Thanks to the global promotion of microcredit by the World Bank, IMF, the Clintons, Queen Sophia of Spain, leading financial institutions of America for the obvious reason, and last but not least, by the Nobel Committee, the average people do not know that microcredit institutions are as bad as loan-sharks having as little compassion for their poor debtors as Shylock had none for those who borrowed from him. People hardly know that microcredit institutions in Bangladesh charge as high as thirty-two per cent interest on their loans, which the borrowers have to repay in fifty-two instalments; and that defaulters part with their goat and cattle, tin-roofs, utensils and jewelleries.

Most scholars, analysts and donor agencies and others having vested interests in microcredit and 'NGO-business' do not bother to know if microcredit is directly responsible for polygamy in some parts of the country, where men take multiple wives to get access to more credit through their wives to run their lucrative, usurious moneylending business. We also do not hear from them a) how many debt-strapped Bangladeshi rural women commit suicide every year; and b) how in the name of loan recovery, Grameen Bank and other microcredit lenders expropriate borrowers by taking away their livestock, jewellery and other assets. Lamia Karim has documented how microcredit providing NGOs expropriate loan-defaulters; turn some of them into rapacious moneylenders; forced some of them to flee to urban centres and even kill themselves. The fate of debt-ridden poor women in Nigeria, India and elsewhere has not been any better. It is heartening that recently a study by the DFID (A British overseas development agency, which is among the top promoters of microcredit and unaccountable 'NGO-Business' in the Third World) has revealed the ineffectiveness of microcredit in alleviating poverty anywhere in the Third World:

Despite the apparent success and popularity of microfinance, no clear evidence yet exists that microfinance programmes have positive impacts….while anecdotes and other inspiring stories purported to show that microfinance can make a real difference in the lives of those served, rigorous quantitative evidence on the nature, magnitude and balance of microfinance impact is still scarce and inconclusive. Overall, it is widely acknowledged that no well-known study robustly shows any strong impacts of microfinance. Because of the growth of the microfinance industry and the attention the sector has received from policy makers, donors and private investors in recent years, existing microfinance impact evaluations need to be re-investigated; the robustness of claims that microfinance successfully alleviates poverty and empowers women must be scrutinised more carefully. Hence, this review re- visits the evidence of microfinance evaluations focusing on the technical challenges of conducting rigorous microfinance impact evaluations….earlier studies [of microfinance] have turned out to have low validity with replicated analysis and critical assessment….Well-known studies which claim to have found positive impacts on females are based on weak research designs and problematic IV analyses which may not have survived replication or re-analysis using other methods, i.e. PSM….our report shows that almost all impact evaluations of microfinance suffer from weak methodologies and inadequate data, thus the reliability of impact estimates are adversely affected [Systematic Review, 'What is the evidence of the impact of microfinance on the well-being of poor people?' by Maren Duvendack et al, August 2011, http://www.dfid.gov.uk/r4d/PDF/Outposts/Systematic Reviews/ Microfinance 2011 Duvendackreport.pdf ].

Than again, contrary to Dr Yunus's misleading assertions, microcredit borrowers do not represent the absolute poor but sections of the moderately poor middle peasants and artisans. Only in a very limited number of cases the real empowerment of the poor has taken place through microcredit. As common sense dictates, most people do not have entrepreneurial skill, let alone the almost totally unskilled illiterate poor village women in Bangladesh. And as various empirical studies suggest, including Aminur Rahman's path breaking book, Grameen Bank and Women's Empowerment in Bangladesh, and the volume under review, the so-called process of 'empowering women' through microcredit has further indebted rural women in Bangladesh.

Thus it appears that it is next to impossible for anyone to make a breakthrough towards freedom from poverty by merely borrowing money at 28 to 32 per cent interest, payable in 52 instalments. On this writer's asking Dr Yunus at a Microcredit Workshop at the RMIT in Melbourne in 1997, 'What miracle happens to a poor Bangladeshi woman who has only one piece of sari to wrap around and having no other source of income and nobody in the family to look after her that she gets freedom from poverty by borrowing from your bank at 28 per cent interest to buy a cow while the cow takes a year to give milk and she repays your loan in 52 instalments immediately after borrowing the money?' he had no convincing answer at all.

The writer is with the Department of Public Management & Criminal Justice, Austin Peay State University, Clarksville, Tennessee, USA