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Financialization & Microcredit: The Misinterpretation- Microfinance, NGOs
And Neoliberalism In Bangladesh Part II

By Farooque Chowdhury

03 September, 2015



 Read Part I

It is said in the article NMN: “Connections between the financialization of global capitalism and the neoliberal reforms created the space for the microfinance boom. Has the statement examined the issues: the financialization of global capitalism, the neoliberal reforms and the microfinance boom?”

Financialization (Fz) has taken shape at a level, and MF/MC in Bangladesh is operating at another level. John Bellamy Foster and Fred Magdoff’s The Great Financial Crisis, its causes and consequences provides the background, face, shape, character, etc. of Fz. A careful study will show the distance between Bangladesh MF/MC and Fz. To connect the Bangladesh MC/MF to Fz is a failure to comprehend the both – MC/MF and Fz, or an abortive attempt to copy a statement. “The financialization of capitalism”, write Foster and Magdoff, is “the shift in gravity of economic activity from production (and even from much of the growing service sector) to finance”. (“The Financialization of Capitalism”, The Great Financial Crisis, Causes and Consequences, Monthly Review Press, 2009) Fz has financial products and instruments, and financial speculation skyrockets with it. (ibid.)

The amount of capital involved with Fz, the modus operandi of Fz, the tools used in Fz and by the monopoly finance capital involved with Fz, the causes behind the rise of Fz, the source of capital involved with Fz, the character the involved capital takes with Fz, and the way it behaves are far different from the capital involved with MC/MF as well as its sources, behavior, role, etc. It’s not only in the case of Bangladesh MC/MF. It can also be found in other countries including in parts of the US where MC/MF claims to be operating. Has the capital involved with MC/MF in the US gone into Fz business? Or, has that capital come from Fz there? Study reports and data from those countries show the fact.

In Bangladesh, data show, the MC/MF mainly goes to petty trade, household-based food processing, poultry and cattle rearing, household level handicrafts production, non- and semi-mechanized transport and crop cultivation. A part of the MC/MF capital goes to food, drinking water, sanitation and health care, house construction, broadly consumption, litigation, dowry, etc. A few cases of Bangladesh MC/MF capital invested in big business, rice husking mill, mechanized transport including bus are there also. Cases of MC/MF capital invested in money lending are also found. A part of MC/MF capital is also used for repayment of debt. Are these a show of Fz? Does Fz enter into these types of activities including household-based petty-production, cottage industry, petty trading? Does Fz enter into consumption by the poor debtors? There’s an important question related to MC/MF: market, local market, connections to market. This vital question is not discussed in this essay.

A baseline and sociological survey found 54.5%, the highest proportion, of respondents reported that they borrowed money or goods to make up food deficits. (Bangladesh Bank, Rural Finance Experimental Project, 1980, Baseline and Sociological Survey, I Report)

About 25 years later, another finding came out that doesn’t show that MC/MF has engaged with Fz game. A study conducted in 2006 found most of the MC/MF goes to trading (36.9%). It was followed by poultry, goat and cow rearing, fish farming, producing puffed rice, and agro-support and agro-based activities (about 24%). About 6% of the MC/MF goes to repayment of old debt, and more than 9% goes for medical, education and marriage expenses. (Qazi Kholiquzzaman Ahmad, ed., Socio-Economic and Indebtedness-Related Impact of Micro-Credit in Bangladesh, UPL, 2007)

Identifying the major group, petty trading, etc., or consumption, is another major question as the two carries two different meanings and significances. The “money” spent for consumption carries a meaning, and unearths a brutal tact. The consumption question is often misinterpreted. Consumption is essentially an element required for regeneration of capital although a group of Bangladesh mainstream economists deliver happy smiles as they find increased consumption by the poor as they like to hide the fact: capital requires this – consumption – in its own interest, and increased consumption is not capital’s benevolence. Probably, they will express their gratitude to the mine owners in South America, mentioned by Marx in one of his notes in the first volume of Capital, as the mine owners forced miners to consume bread and beans although the miners’ preference was only bread. Mainstream likes to wipe out the fact: No tiny fraction of consumption comes from tinniest fraction of profit.

Do the data found show the shift of gravity of economic activities carried on with MC/MF to finance? Are petty trading, household based/cottage production, engaging with non-mechanized or semi-mechanized transport service financialization? Is cow rearing, the NGO-waalaas, NGO-theoreticians, call it cow-fattening, or goat rearing, household-based cattle farming financialization? The same question is with consumption and dowry, with litigation and paying back old debt or paying interest/so-called service charge/part of current debt, the Bangladesh NGO-waalaas call it keestee, “qist” and “kist” cited by Susan Wolcott?

In Bangladesh, the number of MC debtors with Grameen Bank and MC/MF organizations operating with license from the Microcredit Regulatory Authority (MRA) was 27.66 million in 2013. It was 17.79 million in 2008, 18.89 million in 2009, 19.21 million in 2010, 29.02 million in 2011, and 27.68 in 2012. (MRA, Annual Report, 2013, chapter 2,) These organizations disbursed Taka 553.09 billion in 2013 as credit. (ibid.) [Approximately 80 Taka=$1] About one-third of the fund of these MFOs [micro finance organizations] was members’ savings in the years 2010-2013. (ibid.) Loan from commercial banks, one of the sources of fund, was 17.53% in 2009, 15.11% in 2010, 12.84% in 2011, 14.20% in 2012 and 15.43% in 2013. (MRA-MIS Database, 2013, Table 5)

Does the info./data cited above show signs of Fz in MC/MF? The interest rate members, most of whom are MC/MF debtors also, receive on account of their savings, which is lent out to MC/MF debtors, is lower than the interest rate they are to oblige with. Micro Credit: Myth Manufactured, cited above, discusses the issue. First, interest is not Fz. If any theoretical formulation considers interest as Fz, then the formulation has to accept the fact that members/MC/MF debtors have entered into FZ-business, getting benefit and profiteering from the business, Fz began since the beginning of interest. Does fact support it? Isn’t it a nice way to forget the deceived MC/MF debtors? Ways of handling contradictions in the two cases – MC/MF debtors profiteering from Fz and MC/MF debtors deceived and exploited – differ. Hopefully the concerned theoretical formulation will find out the ways with full responsibility. Actually, to tell it very softly and indirectly, with such formulations, obligation – moral, ideological, political – to MC/MF debtors are disowned, an act that doesn’t correspond to pro-people position. It shouldn’t be forgotten: MC/MF debtors in Bangladesh are millions.

Space for MC/MF boom has not been created by “financialization of global capitalism and the neoliberal reforms” as observed in the article NMN. In Bangladesh, space for MC/MF was there with its millions of rural poor living in abject poverty. The MC/MF has recently entangled slum dwelling poor, a part of the working people, living in urban and industrial areas. In rural Bangladesh, there were markets at local level, household-based production and its possibilities for expansion, and a labor not regimented like labor regimented in factories and mills, with possibilities of its exploitation by loan capital. It was the space. A part of the rural poor were in the market of micro-sized credit delivered by rural money lenders. Citing Kalecki’s The Theory of Economic Dynamics (1965) the BIDS paper cited above said: “[P]aupers do not constitute a market”. Paupers were not in the MC/MF market. Poor peasants, petty producers, rural labor were in the market. The MC/MF entered the market dominated by rural moneylenders, engaged into competition with the rural creditors, and then, as a few studies found, in cases, colluded with/strengthened rural moneylenders, and in cases, replaced the rural group of exploiters.

These issues carry significance on (1) questions/issues related to metamorphosis of the capital involved, its character, centralization and concentration, contradictions it creates and faces, (2) part of the population entangled in the web, (3) macro-economy including issues of development in countries like Bangladesh, and (4) politics. The questions related to MC/MF (1) at household level production, (2) in artisan/cottage industry, (3) producing for local market, (4) concentrating MC/MF debtors, and related aspects are also significant. These activities are far away from the Fz. Rather, these types of activities show the state of a part of related market(s). And, also, the issues are related to work for radical change of a society.

Even, the Bangladesh stock market, its composition, capital involved there, its modus operandi, tricks, etc. are yet away from Fz. A closer look, not a glimpse, will provide the facts.

The article NMN thus mistakenly tries to make a simplification, which may sound interesting, but which is not factual. It’s a serious flaw in an exercise with scientific approach.

The article NMN says: “The financialization of global capitalism, and its hunger for new markets due to the mismatch between the supply of goods and the purchasing capacity of the global majority, has created an open space for microcredit/microfinance as a financial market for the poor.”

First, it’s really a difficult statement to assess. Is “financialization of global capitalism”, which is hungry for new markets concerned with “mismatch between the supply of goods and the purchasing capacity of the global majority”? Its hunger is for financial market. It’s not at all concerned with “supply of goods” and “purchasing capacity of the global majority”. Is not this market in the so-called real economy? Does Fz enter into real economy? How “the mismatch between the supply of goods and the purchasing capacity of the global majority caused the financialization of global capitalism’s hunger for new markets”? Has Fz gone into speculation, etc. activities with MC/MF? Is Fz concerned with MC/MF. How much capital engaged with Fz the MC/MF in Bangladesh can “consume”? How much capital is involved with MC/MF all over the world, and how much capital is handled by Fz? A few figures cited below will help relate or un-relate the claim/observation/finding of the article NMN:

“[I]n 1975, 19 million stock shares traded daily on the New York stock exchange. By 1985 the volume had reached 109 million, and by 2006, 1,600 million shares with a value of over $60 billion.

“Even larger is the daily trading on the world currency markets, which has gone from $18 billion a day in 1977, to the current average of $1.8 trillion a day! That means that every twenty-four days the dollar volume of currency trading equals the entire world’s annual GDP!” (Foster and Magdoff, op. cit., emphasis in the original)

There’s another “story”:

“One of the most bizarre futures markets was created in 2003 by the U.S. government’s Department of Defense along with a private company – betting on the likelihood of assassinations and terrorist attacks. As then Senate minority leader Tom Daschle, D-South Dakota, said on the Senate floor: ‘I couldn’t believe that we would actually commit $8 million to create site that would encourage investors to bet on futures involving terrorist attacks and public assassinations … I can’t believe that anybody would seriously propose that we trade on death … How long would it be before you saw traders investing in a way that would bring about the desired result?’ This uproar resulted in the canceling of the government’s participation in the program” (ibid.)

It can be hoped that the NMN’s statement cited above will be reconsidered.

A search will show the capital involved with MC/MF, and will find the difference with the capital involved with Fz. Answers to the following questions will help find out the fact:
(1) At the initial stage, from where came the capital that got involved with MC/MF?
(2) After the initial stage, from where it came?
(3) Now, which capitals are involved with MC/MF? Are these capitals involved with Fz or are the capitals involved with MC/MF coming/came from the Fz? Or,
(4) Is the capital involved with MC/MF getting into Fz?

At the initial stage of MC, it was “aid”/grant “money”. The aid “money”, money capital in reality, metamorphosed into loan capital. This loan capital was followed by some bank capital from other countries. A number of banks in Bangladesh have now entered in the MC/MF business. And, in between to these, it was, that’s the cruelest, significant and mostly ignored part, debtors’ “money”, the “money” the poor MC/MF debtors produce with their body and soul, which “joined” the “aid money”. The loan capital craftily collected surplus and in cases, necessary labor, from would-be debtors, and the loan capital fattened itself. With its modus operandi – the so-called revolving fund, $1 doesn’t operate as $1, rather operates as $many – the loan capital increased its power to extend its tentacles. A dissection of the “game” – from would-be-debtor to the debtor to appropriate the debtor – would have exposed one of the cruelest sides of MC/MF. But, for some unknown reason, that was mostly ignored by the Bangladesh progressives, who concentrated most of their discussions on interest rate, didn’t looked into the source of interest. They also engaged into debate with so-called graduation rate, the rate of debtors crossing so-called poverty line, falling down after crossing the poverty line. And, one of the fundamental questions, the question of debtor-creditor contradiction was neither debated nor handled. And, for some unknown reason, respectable publication, on whose analysis many readers in countries depend, caters confusing statements, which is equal to ignoring scientific approach, and ignoring exploitation and suffering of the MC/MF debtors.

What does the article NMN means by “financial market for the poor”? “For the poor”? Strange! Why not “cheer” as financial market is now “for” the poor?! What role do the poor play in the financial market “for” the poor, a part of the debtor in the thralldom of MC/MF? Are speculation games played there? Isn’t surplus labor of the poor appropriated in the MC/MF “game”? Isn’t the poor kept confined within household-based/cottage production or service units, which doesn’t assist advancement? How many Bangladesh MC/MF shares, if any, floated/traded/speculated/gambled in the financial market? Has the Bangladesh financial market itself reached the “desired destiny” – financialization?

It’s easier to construct a few fine-sounding confusing statements by connecting a few fine-sounding words than conducting a rigorous search with facts. It’s a show of time when factual findings concerning millions of poor persons are discarded by respectable quarters in favor of meaningless statements! The time finds cheaper slogans, easier minds lent to the slogans, and keeping away from scientific search – a favorable condition for the interests involved with MC/MF, and ultimately the exploiting interests.

The article NMN says: “Microfinance became a strong arm of the financialization-globalization development toolset.”

Does data related to MC/MF show MF becoming “a strong arm of the financialization-globalization development”? Financialization-globalization, if these are considered together here, operates with one sort of capital while capital involved with MC/MF is of different type. Putting these two – financialization-globalization and MC/MF – together shows a failure to comprehend both of these, failure to identify the capitals involved, which in turn takes to the failure to define functional questions – who to get organized, how to get organized, what should be the slogans. Doesn’t MC/MF keep a part of the poor confined within the narrow limit of household-based, cottage-level production, shackled with simple commodity production? Simple commodity producers are exploited within the MC/MF mechanism. They are closer to wage workers. Doesn’t MC/MF keep a portion of the MC/MF debtors confined into local market that caters to local demand? The MC/MF debtors, here, the simple commodity producers, produce with simple labor, “which any average individual can be trained to do.” (Marx, A Contribution to the Critique of Political Economy)

These facts/aspects are connected to contradictions, which should be considered while chalking out program for their emancipation. How much and how the capital involved with financialization have entered into MC/MF? Does the capital involved with financialization enter into the business of small-scale, household-level production and petty trading, cow-goat-duck rearing, rickshaw pulling? Data related to these are available, and that provides the answer to the questions raised above.

[This 4-part-essay, originally composed in March-April 2015 and was shorter than the present version, is modified subsequently over the following months after it failed to find the place appropriate for the differing opinion. To have the appropriate place, the original article was once shortened to a few hundred words which formed just a few statements. However, the place was not available.]


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