May 08, 2007

Will Grameen and the entire microcredit industry become targets for revenge?

Will Grameen become a target if the BNP or the AL come to power? A while ago, I saw someone express this very fear on one or another of the blogs I frequent, I forget which. I dismissed it as slightly paranoic. What sounded like paranoia at the time became a bit more real to me as someone whose blog I read and who reads mine put up a post criticising Grameen's business practices.

Now I won't link to this blog. As I said, I do read it now and then, and I'm not looking for a food fight here. I'll reproduce some key aspects of the argument against Grameen and give my humble opinion on it.

The biggest complaint against Grameen seemed to be that it charges high interest rates. Funnily and predictably, a lot of people who used to disbelieve or ignore this accusation when it was made by certain quarters, are now buying this wholesale since it has been repeated by a different quarter.

That however is not a refutation of Grameen's policy to charge high interest rates. The refutation you will find here, here and everywhere on the web.

Here the questioning minds and the party-flock alike might ask: but why not simply give them the money? Charity, you will say. By all means, let us be charitable. Especially in times of floods and monga and to people who are barely alive. However, if charity were a long term solution, there would be no need for progressive taxation either. Something to think about.

Asif Dowla (no relation) in a beautiful article recalls the efforts in the 70s by successive governments (both AL and BNP) to institute credit to the poor. He asserts that these essentially became charities, which is something Grameen consciously strove not to do (pg. 19-20). They did not instil a culture of repayment and he traces their failure to precisely this cause. And mind you by "failure", I refer not to their failures as commercial enterprises (after all, my taxes ensure that no government enterprise ever reaches bankruptcy, simply that their workers remain unpaid!). By "failure", I mean failing to service the neediest of our people. The direct quote from the #1 villain in the scheme, igNobel Yunus himself at the start of page 17 says that most of the loans forgiven by the government in the wake of the '91 floods went to the land-owing, wealthier rural inhabitants, not the landless, poorer ones. Sounds familiar? But then, what does he know about lending to the poor, anyway? He was probably scheming to grab power in 2007, even as he was writing in 1999. You can peruse the entire aricle here, but why bother going through 46 pages? Better to believe your leaders and close your eyes. Life is easier that way. Trust me, I know. Amiyo Bangladeshi.

A third complaint against microcredit is that it does not work. Fair enough. I'm not going to be a polemicist and argue that there is CONCLUSIVE EVIDENCE that it works. But neither has anyone produced a conclusive study to show that it does not work. A simple look at the Wikipedia article on microcredit could tell anyone that not enough research has been done on it. Furthermore, no one I know of has come CLOSE to arguing that it is actually HARMFUL to society. Of course it isn't hard to find people who are skeptical of micro-credit when it is presented as the mother of all solutions for all our problems, as "First-World" donors seem to do now and then. I'm one such skeptic. But it's articles like this that probably form the basis of spinning that healthy skepticism into downright dismissal of microcredit. I don't think someone as knowledgable and respected as Dr. Sobhan would ever make such a broad and blanket dismissal. Even the author of the article does not make that dismissal, but notes accurately: "not as effective". Quite a few people I know have cited this book as a complete refutation.

A fourth complaint is that Grameen has a monopoly on microcredit. This is downright inaccurate. Read the New Age article, and it mentions that BRAC, ASA and Proshika also engage in microlending. And those are the just the largest ones. The only difference is that Fazle Hasan Abed, Shafiqul Haque Choudhury (founder of ASA) or Qazi Faruque Ahmed (President of Proshika, N.B.) did not declare that they wanted to challenge the hegemony of the two political parties and run for office. Thus, the only microcredit operation in Bangladesh is Grameen, because that's the only one we'll choose to focus on for the moment. Reality is what you make of it inside your head. Is this postmodernist audience power at work or a really bad dream? Either way, the charges of usury and monopoly stick.

So what to make of all this? I fear that whoever comes to power will take their revenge on Grameen, or on the microcredit sector as a whole through lower interest-rate caps or "microcredit sector reform". Worse, they will justify it using this sort of rhetoric on the part of ordinary people like us. For the sake of the poorest of my people, I hope they just take it out on Grameen through some sort of special committee chaired by a bunch of partisan sheep, and leave the rest alone.

And if this were to happen, what lessons would the innovators and risk-takers of my generation draw from it? Simply to innovate elsewhere, far away from the green Delta so close to our hearts. Because, perchance you become too big for your boots in trying to help your people, the politicians (a family caste apart) will warn you not to enter their strata and make life difficult for you if you choose not to heed. And they will do this with the support of the very masses you sought to help in the first place.

N.B. Proshika itself has been the target of the BNP government during the past few years, proving once again that if there is a new low to be attained, both our parties will compete hard to attain it. Read about Proshika's troubles here and here.

40 comments:

Fugstar said...

Maybe the nest party in power will feel more compelled to do something better and contribute to the reformation of microfinance thinking and practice. Microfinance is not the solution to every problem the poor face either, not everyone is lucky or entrepreneurial.

Why should the grameen model of it be elevated to the level of revelation just because of somewhiteboy prize award? Its not personal.

I think Proshika were operating outside the law, though the bnp had a political motive inprosecuting them. To you have a link to that 'chargesheet' of evidence against them, it was floating around a few years ago. (lots of dog food and sending a son to the US to study on a scholarship)

was it proven wrong in the end?

DMY was not a vituperative as QFA and is generally publically a lot less activisty.

Salam Dhaka said...

Have you feel that the collection process is legal?

There are countless stories of people's roof or goat being taken away because they did not make a payment.

What exactly are the terms and conditions of the loan?

Asif said...

Fugstar,

I really don't know about charges against Proshika. Absolutely uninterested:).

Grameen model was elevated before the "whiteboy prize" that is the Nobel. Not just by white people, but black, brown, yellow and at times purple people too. I said up there myself that it is NOT a cure for all ills.

Maybe the next party in power WILL feel compelled to refine microfinance practice. Because government interference in business has always paid such big dividends growth-wise in Bangladesh, I'm highly optimistic at the prospect. (sarcasm)

Salamdhaka,

Do I feel the collection process is legal? It really doesn't matter what I feel: the Government of Bangladesh thinks it is.

Do I think it's fair? Well, do I think that big loan defaulters should have their property confiscated? Yes. Therefore I have to answer "yes" to this as well. Painful, but fair.

"Countless stories" and hearsay do not make a valid case for or against anything. I have heard countless stories about a lot of things myself. Let me tell you some of them: I have heard countless stories about corrupt practices in Bangladesh. Yet, most people in Bangladesh are not corrupt. I have heard that America discriminate against Muslim countries. Yet, Pakistan and Egypt are two of the top three aid recipients. I have heard that India is a "Hindu nation", yet 160 million Muslims live there. I have heard countless stories of hijackings in the Dhaka night, yet it has never happened to me. I have heard loads of myths in my life, very few of which have been supported by facts.

Facts, not countless stories and I'll believe you. Fact is that Grameen has a almost 98% repayment rate. If anything, the criticism has been that they allow people more and more time to pay back their loans, unlike commercial banks which would confiscate my property (I don't know about you) if I didn't pay on time. If people are repaying, how many people stand to gain and how many people stand to lose their goat and tin roof?

Terms and conditions: There are four interest rates for loans from Grameen Bank : 20% (declining basis) for income generating loans, 8% for housing loans, 5% for student loans, and 0% (interest-free) loans for Struggling Members (beggars). All interests are simple interest, calculated on declining balance method. This means, if a borrower takes an income-generating loan of say, Tk 1,000, and pays back the entire amount within a year in weekly instalments, she'll pay a total amount of Tk 1,100, i.e. Tk 1,000 as principal, plus Tk 100 as interest for the year, equivalent to 10% flat rate. Taken from the grameen site: http://www.grameen-info.org/bank/GBGlance.htm so more details there.

Anonymous said...

zolpidem online zolpidem tartrate wiki - zolpidem pharmacokinetics

Anonymous said...

buy valium online valium canadian pharmacy no prescription - valium type of drug

Anonymous said...

buy diazepam buy 5mg diazepam online - diazepam and dogs

Anonymous said...

generic xanax online xanax for anxiety in dogs - xanax 2mg bars street value

Anonymous said...

ativan online pharmacy ativan side effects driving - ativan youtube

Anonymous said...

how to buy xanax online buy xanax online no prescription australia - what do generic xanax pills look like

Anonymous said...

buy diazepam online diazepam no prescription 10mg - diazepam etoh withdrawal

Anonymous said...

buy ativan online ativan dosage back pain - ativan withdrawal nightmares

Anonymous said...

where to buy xanax online no prescription xanax online purchase - xanax dosage 0.25

Anonymous said...

buy ativan online ativan effects - buy cheap lorazepam online

Anonymous said...

buy diazepam order diazepam europe - diazepam for alcohol withdrawal treatment

Anonymous said...

cheap alprazolam xanax side effects on the brain - xanax side effects erectile dysfunction

Anonymous said...

how to buy xanax online legally xanax drug interactions advil - buy brand xanax online

Anonymous said...

buy ambien online kind drug ambien - how to buy ambien cr

Anonymous said...

buy ambien online ambien cr normal dosage - ambien drug interactions

Anonymous said...

buy valium online valium vs antidepressants - better anxiety valium ativan

Anonymous said...

soma muscle carisoprodol 350 mg tablets used - order soma online mexico

Anonymous said...

buy ambien online ambien cr for sleep - ambien mg

Anonymous said...

purchase valium where to buy valium in australia - what color is valium 5mg

Anonymous said...

generic valium names buy valium online overnight delivery uk - le diazepam (valium)

Anonymous said...

buy ambien online ambien side effects mood swings - buy ambien pills

Anonymous said...

soma medication soma medication effects - carisoprodol ibuprofen

Anonymous said...

Drug Abuse Poetry prednisone price - prednisone sale http://www.prednisone4sale.com/#prednisone-sale

Anonymous said...

Oxygen Pills Research where to buy diflucan - order fluconazole no prescription http://www.diflucansaleonline.net/#order-fluconazole-no-prescription , [url=http://www.diflucansaleonline.net/#cheap-diflucan ]cheap diflucan [/url]

Anonymous said...

Supreme Court Judge Used Drugs lexapro online pharmacy - lexapro pills http://www.costoflexaproonline.net/#lexapro-pills , [url=http://www.costoflexaproonline.net/#lexapro-price ]lexapro price [/url]

Anonymous said...

2, finasteride without prescription - buy propecia online no prescription http://www.propeciagenericforsale.com/#buy-finasteride-online-no-prescription , [url=http://www.propeciagenericforsale.com/#propecia-pills ]generic propecia online [/url]

Anonymous said...

tfv cheap plavix - plavix 75mg http://www.plavixbuynow.net/#plavix-drug, [url=http://www.plavixbuynow.net/#plavix-drug]plavix for sale [/url]

Anonymous said...

tmd [url=http://www.lamisilonlinerx.net/#cheap-lamisil ]order lamisil online no prescription [/url] - lamisil pills without prescription - lamisil medication http://www.lamisilonlinerx.net/#order-terbinafine-no-prescription ,

Anonymous said...

xrh order strattera - cheap strattera http://www.stratteraforsale.net/#cheap-strattera , [url=http://www.stratteraforsale.net/#order-strattera-online ]order strattera online [/url]

Anonymous said...

losneyfgd buy klonopin online without prescription - cheap clonazepam no prescription http://www.klonopinsaleonline.com/#cheap-clonazepam-no-prescription , [url=http://www.klonopinsaleonline.com/#where-to-buy-klonopin ]where to buy klonopin [/url]

Anonymous said...

Hello, cheap klonopin no prescription - clonazepam online pharmacy http://www.zeekmundial.com/#clonazepam-online-pharmacy , [url=http://www.zeekmundial.com/#klonopin-cost ]klonopin cost [/url]

Anonymous said...


3 cymbalta sale - cheap cymbalta no prescription http://www.cymbaltaonlinerx.net/, [url=http://www.cymbaltaonlinerx.net/]duloxetine no prescription [/url]

Anonymous said...

ooo!!! Buy Topiramate - buy topamax weight loss http://www.cheaptopamaxorder.net/#cheap-topamax, [url=http://www.cheaptopamaxorder.net/#cheap-topamax]Topamax Online[/url]

Anonymous said...

g, generic imitrex - buy sumatriptan http://www.emiratesosteoporosissociety.com/#buy-sumatriptan , [url=http://www.emiratesosteoporosissociety.com/#buy-sumatriptan-online ]buy sumatriptan online [/url]

Anonymous said...

generic ativan online ativan withdrawal how to - buy ativan online overnight

Anonymous said...

http://technologiesuae.com/#5193 buy xanax online for cheap - buy greenstone xanax

Anonymous said...

6, [url=http://www.nexiumpricewatch.net/]Nexium For Sale [/url] - Nexium Price - nexium 20mg http://www.nexiumpricewatch.net/ .