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Micro Credit, Micro Results

"while the press and the global network of localists rave about the bank's lending to "landless" women, the miracle dissolves on closer inspection"
"If we can come up with a system which allows everybody access to credit while ensuring excellent repayment-I can give you a guarantee that poverty will not last long," proclaims Mohammed Yunis, guru to market partisans seeking "new solutions" to poverty. As founder of the widely acclaimed Grameen Bank, the Bangladesh bank that lends to poor rural women, Yunis has found a rapt audience in international development circles with his approach to poverty- one that doesn't involve old-fashioned ideas of expensive government programs, tiresome training, or clunky infrastructure. Instead, Yunis, a Vanderbilt-educated economist, is calling on the goodness of "social consciousness-driven entrepreneurs" and pushing "home-based production by the self-employed masses." This translates as moving the responsibility for antipoverty programs to poor people themselves, using borrowed money-and not only in the Third World, but here in the U.S. as well.

In the Grameen model, "landless women in Bangladesh, the poorest of the poor" are miraculously transformed into business women-with enterprises so small they are tagged with the prefix "micro." Rather than job creation, education, or training, the Yunis solution focuses on jump-starting self-employment, providing the capital for poor women to use their innate "survival skills" to pull themselves out of poverty. Instead of collateral, these "microloans" are secured by the honour and credit lines of a peer group: If one woman defaults, no one in her lending circle will receive another loan. This model has sparked a movement to dismantle development initiatives and decentralise antipoverty programs with the ultimate privatisation of welfare- shoeless women lifting themselves up by their bootstraps. According to the glowing press churned out of the Grameen's Dhaka headquarters, which has been recirculated uncritically in both the popular and professional press, it seems to be working. After all, what other bank lending solely to poor people can claim a 97% repayment rate, and a borrowing clientele that is 94% female?

Poverty alleviation?

But while the press and the global network of localists rave about the bank's lending to "landless" women, the miracle dissolves on closer inspection. For example, Grameen rules insist that its borrowers own their homes-not unlike the assumption that shoeless women have bootstraps. Evidently Bangladeshi homeless women don't count as the poorest of the poor. And unfortunately, Grameen borrowers are staying poor. After 8 years of borrowing, 55% of Grameen households still aren't able to meet their basic nutritional needs-so many women are using their loans to buy food rather than invest in business. That's a figure that the press fails to mention. Ditto the World Bank, which in its 1995 study of Grameen, focused mainly on the bank's financial viability, determining if the program was breaking even or, better yet, turning a profit. It's not; unfortunately, only foreign grants are keeping it afloat.

Yunis himself lustily defends his vision of for-profit lending to the poor. In his words, capitalism doesn't have to be the "handmaiden of the rich"; even poor people can benefit from the system if they are only given the chance to use their innate business savvy. But even though part of his mission is to graduate lenders into commercial banking, and the World Bank sees lenders' graduation a sign of the program's viability, that's just not happening. According to the World Bank report, "The (Grameen) Bank may have a market niche because its borrowers are dependent on the program, but over the long run this relationship could render the Grameen Bank vulnerable. Unless borrowers' graduation from low-level incomes to higher levels (if not from the program entirely) is encouraged or achieved many members will become permanently dependent on Grameen Bank credit and services." The same study found that Grameen had no significant impact on women's wages in rural villages although it did boost men's and children's wages. And with all the hype about Grameen's being the largest micro lending program in the world, one could never guess that loans to women have remained a mere 5% of the total amount lent in the Bangladeshi countryside since the 1980s.

Gendered credit

Proponents of Grameen-style micro lending argue that even despite their flaws these programs benefit and even "empower" women. But in a study recently published in World Development, Anne Marie Goetz and Rina Sen Gupta found that while women are getting the loans from Grameen Bank and similar organisations, an significant

portion of those loans are directly invested by male relatives (although women bear the liability for repayment), and in only 37% of the cases had women retained full or significant control over the businesses that were in their names.In comparison, 22% of those they surveyed didn't know how their husbands, sons, fathers or brothers had used the loan and had not even been involved in "their" enterprises. AtGrameen, daughters of women borrowers are not eligible for a loan because the bank has a policy against making two loans to a family, even though a borrower can take out additional loans for her son "s business . So much for the "empowerment" of women.

Instead of empowering women, it looks more like Grameen is using them as collection agents. As a Bangladeshi government field worker explained to Goetz and Gupta: "We are much better at getting our loan money back now that we are using women as middle-men (sic)." Even the western development literature is guilty of painting women as the sole moral and financial guardians of the family. Grameen's high repayment rate is commonly explained by saying that men gamble the money away while women are more responsible, trustworthy, and concerned about the family. These explanations rarely note the pressure that poor, illiterate women must feel from Grameen's highly educated, primarily male staff, nor do they examine what leads men to behave so irresponsibly, if this is indeed the case. Under the banner of liberation, Grameen ironically reinforces women's traditional roles; while capitalising household activities, women are kept out of waged work-which, whatever its limitations, can offer women a degree of independence. As Goetz and Gupta put it, using women as "conduits for credit for the family" keeps women as the "policers of recalcitrant men," dubious progress in gender relations.

Several outside studies of Grameen confirm that the control women have over their microloans decreases over time-just the opposite effect one would expect from programs meant to promote women as entrepreneurs. Grameen encourages women to borrow for livestock and agricultural purposes-in Bangladesh , traditional women "s work . Grameen"s social interventions have less to do with empowering women than with making them good repeat borrowers. At every meeting women rather cultishly recite the "16 decisions" that they must adhere to in order to be Grameen borrowers including, "We shall reduce our expenses to a minimum" and "If we learn that discipline is not respected . . . we go along to help and restore order."

Grameen might be better at generating media attention, but their services seem Spartan compared to those of the other micro credit programs in Southeast Asia. Grameen, believing women are able to provide for themselves all other inputs necessary to be effective entrepreneurs, provides only credit. On the other hand, India's Self-Employed Women's Association, a union for poor women, offers credit as one of a range of services, along with political organising, training, business skills, leadership skills, mediation, lobbying and project assistance. The Bangladesh Rural Action Committee provides education for the daughters of borrowers as well as health services. But the Grameen model of banking on the poor is strictly quantifiable- "repayment rates," "cost effectiveness" (i.e., how much it costs rich creditors and donors) and "viability." Without the cumbersome delivery of the other services that the poor need, Grameen gets to champion the free market system and all its goodness.

Grameen-style lending elsewhere in the Third World, promoted by the World Bank, isn't scoring any great successes. In Zimbabwe, Patrick Bond pointed out in an article in African Agenda, loans to peasants had a default rate of 80%. Bond quoted Ugandan economist Dani Nabudere as saying that the notion that the rural poor need credit to improve their lives "has to be repudiated for what it is-a big lie!" But the rhetorical appeal of self-help obfuscates the failures of group lending to do anything for the African poor.

Import model

Now U.S. disciples of Yunis are bringing the Grameen religion here. In February the first Micro credit Summit will be held in Washington, and everyone from Hillary Clinton (who has said of micro credit that it " translates to hope for women who dream of better lives. Its impact is gigantic.") to Republican Senator Roben Bennett wants to hop aboard the microbus. The can do enthusiasm of targeting the poor meshes nicely with the shredding of the social safety net, so the applicability in the U.S. of the peer-lending model for small, informal businesses is never questioned. Micro credit fits in nicely with prevailing U.S. prejudices, since it relies on local, rather than national, programs and individual, rather than collective, approaches.

- Gina Neff
From : the Left Business Observer (LBO)

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