By Gina Neff
"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.
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 anti-poverty programs to poor people themselves, using borrowed money.
In the Grameen model, "landless women in Bangladesh, the poorest of the poor" are miraculously transformed into businesswomen — 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. These "micro-loans" 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 anti-poverty 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.
Poverty alleviation?
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 eight 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.
Even though part of Yunis' mission is to graduate lenders into commercial banking, and the World Bank sees lenders' graduation as a sign of the program's viability, that's just not happening.
According to a 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, 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
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, a "significant portion" of those loans are directly invested by male relatives (although women bear the liability for repayment).
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.
At Grameen, 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.
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]".
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.
Under the banner of liberation, Grameen reinforces women's traditional roles; while capitalising household activities, women are kept out of waged work — which, whatever its limitations, can offer women some 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 micro-loans decreases over time — just the opposite effect one would expect from programs meant to promote women as entrepreneurs.
Grameen's services seem Spartan compared to those of the other microcredit programs in south-east Asia.
Grameen provides only credit. 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.
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 US disciples of Yunis are bringing the Grameen religion here. The can-do enthusiasm of targeting the poor meshes nicely with the shredding of the social safety net.
Microcredit fits in nicely with prevailing US prejudices, since it relies on local, rather than national, programs and individual, rather than collective, approaches.
But the notion that microlending could seriously reduce poverty in the US is ludicrous. Women's World Banking, a microcredit coalition based in New York, highlights the success of microlending in this country with stories of a newspaper journalist turned doll maker, a low-income mother of four who paints children's faces and murals, and a lower middle class woman who opens a gourmet coffee shop.
Beyond the vulnerability of these new businesses is the issue of how right they are — that is, is it right that programs are encouraging women and the poor to take these kinds of low-paying, albeit self-paid, jobs?
Behind the chic rhetoric of flexibility and decentralisation, there is an exploitative feel to many of these programs. Yunis' vision of moving mass production out from under one factory roof into home-based self-employment sounds frighteningly like a return to 19th-century-style piecework.
And when there's no transformation of production, wordplay can do miraculous work; for example, maids with micro-loans suddenly become microentrepreneurs with their own "cleaning service".
In an article in Inc. magazine, Timothy M. Bates and Lisa J. Servon slammed the microcredit movement for touting poverty relief as a viable goal. According to Bates and Servon, at Working Capital, a group that targets "low-income communities to rebuild local economies", only 16% of the borrowers had personal incomes below $15,000 and almost half earned $30,000 or more.
As they put it, "running a small business in this country requires an education and a dependable support network as well" — something the inner-city poor don't have.
Since some individuals have been helped by micro-loans, their individual cases form a powerful body of rhetoric that plays into the myth of America itself — work hard and make it. Now the microlenders promise the destitute they can "borrow our money and be your own boss". Sounds like a late-night TV pitch for instant wealth through no-money-down real estate — and just about as believable.
[Abridged from Left Business Observer. To subscribe for one year, send US$22 to 250 West 85th St, New York, NY 10024-3217, USA.]