And The Nobel Prize
By Anu Muhammad
04 December, 2006
'We link the poor to
NGO official in Bangladesh
"When I feed the
poor they called me a saint but when I asked, 'why are they poor?' they
called me a communist."
Camara in Brazil
year we have monga in Bangladesh. Monga is a local Bangla word that
means a famine like situation, which appears specially in September
through November or in Bangla months Aswin and Kartic. People usually
call the period as mora Kartic, meaning the months of death and disaster.
These two months give rural people more hard time than usual because
of extremely shrinking job opportunities. A large number of rural poor
try to survive by migrating into towns, in addition to those who migrate
for good. Not everyone can do it. There are many who are pushed to worse
situation, compelled to eat not-eatable things and get sick, if not
This year is not an exception.
However, one thing is very special in this year. Dr. Muhammad Yunus
and the Grameen Bank have achieved the highest award, the Nobel Peace
Prize, for their contribution in poverty alleviation. According to the
Nobel Committee, the model of 'Micro-credit has proved to be an important
liberating force' meaning instrumental in poverty alleviation. Despite
whole Bangladesh, specially the urban middle class and upper income
people, overwhelmed with joy and pride, the reports on monga found its
way, got comparatively shorter space this year, to create an embarrassment
to the mood. In fact, it is not only in the monga period that people
suffer from hunger. Despite self-sufficiency in food production in the
country, majority people, over the year, suffer from food intake that
goes below the poverty line calorie level, half of them live in hardcore
poverty meaning they live with regular hunger. A monga situation is
a permanent experience for them.
What macro data speak about
poverty in Bangladesh after decades of innovative and successful poverty
alleviation programmes in Bangladesh? The latest figure on poverty delivered
by research organization Bangladesh Institute of Development Studies
showed in recent overview (October 2006) that nearly 40 million people
in Bangladesh are living in extreme income poverty and about 30 million
are in chronic poverty. According to the government document, nearly
70 million people are still living below the income poverty line.
In this poverty friendly
scenario, the two months become so severe that it is difficult to hide
the wound as well as the vulgarity of never ending poverty alleviation
programmes, studies and festivity. Monga sustains and are renewed every
year. Therefore, it is necessary to look at coexistence of sustained
monga situation and huge success of micro credit in perspective.
The mobility of Global
Dr. Muhammad Yunus became
world famous personality along with the Grameen Bank much before the
Nobel recognition. The world gurus have been talking about the Bank
as a model to alleviate poverty for years, and its success is also measured
by its spread in many more countries. Establishment of an institution
like Grameen Bank with own initiative and develop it into a global level
is really a great achievement of Muhammad Yunus and others in the Bank.
Moreover, Yunus and his colleagues have helped micro credit to integrate
into mainstream banking operations. That is obviously a brilliant achievement
for him and this is also very crucial contribution of him to the 'late
capitalism' of the present world.
In the present phase of global
capitalism financial sector has become dominant over production sectors.
Investment in speculation multiplied much faster than investment in
other sectors. Banks, Insurances, share markets, all have become much
more crucial. Financial capital, as a whole, has taken the lead of global
capitalism. The unprecedented growth of 'money for money' activities
helped many rich to become richer at a rate that is unprecedented in
history. These may not bring good moment for the majority. Because,
these activities have fraudulent elements and often create disastrous
affects for many. Some of it became visible in the recent past in many
countries including Argentina and many countries in East Asia. Other
countries including the US had the heat of it. The force of uncertainty
and collapsing experiences prompted James Tobin, leading economist of
the US, to ask for imposing taxes on this speculative investments and
transfer of money. George Soros, the guru of speculation and financial
investments cautioned global leadership to take actions, extend state
control over uncontrolled money movement, to save capitalism.
Capitalism in its stunning
horizontal and vertical growth, borrowing Marx's words, revolutionized
everything, touched everything, moulded everything and spread fast to
become a global system. Now we are witnessing a real global capitalism.
Nevertheless, despite its success in revolutionizing many things and
radically opening up global opportunities for capital, capitalism could
not resolve its inherent dynamics that creates contradictions in itself.
Therefore, development and destruction go hand in hand, with growing
resources and increased deprivation, with increasing potential and increased
vulnerability of the people, increasing command over knowledge and horrible
level of mass destruction. Therefore, the world with unprecedented growth
of resources witnesses high level of poverty and insecurity. Uneven
development in global scale as well as within country is an integral
part of that. Bangladesh, located in the periphery, has been a victim
In the last few decades,
finance and banking operations around the world have grown in an unmatched
proportion in both size and area of network. There are two reasons behind
this. One, this gives high return to capital, therefore flow of capital
gets the direction to have that. Two, production of consumer items in
the world economy has been piled up at a much faster rate than the increase
of aggregate income of the people as a whole. Therefore, rapid credit
expansion has been a response to both demand and supply needs.
Nevertheless, size of credit
market amongst urban high and middle-income group becomes too little
with respect to the high rate of accumulation of Bank capital. In this
context Grameen Bank model has in fact opened up a vast market for finance
capital. The poor, until today, the majority of world population, are
being kept outside banking net by collateral conditions. Although there
have been many initiatives around the world to build for collateral
free credit net, BRAC in Bangladesh or SEWA in India have started similar
programmes around same time, Grameen Bank has been probably the first
one that could attract world attention.
While Muhammad Yunus must
be credited highly for his contribution in innovation in banking and
opening up vast sea of market for the huge accumulated finance capital,
linking of poverty alleviation with this corporate success is ridiculous
and may not very innocent one.
Poverty 'alleviation' agencies
and the old ideology Poverty 'alleviation' became an agenda of 'development'
in the early 70s after poverty-friendly growth exercises reached its
peak in the 1950s and 60s. After finishing the job of Defense Secretary
of the US Robert McNamara, the war manager in Vietnam, took the charge
of global development as President of the World Bank! During his tenure
in the World Bank, he initiated new file, the poverty. His speech in
1973 reflected the new inclusion in policy package of the World Bank.
It was followed by increasing flow of fund 'targeting' poor for carrying
out research in measuring poverty and establishing poverty 'alleviating'
The growth of new breed of
Non Government Organizations (NGO) s in the peripheral countries, wholly
depended on western fund, had a link of this policy emphasis in capitalist
centre. It should be noted here that the development NGOs were not the
first organizations assigned to address rural poverty in Bangladesh.
The rural development efforts, since 1960s, e.g.Comilla model, IRDP
or Swanirvar can be safely mentioned as the predecessor of NGO experiment.
The failure of these attempts to alleviate poverty and to attain other
goals is well documented in Akhter Hamid Khan's memoirs, who was one
of the pioneers. In the 70s, after non-sustainable performances of earlier
models, the viability of the dominant models faced challenges. Growth
of NGOs in global scale as well as in Bangladesh is an outcome of searching
of improvised version or an alternative.
The growth of Non-Government
Organizations (NGOs) in Bangladesh has been spectacular since mid 70s.
NGO model of development in Bangladesh, which includes group formation,
the target group approach, participatory development, and micro credit,
has added a new dimension to development thinking. The model is treated
by global institutions (wrongly called donors) as a safety net for the
people (actually for themselves?), who are the victims of other development
measures prescribed by the same institutions. Horizontal expansion as
well as qualitative changes in its composition characterized the last
thirty years of their activities. Initially, NGOs appeared with a promise
to work on social issues, struggle against exploitation and discrimination,
work outside the domain or influence of local or national power structure.
Since early 1980s, micro credit operations started getting priority
among some NGOs and by early 90s, it became main focus of most of the
sectors. Moreover, NGOs with polarization in itself gradually have found
their proper place as part of corporate world.
In the process over two decades,
NGOs became polarized between few very big NGOs and many small, where
the small ones were reduced to subcontractors of the big. The big NGOs
have become corporate groups as well. Big NGOs are also in the process
of forming alliances with multinational corporations. To give a few
examples: BRAC work with UNOCAL and Monsanto; the Grameen Bank, the
Bank in NGO model, initially intended to work with Monsanto but failed
due to resistance, has now been intensely working with multinational
telecommunication company. Recently it has started a project with Denom,
the French food company. All in the name of 'poverty alleviation'! It
is therefore not surprising to find Muhammad Yunus always advocating
privatization of public institution or services and liberalization of
the economy in favour of global corporates.
One of the major promises
of the NGOs was also to initiate a new development paradigm in contrast
to poverty- friendly dominant development paradigm. Soon NGOs became
largely concentrated in credit operation and export-oriented activities.
It is correct to observe that, "The potential irony is that NGOs
originally challenged the concept of 'trickle down' to help create the
target group based approach. But in so doing, they have unwittingly
contributed toward its reinstatement, as credit delivery has increased
in importance as a key rural development input."
NGO model has been successfully
captured development ideology. Its hegemony has become so absolute that
media, research and academic world take the model as an obvious choice
in a country like Bangladesh. Poverty alleviation became buzzword of
this model. Micro credit is considered as the most important means of
that. The World Bank as well as USAID in different official documents
expressed high opinion about these NGOs and gave much more emphasis
on the role of NGOs as delivering agencies of the International bodies.
It is now also clear that, increasingly they are preferring NGOs to
the Government. One can also have valid reasons to believe that the
"stress on NGOs can be seen as part of the privatization strategy
of the World Bank and most donors". It may be also argued that,
"The role of donors in bringing NGOs and government together under
their own agendas of privatization is clearly an important one in Bangladesh
in shaping NGO activities."
It seems that during mid
90s the World Bank realised long run significance of micro credit in
finance capital's global operation. In 1995, the Bank opened new window
on micro credit. In 1996 World Bank's recommendations regarding NGO
and micro credit in Bangladesh are noteworthy here. Recommendations
categorically stated: "Integrate NGOs with commercial finance markets
by: a) developing an appropriate regulatory framework for the financial
operations of the NGO sector; (b) encouraging large NGOs to establish
themselves as banks; (c) encouraging 'wholesaling' of credit to established
NGOs; and (d) using smaller NGOs as brokers to mobilize self-help savings
groups." In 1997 first international micro credit summit was held
in Washington. In the conference, World Bank, USAID, UNDP and Citibank
among others declared about their special fund for micro credit. In
the last decade, not only Grameen Bank model started spreading in other
countries, mainstream Banks also have started introducing micro credit
in its operation. The second micro credit summit held this year assembled
many big corporates together. Monsanto, Citigroup were among the sponsors.
Some findings on
Micro credit at micro level
In the last few years, I
had the opportunities to be involved in field studies on micro credit
in fifteen villages in different parts of the country. Let me summarize
some very important features of micro credit revealed in these studies.
These are as follows: (a) its tiny amount keeps its use in limited areas
mostly in retail trade or reinvest in credit market with higher interest.
(b) The borrower of micro credit does not have to show any collateral
but s/he has to be accountable to the group s/he belongs. (c) The borrower
receives the amount minus some savings, about 10 per cent, and has to
repay the loan in weekly installments with interest of around 20 per
cent of the total. (d) Since more than 20 per cent return on the loan
amount is essential to keep repayment regularly for every week, every
month and every year without any break, if anything happens to break
the payment or if the borrower cannot earn more or at least equal to
the repayment amount, she /he becomes defaulter, which has chain effect.
(e) It is assumed that, cateris paribus, as standard practice in economics,
other things remain same, meaning everything will be favourable for
weeks, months and years. No natural disaster, no accident, no sickness.
Reality does not follow this. If anything much less than above happens,
the repayment gets stuck. That happens for the majority. (f) Further
hidden assumption is that the property relations, power structure, market
process all favour the poor, which is proved completely wrong. (g) For
every breakdown of the wrong assumptions the borrower faces helpless
uncertain and burdened situation. Defaulters therefore are on the rise
among the poor who are compelled to take new loans from other sources
at higher interest rates.
Studies reveal that only
5 per cent of the borrowers showed improvement of their situation with
the help of micro credit, those have other sources of income as well.
The best investment area is found to further engaged in credit business
with higher interest rate. The second best is the service sector, like
small shops, rickshaw-van or retailing. I found 50 per cent of the borrower
who could not improve but could retain the position but by taking loans
from multiple sources. About 45 per cent could not do it at all, their
position deteriorated. Many of them could not bear the burden and fled
or on the way to leave the village with many liabilities on the head.
If anybody looks for micro credit defaulters it is possible to find
many of them amongst urban poor migrated from villages.
Other studies also have found
similar scenario. In the findings of a resurvey of 17 villages under
Poverty study of 62 villages a decade ago, Hossain Zillur reported that,
only 19 per cent respondents informed that their conditions had improved,
out of which only 5 per cent gave credit for this improvement to NGO
intervention, 24 per cent informed that their situation has deteriorated
while no change was observed in 58 per cent cases.
Women empowerment is an area
that deserves special attention in discussing NGO process in Bangladesh.
Bringing 'target group' women into credit market is specifically a success
for credit-giving NGOs and Grameen Bank. This was also proved to be
much more profitable as women borrowers seem more serious and consistent
about repayment. The Grameen Bank and other NGOs also developed an alternative
to collateral that is group responsibility; this is also an innovative
success in expanding banking into rural poor. Expanding the credit net
into rural areas, specially into women has also significant impact into
those women's 'private' and 'public' life.
Women's overwhelming majority
in micro credit receivers is considered as one of the biggest achievement
of the endeavour. However, due to patriarchal setting the net user of
micro credit has been male in most of cases, as high about 80 per cent
in our study areas. In many areas, Grameen Bank and other micro credit
institutions deal unofficially with real users, the male. Rate of defaulting
among borrowers also have been increased. According to a study, rate
of repayment will come down to 40 percent, against 98 per cent as claimed,
if rescheduling considered. This may be the reason that makes Grameen
to gradually shift its attention to other investments and other income
groups including better off amongst poor.
Bringing credit to the poor
as a major, sometime lone, determinant of development and poverty alleviation
echoes the dominant development strategy of the 50s, which singled out
capital scarcity as the major determinant of underdevelopment of the
post-colonial countries. It emphasized that capital was the "missing
component" of those countries. Needless to say, that theory has
been used to rationalize export of capital and flow of foreign 'aid'
from the centre capitalist countries to the peripheries.
The new myth
Even with contradictions
within the system and limits to a great extent, one cannot deny substantial
role that micro credit has played in some areas in the last two decades.
That has developed alternative credit institution, brought women as
worthy borrower, that has weakened the assertive power of traditional
mohajons (money lenders) in some places.
However, one could be skeptical
to equate 'access to credit' with 'empowerment'. Despite credit's role
in giving women member more space into private life and her relative
mobility into social life, one could raise questions about its limit.
Credit programme offers women the jobs that she is already accustomed
to, in that sense it cannot create that mobility of women to go beyond
that limit. Secondly, many male members of the family take the opportunity
to use female member to get access to the money. The credit here becomes
another dowry. Shamim Hamid rightly pointed out that, "amongst
the NGOs, Grameen Bank, BRAC and Proshika have gained international
reputation for involving large numbers of women. However, none have
achieved significant breakthrough in helping women to move to higher
productivity or to activities with higher economic returns."
One NGO official has told
rightly that the main objective of micro credit has been to 'link poor
to the market'. The more marketization of rural economy today certainly
has got momentum from micro credit. But the questions remain, why this
link fails to make any significant impact on poverty at macro level?
Why despite huge success of micro credit people in distress keep migrating
to urban centres? Why monga type situation persists? Moreover why number
of people under poverty line keep rising with rising micro credit and
allocation in poverty alleviation programmes? One must look at potential
of micro credit keeping these facts in mind.
Poverty has its roots and
causes, expanding credit net without addressing the causes may satisfy
Pareto optimality but not affect poverty situation. Experiences show
that if countries like Bangladesh rely on micro credit for alleviating
poverty, poverty will certainly remain to keep the programmes alive.
Along with scenario of sustained
poverty, these success and failure, achievements and limits of micro
credit also proved that, poverty, deprivation, illiteracy, environment,
malnutrition, insecurity, gender subordination, unexplored productive
potentials need much more than mere money flow in various forms. Intervention
into present condition and change it significantly demand structural
change, national initiative and social mobilization. These certainly
call for a radically different development paradigm.
Grameen Bank or micro credit
is no more a Bangladesh phenomenon, it has gone global. Inspired by
neo liberal ideology World Bank literatures and Economics textbooks
now refer micro credit experience as a success story of market fundamentalism.
A new myth has been created in this regard. For people really want to
address poverty, it is naive to feel happy about Nobel Peace Prize for
micro credit by seeing it as a victory for alternative. This is not
alternative but supplementary to the dominant development paradigm.
With awarding Muhammad Yunus with Nobel Prize, the whole neo-liberal
regime has now got a new impetus to push for more corporate grabbing,
a machine for poverty reproduction, by showing the victims micro credit
as their Aladdin's lamp.
Share Your Insights