North South University

Fall 2019
Contemporary Issues in Gender Relationships (SOC 201)
Faculty: Dr. Naseem Akhter Hussain (NAHI)

Lecture- 16: Micro-credit : Illusion of Women’s Empowerment

Micro-credit
In Bangladesh traditional sources of loan were from rural mahajans who charged high
interest crossing 200%. With the purpose of increasing agricultural production state
collected foreign loans and distributed it as loans through banks. It charged high
interest and land ownership and collarless were required. It benefited only wealthy
land owners and became a corrupt system by the midterm beneficiaries who selected
loan receivers.

Grameen Bank was established in 1976 in Rangunia, Chittagong with the objective of
giving loans to poor people whose productive capacity is hampered due to shortage of
economic resources. It started the programme of micro-credit. Peasants who owned
0.5 acres of land could get micro-credit. Others were also benefited as it did not
require any collateral. There were examples of micro-credit in Indonesia Kenya,
Bolivia. But MC in Bangladesh was successful.

Micro-credit is designed to provide very small loans to the poor to create small
business enterprises without any financial collateral. The shift towards MC was a
result of globalization, trade liberalization, negative effects of Structural Adjustment
Policy (SAP) by the World Bank. In the name of development GB is ultimately
promoting a Western neo-liberal agenda and advancing corporate capitalist interests
through MC operations in Bangladesh.

The Formula of GB
Present Condition: Low income →Low investment →Low income

Change: Low income →Loan →Investment →More income →More Loan →More
Investment →More Income.

Neoliberal Economics
Neo-liberalism as a political economic paradigm first appeared in 1970’s and gained
acceptability in 1980’s with aggressive support of Regan and Thatcher. The fall of
USSR supported the domination of neo-liberal ideology in development. It called for
deregulation, privatization, withdrawal of states, private enterprises and
entrepreneurial initiatives for creation of wealth. In a neo-liberal state individual
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responsibility and accountability are key to an individual’s well being. Public
spending on education, healthcare, safe drinking water etc. are considered to be
liabilities. On the other hand military budget, corporate subsidy and tax facilities for
the rich are prioritized. As the costs of SAP affected the poor so the international
development agencies looked for new approach to poverty alleviation.

Grameen Bank has retained the western hegemonic model of development but slightly
in a different form. It assumed that all women would be empowered through capitalist
development and their incorporation into the public sphere through access to an
expanding cash economy. This model of development has imposed unrealistic
solution globally where development meant striving to become more western and
more modern and neglected the diverse experiences, realities and needs of non-
western women.

Organization of GB
Grameen Bank gives MC to small groups of 5 women on a short term basis for 6-12
months. These groups work as collateral for the loans. It requires weekly repayment
regular attendance at group meetings. It thus compels women to be connected
although they have other problems in their households. In the small group one acts as
chairperson and another as secretary. It is said that “borrowers know the best”. The
group functions on the basis of mutual trust. The basic structure is formed with 5
members and 50-60 groups make a branch. Each branch is supervised by 10 officials.
The borrowers do not come to the bank rather the bank goes to the door steps of the
borrowers. Grameen Bank is administered by 13 members among whom 9 members
are representatives of the borrowers and 3 members are government employees. The
sources of credit are Bangladesh Bank, Commercial Banks and International
Organizations. The members own 92% of the total shares of Grameen Bank and the
rest 8% shares are owned by the government.

Loan
Grameen Bank gives general loan (equivalent to $ 100) to two of the members of the
group. This loan has to be paid in 50 installments with 10% interest. There is also a
savings programme where 5% of each loan is deposited. Every member has an
individual saving fund where she deposits one taka every week. When the total money
of the saving fund becomes 600 taka, Grameen Bank purchases one share equivalent
to 500 taka and each member of the group is the owner of 100 taka of the share. After
the general loan other loans like home loan, technology and crop loans are given.

Repayment

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Grameen Bank is not NGO; it is a bank. The repayment rate of Grameen Bank is very
high like 95% - 99%. The loan receivers belong to the same class who know each
other very well. Discipline and supervision in the group are also very strict. Grameen
Bank offers capacity building training to recipients in addition to the saving
programme. The main success of Grameen Bank is its rapid expansion. Grameen
Bank has over 8 million borrowers, 97% of whom are women. Grameen Bank
provides services to more than 97% of the villages in Bangladesh with 2565 branches.
Most of the borrowers have invested loan for crop processing, small industries, small
business and local level transport. It is known that some members were successful in
increasing 40% of their income with MC. It has also contributed towards self
employment. The MC is viewed as a way for the poor to achieve self reliance and
independence in order to eradicate poverty.

However there are some vital questions regarding the MC. How successful was MC in
delivering real results and solution to rural Bangladesh in alleviating poverty, What
role does MC play for empowering rural women? What is more appropriate – “credit
only” or “credit plus”? Can MC create enabling environment for rural poor? Can it
control exploitation in the rural economy?

Are poor women real beneficiaries of micro-credit?

MC is viewed as a way for the poor to achieve self reliance and independence in order
to eradicate poverty.

This conception of poverty is treated as a temporary state that can be solved by

improving cash flow. It assumes that poor are able to become developed people with
just a little bit of credit.

However turning people into indebted entrepreneurs and self employed workers
narrow the conception of development.

Moreover Grameen Bank focuses on profit making and institutional financial

sustainability through recovering full lending costs from the borrowers. Grameen
Bank does not focus on borrower’s sustainability and their development.

If a person in the group defaults the whole group is responsible and prevented from
getting loans. Female borrowers engage in surveillance and monitoring co-borrowers
on behalf of Grameen Bank.

Chromic debt-trap is created by MC. The Poor women fall into a chain of taking out
loans from other lenders of NGOs to meet weekly installments. About 5% - 10%
people are able to change their economic condition through MC. Even in these cases

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they have other sources of income besides MC. Debt-trap is so severe that some
people sell their organs (kidney, liver) to pay weekly installments in time.

In reality MC benefits the less indebted middle class more than the poor. Grameen
Bank targets moderately rich rural clients as they are able to make payments and they
pose less risk. Richer clients open up ways for Grameen Bank to maximize its profits.
Richer clients use poor women as ‘proxy numbers’. They take the money given to
poor women as MC and in exchange give them a fee. However if richer clients default
– poor proxy female member is accountable for repayment.

Grameen Bank claims that MC reduces money – lending. But it really reproduces
money – lending among rural women in Bangladesh. Due to lack of investment
opportunities available to them in the rural economy MC is used for money-lending.

Grameen Bank justifies its practice of usury (high interest rate) to protect its own
profits. Grameen Bank formulated its own logic to justify charging high interest from
its borrowers. According to Grameen Bank logic ‘borrowers are also owners of
Grameen Bank’ owning 94% of its total equity. Therefore it is said that the interest is
paid to the company that they own and thus they pay for themselves. In reality
borrowers do not receive any benefit or financial gain from any of the interest paid to
Grameen Bank.

Grameen Bank charges high interest rate and it is rigid on repayment. Grameen
Bank’s interest rate is over 20% which is at least 8% higher than commercial banks. It
is charged at non-reducable rate throughout the period of loan which corresponds to
interest rate of 25% - 30%.

MC does not reduce poverty. After 25 years of credit facilities in many villages level
of poverty has remained to be 50% - 60% which is above the national level.

It is cited that MC benefits and empowers women by increasing their access to cash
income from market oriented activities and their ownership of non-land asset. It is also
observed that women invest more in human capital (like children’s education) and
men spend more on physical capital.

It is observed that when women earn income they bring more benefits to the family.
Women’s priorities are children and household unlike men.

MC enhances rural women’s mobility in the public sphere. Therefore there is a

possibility to have a role in decision-making in the household.

There is an argument that money is a collective resource and the money earned by
women as loan and its use by men in the family is not an issue of conflict.
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Does micro-credit contribute for women’s empowerment?
MC is considered to be an appropriate strategy to integrate women with the
development process.

The concept of powerlessness is negative valuation of women as an oppressed group.

There are two power blocks which create powerlessness – direct power blocks and
indirect power blocks. Direct power blocks are lack of access to education, job
opportunities, health care and other resources. Indirect power blocks are negative
valuations internalized by women as oppressed groups for which they make no effort
to exert power.

Development agencies address the indirect power blocks. This model assumes
oppressed women as ignorant and so powerless. Thus it balances women for lack of
understanding and ability.

This approach is based on ‘empowering the individual’ and self liberation. It does not
consider collective social action or transformation of the totality of the society which
is oppressive.

In the 1970s women were integrated with development activities initiated by the
government. These programmes benefited those who were rich and powerful. Because
government worked through rural power structure. In the 1980s government
programmes were replaced by NGOs to address the impact of development on
women. Rural poor women formed the target group. In the 1990s NGOs became
dominant in development activities almost independent of governmental control.
NGOs in Bangladesh turned to credit extension for women because inclusion of
women’s issues could further expand and legitimize their activities in order to attract
new sources of funding from the donors in the West.

The alternative approach of empowerment begins when oppressed people begin to

shape the content and structure of their daily existence to participate in a movement
for social change.

It is observed that income generating activities increased the number of women

income earners. But these have not challenged the gender ideology. It has not
decreased women’s additional house work and women’s position as subsidizers to the
male workers.

It is said that Grameen Bank empowers women. However Grameen Bank first started
targeting rural men for MC. But men proved difficult for collection of money and they
are not subjected to strict rules. Grameen Bank quickly capitalized on the issue of
women’s development programme and focused on rural poor women.
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Grameen Bank gives loan to women because they are ‘traceable’, ‘reliable’,
‘submissive’, ‘easier to control’.

Women are regular on weekly repayment because they are afraid of losing ‘izzat’ by
being defaulters. There are many cases when female borrowers hanged themselves for
being defaulters and for being locked in Grameen Bank office.

Grameen Bank loans are given to women. But unmarried women, widows, abandoned
women do not qualify for MC. Does it mean that women without men, do not fall
under the criterion of being empowered?

Another observation is that signature of husband or son is required while giving loans.
Men are brought to accountability who really use loan.

Majority women depend on male member for utilization of loan or they hand over
loan money to men for investment. Women may benefit partially when men invest
money but that does not empower them. Women are thus nominal members of
Grameen Bank. Men are utilizer, loan repayers, real beneficiaries of MC.

Men control a significant amount of MC but women are responsible for loan
repayment. In fact men use 95% of the loans. As most of the NGOs do not lend
money to men, as a result men force women to take loan from Grameen Bank. They
use culturally approved threats/intimidation/violence against women. As women are
unable to control their own resources, their empowerment is hindered. Grameen Bank
still targets women who are weak and docile and subjects them to strict rules.

In reality women fall into a trap of high lending rates – taking new loans to repay the
old one – not able to withdraw money from saving fund at times of crisis.

Women are powerless in facing the policeman attitude of debt collectors – forced
acquisition of household utensils – livestock or other assets of defaulting members.

Women face oppressive power structure and oppressive nature of gender relations.
Grameen Bank’s whole process depends on rich-biased class structure and male-
biased gender structure in Bangladesh.

Grameen Bank conducts awareness building programmes for the poor female
beneficiaries. But these are more disciplinary aspects of MC membership. Group
meeting are like semi military structure. Poor women recite the beautiful slogans and
try to memorise a long list of principles like Grameen Bank’s 16 decisions. These
appear to be more ritualistic.

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On the questions of group solidarity - Grameen Bank’s role is negative as it destroys
the spirit of cooperation. “Not so poor” women are clients of Grameen Bank. “Poorest
of the poor” women are excluded. Women identify themselves as NGO beneficiaries
like BRAC or GB members. It seems like patron – client relationship. NGOs and GB
do not unite for women’s common causes. Rather MC intensifies separation and
competitiveness among women and destroys solidarity. Repayment causes regular
conflicts among poor women. Increased group pressure for defaulters is a common
scenario in rural Bangladesh. This is like factional politics where leaders divide poor
villagers in order to establish their domination. The organizations giving loans
compete among themselves and divide clients the same way. Confrontation is between
poor vs poor – not poor powerless vs rich powerful. In the midst of all these conflicts
the agenda of women’s empowerment withers away.

MC also facilitates the practice of dowry. Dowry system further increases the
vulnerability of women and turns them into liabilities for the families. It is observed
that MC is used for dowry and child marriage.

MC advances a shallow and superficial notion of empowerment where the value of

women in society is linked to their ability to generate an income. MC out burdens and
alienates them through its oppressive economic strategies to maximize profit. It
represents mainstream development’s ideological connection to capitalism where
women, disguised as entrepreneurs are reduced to income – earning labour and
nothing more.

As MC does not view women as real human being and does not create practical
opportunities for rural women in Bangladesh to flourish, it largely disempowers
women and is ineffective in making real sustainable changes to their lives. Rather MC
clients turn into prisoners of debt.