THE INCOME GENERATING PROGRAM OF WOMEN IN GRAMEEN BANK

THE INCOME GENERATING PROGRAM OF WOMEN IN GRAMEEN BANK

Md. Mahabub Ullah Khan


Abstract

The title of the present research is “The Income Generating Program of women in Grameen Bank: A Study on Kushtia District”. It is an empirical study, which shows Social problems, especially about women and their income.  The study also shows the roles of Grameen Bank.

Micro-credits have become an important tool in development economics and play an essential role in the fight against poverty, in particular with respect to the empowerment of women. Since Muhammad Yunus, the founder of the Grameen Bank, received the Nobel Prize for Peace in 2006, microcredit-systems have been increasingly conceptualized as part of a profit-oriented “financial system approach”.

In this paper I shall discuss different approaches to micro-credits dealing with the question of how far different concepts influence societal gender arrangements and under which circumstances micro-credits are useful tools for the empowerment of women in a sustainable way. For this reason, the results of an empirical study conducted in Kushtia district will be presented in order to develop a multilayer model for the empowerment of women which shows possible impacts of micro-credits on the individual level (micro level), the community level (meso level) as well as the socio-political level (macro level).




Acknowledgements


I would like to gratefully acknowledge the enthusiastic supervision of Mrs. Rakiba Yesmin, Professor of Politics & Public Administration, Islamic University, Kushtia. She has taken much pain to supervise my thesis with utmost care and attention.


I am grateful to all my friends of MDS program, for being the surrogate family during the course I stayed there and for their continued moral support there after. From the staff, Bacchu is especially thanked for his care and attention.


Finally, I am forever indebted to my parents for their understanding, endless patience and encouragement when it was most required. I am also grateful to Professor Dr. Begum Rokshana Mili, SM Shafiqul Alam, to Professor Dr. AKM Motinur Rahman, Md. Zulfiquar Hossain, Professor Nasim Banu, Md. Gias Uddin, Dr. Md. Assaduzzaman, for their support.




Contents

Chapter-1 01----08

1.1 Introduction
1.2 Theoretical Framework
1.3 Assumption and hypothesis
1.4 Objectives
1.5 Description of the study area
1.6 Methodology of the study
1.7 Review of literature

Chapter-2 09----17

Conceptual Analysis of the Study
2.1  NGO
2.2  Grameen Bank
2.3  Micro-credit
2.4  Income-Generating Activities
2.5  Bourdieu and Capital Dimensions



Chapter-3 18----30

Development of Micro Credit Program
3.1 Introduction
3.2 Early Beginnings
3.3  Modern Microcredit
3.4  Economic Principles of Microcredit
3.5  Developed World and Microcredit
3.6  Criticism of Microcredit
3.7 Method of Action of Grameen Bank

Chapter-4 31----35

SUSTAINABLE MICRO-CREDIT-PROGRAMS: COMBINING THE “FINANCIAL SYSTEM APPROACH” AND THE “POVERTY REDUCTION APPROACH”

4.1 Introduction
4.2 Analysis of the Topic




Chapter-5 36----40

CASE STUDY

5.1 Case-1
5.2 Case-2
5.3 Case-3
5.4 Case-4
5.4 Case-5

Chapter-6 41----49

Findings of the study

6.1 Limitations of income generating program in Bangladesh
6.1.1 Poverty Alleviation, Metrics, and Relationships Between Mfis And Borrowers
6.1.2 Income generating program and Gender Relations
6.2 Limitations of Grameen Bank:


Chapter-7 50----53

The way to overcome
7.1  Improve the financial market
7.2 Conclusion and Policy implications

Chapter-8 54----57

References
8.1 Published Sources
8.2 Electronic Sources


Chapter-1

1.1 Introduction
1.2 Theoretical Framework
1.3 Assumption and hypothesis
1.4 Objectives
1.5 Description of the study area
1.6 Methodology of the study
1.7 Review of literature


1.1 Introduction


Micro-credits have become an important tool in development economics and play an essential role in the fight against poverty, in particular with respect to the empowerment of women. Since Muhammad Yunus, the founder of the Grameen Bank, received the Nobel Prize for Peace in 2006, microcredit-systems have been increasingly conceptualized as part of a profit-oriented “financial system approach”.

The past century was marked by discussions and fundamental changes in ethical and moral principles from a global perspective. Therefore, on the political level (e.g. UNO, UNESCO, UNIDO, and EU) many attempts have been undertaken in order to come to a common ethical understanding of human rights, working and living conditions. But many of the ethical and moral principles still suffer from unconsidered, ignored and deep-rooted mechanisms of in- and exclusion. With respect to this, many women in different cultural contexts are still disadvantaged due to strict hierarchical gender-roles and relations. In order to initiate and encourage the social change of gender relations, the interrelated construction of gender-relations on the macro- as well as the meso and micro level of societies has to be taken into consideration. As Acker (1992) points out, gender is a social construction which takes place at the structural (e.g. gender specific work division in societies and organizations), the interactional, the symbolic (e.g. language and pictures) as well as at the individual level (e.g. self-representation and identification). From the author’s point of view these levels have to be seen as mutually dependent and culturally influenced. This dependency can also be observed when it comes to the conceptualization and implementation of micro credit systems for the empowerment of women. In the sense of a more sustainable approach the social construction and reproduction of gender relations and their societal meaning and functions have to be taken into account. For this reason the study presented is dealing with the core question of to what extent different concepts of Grameen Bank’s micro-credits influence societal gender arrangements and under which circumstances micro-credits are useful tools for the empowerment of women in a sustainable way. The empirical data for the study were gathered in case studies of female beneficiaries in Kushtia who suffer from multiple discrimination and social exclusion (namely single women, having lost their husbands due to death, divorce or imprisonment) and in interviews with financial experts from NGOs and other institutions who are engaged in micro-credits.

The aim of the research project was to develop a new model for the sustainable empowerment of women focusing on the possible impact of micro-credits on the micro, the meso and the macro level considering the different interests and power of the main actors on these levels. I use Bourdieu’s social theory on capitals in order to identify the relevant resources for social and political power and therefore for sustainable gender-specific social change.

The paper is structured as follows: After an introduction I present the theoretical framing – Bourdieu’s social theory on capital dimensions – of the study. A summary of the case study results follow in the third chapter. In the fourth part, I present their multi-layer model for the empowerment of women. The paper closes with some policy implications.


1.2 Assumption and Hypothesis


Our primary assumption is The Income Generating program of Garmeen Bank does not get success enough in Kushtia. Because we cannot observe such improvement that can make a sign. Secondary assumption is the program does not focus to generate the income of poor women but they mainly focus on collecting the interest.




1.3 Objectives


The specific objectives of the research are:

1. To clarify the concepts of NGO, Grameen Bank, Micro-credit, income generating activities and Bourdieu and Capital Dimensions.
2. To identify the social factors that is affected by income generating program of women in Grameen Bank.
3. To find the impact in the society by the program.
4. To find the trend of social change.
5. To compare the reality and Myth.







1.4 Description of the study area



Country Name : Bangladesh
Division : Khulna Division
District name : Kushtia
Area : 1,621.15 km2 (625.9 sq mi)
Population : Total 1,713,224
Density : 1,056.8/km2 (2,737.1/sq mi
Coordinates : 23.9333° N 89.0000° E







1.5 Methodology of the study


In my research I was trying to approach the same issue from two directions. How would it be possible to reach results indicating beyond the economic crisis and decrease the risks existing in the field of budgeting by the modernization of the legal environment, the tightening of the budgetary discipline and by the introduction of more efficient methods.

1.5.1 Sample Size and Sampling Method
Since one woman per household can be the member of the project, households were considered as the sample unit and each respective woman is the respondent. Out of total 600 beneficiaries, 40 women were taken as the sample respondents. Besides, informal discussions were conducted with a large number of women during their group meeting. Respondents were selected randomly from the list of the names and activities, which was collected from the project office. A proportionate and stratified random sampling method was followed to select respondents from each activity type proportionately. Table -1 presents the distribution pattern of activities among
the respondents.


Table 1: Distribution Pattern of Activities among the Respondents

Types of Activities No. of Engaged Women
1. Cattle Rearin 5
2.Poultr 2
3.Piscicultur 5
4. Grocer 4
5. Basket/Rope Makin 3
6. Leather Goods Makin 3
7. Vegetables/Fish Sellin 4
8. Saree/Utensil Sellin 5
9. Rice Husking / Muri Makin 4
10. Others (Tailoring/Paper Packet
Making/Bakery) 5

I have done some special case study for my research. I think it would be help my research to reach my optimum goal.






1.6 Review of literature

A considerably large number of literatures have examined the relationship between Micro-credit and social change. It would be difficult to spell out all studies that were done during last three decades. Here I will try to summarize some significant studies those are related with my research issue.

In one of the initial studies, Burra, Ranadive and Murthy(2005)[Micro-credit, poverty and empowerment: linking the triad] examined micro-credit interventions made in India and provides valuable insights into: the role of social mobilization in reducing poverty; the working of community Banking programmers at the village level; the efforts to create space for women to carry out credit and savings transactions; the process of empowerment through the formation of women's groups; and the improvement of women's lives through savings and credit activity.

Another important study conducted by Islam(2007) [Microcredit and poverty alleviation] examined the principles that could, and perhaps should be followed by the microfinance institutions when considering why and when microfinance works - and when and why it fails to achieve its promise. Critically analyzing the ugly facts of the one-size-fits-all microfinance fancy model, the book bridges the gap between the claims that microfinance is a panacea for poverty alleviation and the counter-claims that caution against such enthusiasm.

Rahman(2001) [Women and microcredit in rural Bangladesh: anthropological study of the rhetoric and realities of Grameen Bank lending] examined women borrowers’ involvement with the microcredit program of the Grameen Bank, and the grassroots lending structure of the Bank; it illustrates the implications of Grameen lending for the borrowers, their household members and Bank workers. The focus of the study is on the processes of village-level microcredit operation; it addresses the realities of the day-to-day lives of women borrowers and Bank workers and explains informant strategies for involving themselves in this microcredit scheme. The study is on the power dynamics of everyday lives of informants as they affect women borrowers’ relationships within the household and the loan centers, and Bank worker relationships within the loan center and the Bank.




Chapter-2

Conceptual Analysis of the Study
2.1  NGO
2.2  Grameen Bank
2.3  Micro-credit
2.4  Income-Generating Activities
2.5  Bourdieu and Capital Dimensions

2. Conceptual Analysis of the Study



2.1 NGO
A non-governmental organization (NGO) is a legally constituted organization created by natural or legal persons that operates independently from any government. In the cases in which NGOs are funded totally or partially by governments, the NGO maintains its non-governmental status by excluding government representatives from membership in the organization. The term is usually applied only to organizations that pursue some wider social aim that has political aspects, but that are not overtly political organizations such as political parties. Unlike the term "intergovernmental organization", the term "non-governmental organization" has no generally agreed legal definition. In many jurisdictions, these types of organization are called "civil society organizations" or referred to by other names.

A non-governmental organization (NGO) is any non-profit, voluntary citizens' group which is organized on a local, national or international level. Task-oriented and driven by people with a common interest, NGOs perform a variety of service and humanitarian functions, bring citizen concerns to Governments, advocate and monitor policies and encourage political participation through provision of information. Some are organized around specific issues, such as human rights, environment or health.  They provide analysis and expertise, serve as early warning mechanisms and help monitor and implement international agreements. Their relationship with offices and agencies of the United Nations system differs depending on their goals, their venue and the mandate of a particular institution.

International non-governmental organizations have a history dating back to at least 1839. Rotary, later Rotary International, was founded in 1905. It has been estimated that by 1914 there were 1083 NGOs. International NGOs were important in the anti-slavery movement and the movement for women's suffrage, and reached a peak at the time of the World Disarmament Conference. However, the phrase "non-governmental organization" only came into popular use with the establishment of the United Nations Organization in 1945 with provisions in Article 71 of Chapter 10 of the United Nations Charter for a consultative role for organizations which are neither governments nor member states—see Consultative Status. The definition of "international NGO" (INGO) is first given in resolution 288 (X) of ECOSOC on February 27, 1950: it is defined as "any international organization that is not founded by an international treaty". The vital role of NGOs and other "major groups" in sustainable development was recognized in Chapter 27 of Agenda 21, leading to intense arrangements for a consultative relationship between the United Nations and non-governmental organizations.


2.2 Grameen Bank
 The Grameen Bank is a microfinance organization and community development Bank started in Bangladesh that makes small loans (known as microcredit) to the impoverished without requiring collateral. The word "Grameen" is derived from the word "gram" and means "rural" or "village" in Bangla language.

The system of this Bank is based on the idea that the poor have skills that are under-utilized. A group-based credit approach is applied which utilizes the peer-pressure within the group to ensure the borrowers follow through and use caution in conducting their financial affairs with strict discipline, ensuring repayment eventually and allowing the borrowers to develop good credit standing. The Bank also accepts deposits, provides other services, and runs several development-oriented businesses including fabric, telephone and energy companies. Another distinctive feature of the Bank's credit program is that the overwhelming majority (98%) of its borrowers are women.

The origin of Grameen Bank can be traced back to 1976 when Professor Muhammad Yunus, a Fulbright scholar at Vanderbilt University and Professor at University of Chittagong, launched a research project to examine the possibility of designing a credit delivery system to provide Banking services targeted to the rural poor. In October 1983, the Grameen Bank Project was transformed into an independent Bank by government legislation. The organization and its founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize in 2006; the organization's Low-cost Housing Program won a World Habitat Award in 1998


2.3 Micro-credit
Microcredit is the extension of very small loans (microloans) to those in poverty designed to spur entrepreneurship. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of a wider range of financial services to the very poor.

Jonathan Swift inspired the [Irish Loan Funds] of the 18th and 19th centuries. In the mid-19th century, Individualist anarchist Lysander Spooner wrote about the benefits of numerous small loans for entrepreneurial activities to the poor as a way to alleviate poverty. Ideas relating to microcredit were mentioned in portions of the Marshall Plan at the end of World War II.

The origins of microcredit in its current practical incarnation, with attention paid by economists and politicians worldwide, can be linked to several organizations founded in Bangladesh, especially the Grameen Bank in the 1970s and onward, for which its founder Muhammad Yunus was awarded the Nobel Peace Prize in 2006.

The modern invention of microloans is credited to St. Louis entrepreneur Menlo Smith who was struck by the abject poverty he saw in the Philippines. Microcredit is a financial innovation that is generally considered to have originated with the Grameen Bank in Bangladesh. In that country, it has successfully enabled extremely impoverished people to engage in self-employment projects that allow them to generate an income and, in many cases, begin to build wealth and exit poverty.

Due to the success of microcredit, many in the traditional Banking industry have begun to realize that these microcredit borrowers should more correctly be categorized as pre-Bankable; thus, microcredit is increasingly gaining credibility in the mainstream finance industry, and many traditional large finance organizations are contemplating microcredit projects as a source of future growth, even though almost everyone in larger development organizations discounted the likelihood of success of microcredit when it was begun. The United Nations declared 2005 the International Year of Microcredit.


2.4 Income-Generating Activities
The limits of a welfare-oriented response to this growing crisis are now well recognized. Alternatively, many development agencies are increasing their emphasis on assisting women to secure income through their own efforts. Such approaches are often categorized as `income-generating activities' and cover initiatives as diverse as small business promotion, cooperative undertakings, job creation schemes, sewing circles, credit and savings groups and youth training programs. So, how can `income-generation' be defined? It is sometimes argued that education and health provision, legal and political changes, and global economics all affect the abilities of people to secure an income. From this stems the confusion in the use of the term `income-generation'. For the purpose of this paper, `income-generating activities' will be considered those initiatives that affect the economic aspects of people's lives through the use of economic tools such as credit. Other types of support affecting women's production are considered complementary to income-generating activities. For example, these might include child care or basic services provision and labor-saving technologies.

2.5 Bourdieu and Capital Dimensions
Micro-credits are often discussed in context with the development of poor countries. In the social, political and cultural sciences the term “development” is heavily discussed since different meanings and approaches are linked to it (see e.g. Nuscheler 2004). On the one hand the term refers to the individual ability to improve skills to handle everyday problems. On the other hand “development” means structural changes induced by organizations, institutions, and states. In particular the latter often implicitly presume a relationship of “donor” and “beneficiary” building the development strategy on the value systems of the donor. From a gender perspective “development” refers to the provision of basic services for men and women, and to the establishment of living conditions guaranteeing human dignity and self-determination. Accordingly, the need arises to question given power relations and gender hierarchies in particular with respect to the empowerment of women and gender-specific social change.

This leads to the question, which power related institutional settings and capacities are important for women to be able to act on the individual, the community and the socio-political level and how can Grameen Bank’s micro-credits as tool for empowerment support women to act? Bourdieu (1997) considers “acting” not as purposeful doing but as relative behaving in-between disposition and the structure of a situation. Due to this, he identifies the concept of social fields and capitals. Bourdieu mainly classifies three types of capitals specifying the degree of capacity to act:

1. Economic capital: is the fundamental one and includes income and wealth.
2. Cultural capital: in terms of education and knowledge.
3. Social capital: the social network in terms of numbers and potential of the network members.

New acting based on changes in perceiving and thinking schemata is reflected in capital dimensions. Bourdieu states that the structures of these capitals are reproductive and persisting. The stability of the system is guaranteed by existing institutional settings, although there is space for learning and changing.

In the research project this theoretical approach was used to identify the various aspects and mutual dependencies of capital dimensions, in particular concerning the situation of women. The culturally embedded power of men is manifested in norms and rituals systematically subordinating women by discriminating against them with respect to education, health, nutrition, status, decision making power and self determination. With respect to this, the chosen group of women, (singles without husbands due to divorce, death or imprisonment) seems to be especially interesting: These women are highly marginalized since their existence challenges given power structures and questions the culturally given norms. In other words, within the social space they are positioned on a low level due to the lack of the capital dimensions mentioned above: no economic capital, no cultural capital, and no social capital. The situation of these women is so exceptional that they have to be innovative in dealing with their situations and have to create space for learning and changing.

Informed by feminist theories and Bourdieu’s social theory, the theoretical basic assumption of the authors’ was that the trigger for social change can only be initiated if economic improvements at the individual level (see also Mayoux 2000) lead to more power in families, in the community and finally in the political and societal system. All capital dimensions have to be taken into account in order to achieve sustainable social change. Furthermore it is essential to consider the institutional context and all involved stake-holders with their particular interests and preferences. The following presentation of the main results of the empirical study should illustrate this holistic approach to micro-credits related to a sustainable empowerment of women and social change.

Chapter-3

Development of Micro Credit Program
3.1 Introduction
3.2 Early Beginnings
3.3  Modern Microcredit
3.4  Economic Principles of Microcredit
3.5  Developed World and Microcredit
3.6  Criticism of Microcredit
3.7 Method of Action of Grameen Bank


3. Development of Microcredit Program


3.1 Introduction
Microcredit is the extension of very small loans (microloans) to those in poverty designed to spur entrepreneurship. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of a wider range of financial services to the very poor.

Jonathan Swift inspired the [Irish Loan Funds] of the 18th and 19th centuries. In the mid-19th century, Individualist anarchist Lysander Spooner wrote about the benefits of numerous small loans for entrepreneurial activities to the poor as a way to alleviate poverty. Ideas relating to microcredit were mentioned in portions of the Marshall Plan at the end of World War II.

The origins of microcredit in its current practical incarnation, with attention paid by economists and politicians worldwide, can be linked to several organizations founded in Bangladesh, especially the Grameen Bank in the 1970s and onward, for which its founder Muhammad Yunus was awarded the Nobel Peace Prize in 2006.

The modern invention of microloans is credited to St. Louis entrepreneur Menlo Smith who was struck by the abject poverty he saw in the Philippines. Microcredit is a financial innovation that is generally considered to have originated with the Grameen Bank in Bangladesh. In that country, it has successfully enabled extremely impoverished people to engage in self-employment projects that allow them to generate an income and, in many cases, begin to build wealth and exit poverty.

Due to the success of microcredit, many in the traditional Banking industry have begun to realize that these microcredit borrowers should more correctly be categorized as pre-Bankable; thus, microcredit is increasingly gaining credibility in the mainstream finance industry, and many traditional large finance organizations are contemplating microcredit projects as a source of future growth, even though almost everyone in larger development organizations discounted the likelihood of success of microcredit when it was begun. The United Nations declared 2005 the International Year of Microcredit.


3.2 Early Beginnings
Jonathan Swift inspired the Irish Loan Funds of the 18th and 19th centuries. In the mid-19th century, Individualist anarchist Lysander Spooner wrote about the benefits of numerous small loans for entrepreneurial activities to the poor as a way to alleviate poverty. At about the same time, but independently to Spooner, Friedrich Wilhelm Raiffeisen founded the first cooperative lending banks to support farmers in rural Germany. Ideas relating to microcredit were mentioned in portions of the Marshall Plan at the end of World War II.
In the 1950s, Akhtar Hameed Khan began distributing group-oriented credit in East Pakistan. Khan used the Comilla Model, in which credit is distributed through community-based initiatives. The project failed due to the over-involvement of the Pakistani government, and the hierarchies created within communities as certain members began to exert more control over loans than others.


3.3 Modern Microcredit
The origins of microcredit in its current practical incarnation can be linked to several organizations founded in Bangladesh, especially the Grameen Bank.The Grameen Bank, which is generally considered the first modern microcredit institution, was founded in 1976 by Muhammad Yunus. Yunus began the project in a small town called Jobra, using his own money to deliver small loans at low-interest rates to the rural poor. Grameen Bank was followed by organizations such as BRAC in 1972 and ASA in 1978. Microcredit reached Latin America with the establishment of PRODEM in Bolivia in 1986; a bank that later transformed into the for-profit BancoSol. Microcredit quickly became a popular tool for economic development, with hundreds of institutions emerging throughout the third world. Though the Grameen Bank was formed initially as a non-profit organization dependent upon government subsidies, it later became a corporate entity and was renamed Grameen II in 2002. Muhammad Yunus was awarded the Nobel Peace Prize in 2006 for his work providing microcredit services to the poor.


3.4 Economic Principles of Microcredit
Microcredit is based on a separate set of principles, which are distinguished from general financing or credit. Microcredit organizations were created to serve in the place of loca [loan-sharks] known to take advantage of clients. Many microcredit organizations began as non-profit organizations, running off of government or private subsidies. By the 1980s, the ‘financial systems approach,’ influenced by neoliberalism and propagated by the Harvard Institute for International Development became the dominant ideology among microcredit organizations. The commercialization of microcredit began with the formation of Unit Desa (BRI-UD) within the Bank Rakyat Indonesia in 1984, which offered ‘kupedes’ microloans based on market interest rates. Most microcredit organizations now function as independent banks, leading to high interest rates and a greater emphasis on savings programs. The application of neoliberal economics to microcredit has generated much debate among scholars and development practitioners, with some claiming that microcredit bank directors, such as Muhammad Yunus, are employing the practices of a loan shark for their own personal enrichment. Indeed, a Wall-street style scandal involving the Mexican microcredit organization Compartments illuminated the limitations of profit-driven microcredit institutions. Microcredit emphasizes trust building, which can enable micro-entrepreneurship, so generating employment and helping people to help themselves during enterprise initiation and during difficult times.

3.4.1 Group Lending
Though group-lending has long been a key part of microcredit, microcredit initially began with the principle of lending to individuals. Despite the use of solidarity circles in 1970s Jobra, Grameen Bankand other early microcredit institutions initially focused on individual lending. Indeed, Muhammad Yunus propagated to notion that every person has the potential to become an entrepreneur. The use of group-lending was motivated by economics of scale, as the costs associated with monitoring loans and enforcing repayment are significantly lower when credit is distributed to groups rather than individuals. Many times the loan of one participant in group-lending depends upon the successful repayment of another member, thus transferring repayment responsibility off of microcredit institutions to loan recipients.

3.4.2 Lending to Women
Lending to women has become an important principle in microcredit, with banks and NGO’s such as BancoSol, WWB, and Pro Mujer catering to women exclusively. Though Grameen Bankinitially tried to lend to both men and women at equal rates, women presently make up ninety-five percent of the bank’s clients. Women continue to make up seventy-five percent of all microcredit recipients worldwide. Exclusive lending to women began in the 1980s when Grameen Bank found that women have higher repayment rates, and tend to accept smaller loans than men. Subsequently, many microcredit institutions have used the goal of empowering women to justify their disproportionate loans to women. Microcredit is a tool for socioeconomic development.


3.5 Developed World and Microcredit
Microcredit is not only provided in poor countries, but also in one of the world's richest countries, the USA, where 37 million people (12.6%) live below the poverty line. Among other organizations that provide microloans in the United States, Grameen Bank started their operation in New York in April 2008. According to economist Jonathan Morduch of New York University, microloans have less appeal in the US, because people think it is too difficult to escape poverty through private enterprise. Bank of America has announced plans to award more than $3.7 million in grants to nonprofits to use in backing microloan programs.

Other developed countries in which the micro-loan model is in fact gaining impetus include Israel, Russia, the Ukraine and more, where micro-loans given to small business entrepreneurs are also used to overcome cultural barriers in the mainstream business society. The Israel Free Loan Association (IFLA) has lent out over $100 million in the past two decades to Israeli citizens of all backgrounds.

Even so, efforts to replicate Grameen-style solidarity lending in developed countries have generally not succeeded. For example, the Calmeadow Foundation tested an analogous peer-lending model in three locations in Canada, rural Nova Scotia and urban Toronto and Vancouver, during the 1990s. It concluded that a variety of factors—including difficulties in reaching the target market, the high risk profile of clients, their general distaste for the joint liability requirement, and high overhead costs—made solidarity lending unviable without subsidies. However, debates have continued about whether the required subsidies may be justified as an alternative to other subsidies targeted to the entrepreneurial poor, and VanCity Credit Union, which took over Calmeadow's Vancouver operations, continues to use peer lending.

Some organizations, however, have been able to find success bringing the microfinance model to the United States. ACCION USA, the US subsidiary of the better-known ACCION International, has been able to provide US$117 million in microloans since 1991, with an over 90% repayment rate.


3.6 Criticism of Microcredit
Gina Neff of the Left Business Observer has described the microcredit movement as a privatization of public safety-net programs. Enthusiasm for microcredit among government officials as an anti-poverty program can motivate cuts in public health, welfare, and education spending. Neff maintains that the success of the microcredit model has been judged disproportionately from a lender's perspective (repayment rates, financial viability) and not from that of the borrowers. For example, the Grameen Bank's high repayment rate does not reflect the number of women who are repeat borrowers that have become dependent on loans for household expenditures rather than capital investments. Studies of microcredit programs have found that women often act merely as collection agents for their husbands and sons, such that the men spend the money themselves while women are saddled with the credit risk.[1][36] As a result, borrowers are kept out of waged work and pushed into the informal economy.

Many studies in recent years have shown that risks like sickness, natural disaster and over indebtedness are a critical dimension of poverty and that very poor people rely heavily on informal savings to manage these risks (see, for example, The Microfinance Revolution: Sustainable Finance for the Poor by Marguerite Robinson). It might be expected that microfinance institutions would provide safe, flexible savings services to this population, but—with notable exceptions like Grameen II—they have been very slow to do so. Some experts argue that most microcredit institutions are overly dependent on external capital. A study of microcredit institutions in Bolivia in 2003, for example, found that they were very slow to deliver quality microsavings services because of easy access to cheaper forms of external capital. Global data tables from The Microbanking Bulletin show that savings represent a small source of funds for microcredit institutions in most developing nations.

Because field officers are in a position of power locally and are judged on repayment rates as the primary metric of their success, they sometimes use coercive and even violent tactics to collect installments on the microcredit loans. Some loan recipients sink into a cycle of debt, using a microcredit loan from one organization to meet interest obligations from another.[1] Also, counter to the original intention of the microcredit system to empower women, one of the effects of an infusion of cash into local economies has been to increase dowries, with women forced at times to take microcredit loans as the only means to pay these increased dowries for their daughters.

Former Finance and Planning Minister of Bangladesh M. Saifur Rahman charges that some microfinance institutions use excessive interest rates. In recent years, there has been increasing attention paid to the problem of interest rate disclosure, as many suppliers of microcredit quote their rates to clients using the flat calculation method, which significantly understates the true Annual Percentage Rate.

The BBC Business Weekly program reported that much of the supposed benefits associated with microfinance, are perhaps not as compelling as once thought. In a radio interview with Professor Dean Karlan of Yale University, a point was raised concerning a comparison between two groups: one African, financed through microcredit and one control group in the Philippines. The results of this study suggest that many of the benefits from microcredit are in fact loaned to people with existing business, and not to those seeking to establish new businesses. Many of those receiving microcredit also used the loans to supplement the family income. The income that went up in business was true only for men, and not for women. This is striking because one of the supposed major beneficiaries of microfinance is supposed to be targeted at women. Professor Karlan's conclusion was that whilst microcredit is not necessarily bad and can generate some positive benefits, despite some lenders charging interest rates between 40-60%, it isn't the panacea that is purported to be. He advocates rather than focusing strictly on microcredit, also giving citizens in poor countries access to rudimentary and cheap savings accounts.

Furthermore, there are widespread accumulations of studies that indicate that the Grameen Bank system does not reach very far down the poverty [spectrum], either in absolute terms or relative to other income categories. So according to Tazul Islam, it risks the exclusion of the below poverty line, since the clients of the bank incline to be clustered around the poverty line of predominantly moderately poor or vulnerable non-poor. Also, of the poor who join the bank’s microcredit program, a high percentage often dropout after only a few loan cycles, while many others eventually dropout in later loan cycles as loan amounts begin to exceed their repayment capacity. For women, their loans are seen as the source of capital acquisition and this may lead to manipulation of women by putting pressure on them to gain membership of a credit group. Also, there are criticisms over microfinance institutions (MFIs) in creating small-debt traps for the poor with high interest rates and coercive methods of recovery. In Andhra Pradesh, the villagers who take out the loan often do not know the interest that they were being charged and are not aware of the consequences of taking multiple loans as they take the second loan to clear the first loan. Also, some studies reveal that the repayment rate of Grameen’s loans does not match anywhere near what the bank claims, that at least one quarter of its loans were being used for household consumption and there is no serious supervision of bank, which leads to bank delaying defaults and hiding problem loans.

3.6.1 Negative Impact on Women
Studies note that there is increase in domestic violence for women who do not get the loan or have to wait a long time to get the loan and often times their loans are given over to their male relatives or husbands. Women are more likely to retain control over their loans in traditional women’s work like livestock rearing that are considered “women’s work”[43]. Moreover, the bigger the size of the loan, women lose their control more. For example, Montgomery’s studies show that women have 100% control over loans that are smaller than 1000 TK but only 46% of control if the loan is bigger than 4,000 TK. Women also face the situation that they have to depend on men when they cannot generate enough income, which can lead to gendered pattern of dependency and new source of tension within the household.

3.7 Method of Action of Grameen Bank
The Grameen Bank's Method of action can be illustrated by the following principles:
1. Start with the problem rather than the solution: a credit system must be based on a survey of the social background rather than on a pre-established banking technique.
2. Adopt a progressive attitude: development is a long-term process which depends on the aspirations and committment of the economic operators.
3. Make sure that the credit system serves the poor, and not vice-versa: credit officers visit the villages, enabling them to get to know the borrowers.
4. Establish priorities for action vis-a-vis to the the target population: serve the most poverty-stricken people needing investment resources, who have no access to credit.
5. At the begining, restrict credit to income-generating production operations, freely selected by the borrower. Make it possible for the borrower to be able to repay the loan.
6. Lean on solidarity groups: small informal groups consisting of co-opted members coming from the same background and trusting each other.
7. Associate savings with credit without it being necessarily a prerequisite.
8. Combine close monitoring of borrowers with procedures which are simple and standardised as possible.
9. Do everything possible to ensure the system's financial balance.
10. Invest in human resources: training leaders will provide them with real development ethics based on rigour, creativity, understanding and respect for the rural environment.



Chapter-4
SUSTAINABLE MICRO-CREDIT-PROGRAMS:
COMBINING THE “FINANCIAL SYSTEM APPROACH” AND THE “POVERTY REDUCTION APPROACH”

4.1 Introduction
4.2 Analysis of the Topic



4. SUSTAINABLE MICRO-CREDIT-PROGRAMS:
COMBINING THE “FINANCIAL SYSTEM APPROACH” AND THE “POVERTY REDUCTION APPROACH”


4.1 Introduction
The  above  sections  highlighted  the  current  discussion  o n  micro-credit  systems  in  development  economics.  The  “financial  system approach”  represented  mainly  by banks  and  international  NGOs  focuses on  the  win-win situation of demand and suppliers.  In order to achieve higher market shares also low-level loans have to be offered to poorer people. Nevertheless this assumes the availability of at least “bankable” clients.  Contrary  to  that,  the  local  NGOs  emphasize  the  importance  of  the  “poverty  reduction  approach”  focusing  on  the poorest  of  the  poor.  Since  these  groups  suffer  from  illiteracy  and  bad  living  conditions  suitable  accompanying  programs  have  to  be offered.



4.2 Analysis of the Topic
In the sense of sustainable development what’s often overseen is that the different stake-holders of a specific societal system have to be taken into consideration. Exclusively following the “financial system approach” means forgetting about the poorest of the poor. Concentrating on the “poverty reduction approach” might contribute to the improvement of the individual living circumstances but may fail to initiate sustainable changes on the meso and the macro level. Obviously there is a need to bring both concepts together and to establish a holistic model of the micro-finance system considering, in particular, the time-dimension of changes (see figure 1): Consequently the grant of a micro-credit is by far not sufficient to induce sustainable change or as Mayoux (2000:17) points out: “Changes in expectations of women’s economic contribution to the household may seriously overburden women with adverse implications for their health and their children. The combination of low incomes, lack of control, greater burden of work, and repayment pressure may do little to increase women’s bargaining power within the household.” (Mayoux 2000:17). For this reason, accompanying measures are necessary. These are the first steps of poverty reduction approaches (short-time, effects within families – power 1. dimension).

The result of the empowerment of the poorest of the poor could lead in the mid-term to an emancipation and result in a “bankable” group being capable of dealing with bigger and more complicated projects and therefore would be interesting in terms of the financial system approach. This again can lead in the long-term to changes in power structures by building critical masses on the community level (e.g. networks, activity groups and clubs) – or as Rankin describes it: “This kind of social network – solidarity grounded in women’s own analysis of dominant cultural and political ideologies – can provide the surest foundation for “development,” in collective strategies for challenging the social basis of inequality.” (Rankin 2002, 19). The according effects operate in the mid- and long-term in communities and neighborhoods (power – 2. dimension). These dynamics have to be pushed to the macro-level in the long-term by providing women with political power (power 3. dimension).

With respect to Bourdieu as highlighted in section 2 the dynamics of social change can be structured as follows: By granting micro-credits changes of diverse schemata are initiated: Through income women gain more economic capital and through educational programs they gain insights and knowledge to actively improve their living circumstances (changes in schemata of acting). As a consequence of this knowledge and due to elevated self-confidence they critically reflect on the societal norms and values and eventually start to change them, such as by refusing FGM for their daughters or deciding to send them to school (changes in schemata of thinking).

The implicitly given structures are made explicit and can, therefore, be discussed and negotiated (schemata of perceiving) – which conversely influences the schemata of acting and thinking.







Micro-level

economic
empowerment

individual
empowerment

time-line
short-term

scope of
acting
family Micro-credits embedded in other developing measures

 financial income
 contribution to family’ s income

Gain of power – 1. dimension
within family/household

 scope of acting and of decision making increase
 increase in self-confidence
Emergence of networks through a »critical mass«

 clubs, networks, activity groups, etc.

Gain of power – 2. dimension
Within communities, neighborhoods

 societal emancipation
 economic independence
 legal rights

societal structures

Initiating change processes

Gender-specific social change

Gain of power – 3. dimension
community, state, society
Meso-level

social
empowerment

time-line
mid- to
long-term

scope of
acting
community
neighborhoods
Macro-level

political
empowerment

time-line
long-term

scope of
acting

community,
state,
society




Summarized it can be stated that just to offer women micro-credits is not enough as long as changes in the above mentioned schemata are not initiated. Through the combination of micro-credits and measures to fight poverty, cultural and social capital would be established. This would be a basis for building sustainable economic capital. Evidently the proposed model has the potential to lead to sustainable social change by combining the “poverty reduction approach” and the “financial system approach”. The model also would lead to the establishment of suitable institutions and specification of the division of labor as well as the way of co-operation; these topics, however, extend beyond the scope of this paper.

5. CASE STUDY

The selected cases of women living without men due to divorce (three), death (three) or imprisonment (three) are multiply excluded and exposed to extreme social pressure. The women were between 24 and 50 years old and did not correspond to the “financial system approach” since they have no capitals as described in chapter 2: Economically seen they do not have any income or wealth, due to the lack of education they do not possess cultural capital and since they are marginalized they have only little social capital such as sustainable social networks.

5.1 Case-1: Halima
Halima thinks that she is 41 years old (“My parents did not take care of getting a birth certificate for me”). She is a widow and was married at the age of approximately 12 years to a man of 37 years. Halima is illiterate as are the four daughters (who are circumcised). Only her son went to school – at least until her husband died. Halima lives with her parents-in-law. Her son and his wife also stay in the house of Halima but have their own room. Halima took a micro-credit to buy a goat. She sells the goat milk and also uses it for her own family. She is a member of a money saving club consisting of six women who all pay a small amount of money and via a rotation system every single woman gets the deposits.






The case of Halima shows male power in the form of norms and rituals not even being questioned by the women themselves. Early marriage, FGM as well as discrimination against girls in educational issues are reproduced. The lack of formal identity proofs (birth certificate, identity cards etc.) plays a crucial role at the symbolic level (they do not “exist”) as well as at the legal level.

5.2 Case-2: Nasima

Nasima is 55 years old, a widow and mother of two daughters and two sons. She does not remember when she was married. One daughter is divorced and is the mother of a three year old son. The daughter and the grandchild live with Nasima. The micro-credit of Nasima gave her a financial back-up so that she could support her daughter during the divorce from a violent husband. She started a small chicken farm and now both women run the business. Although Nasima’s daughter is marginalized due to her divorce, the family is at least economically secure.




The case of Nasima shows again male power expressed by the fact that a divorce is still a shame for a woman even if the husband was violent. Due to economic dependence Nasima’s daughter could not have left her husband, - only the micro-credit of her mother allowed her to start a new life. The economic capital lead to a change in the often internalized value systems: Despite the given ostracism of divorced women the mother encouraged her daughter to resist this norm.





5.3 Case-3: Fatima

Fatima is a 28 years old Christian, she has three daughters (all circumcised), her husband is in prison. Fatima married against her family’s will, therefore she does not get any support. Fatima has a diploma; nevertheless she is exposed to extreme social pressure due to her husband’s imprisonment. She took a micro-credit and started a small sewing business. The money allows her to make midland long-term plans such as opening a sewing centre. In order not to experience even more social ostracism she decided to circumcise her daughters but in the Sunna-version.




The case of Fatima shows that in changing phases there is a severe tightrope walk: On one side Fatima has broken with traditional expectations such as the parental marriage arrangements and she even has a higher education, on the other side she tries not to provoke even more societal exclusion by accepting traditional rituals such as FGM for her daughters. She is saving money for her daughters’ education and can even imagine cooperating with other women – even if she knows that this might be difficult given her private situation.

5.4 Case-4: Mina

Mina is 52 years old, a widow and mother of two daughters and two sons. She does not remember when she was married. One daughter is divorced and is the mother of a three year old son. The daughter and the grandchild live with Mina. The micro-credit of Mina gave her a financial back-up so that she could support her daughter during the divorce from a violent husband. She started a small chicken farm and now both women run the business. Although Mina’s daughter is marginalized due to her divorce, the family is at least economically secure.



The case of Mina shows again male power expressed by the fact that a divorce is still a shame for a woman even if the husband was violent. Due to economic dependence Mina’s daughter could not have left her husband, - only the micro-credit of her mother allowed her to start a new life. The economic capital lead to a change in the often internalized value systems: Despite the given ostracism of divorced women the mother encouraged her daughter to resist this norm.


5.5 Case-5: Saima

Saima thinks that she is 41 years old (“My parents did not take care of getting a birth certificate for me”). She is a widow and was married at the age of approximately 12 years to a man of 37 years. Saima is illiterate as are the four daughters (who are circumcised). Only her son went to school – at least until her husband died. Saima lives with her parents-in-law. Her son and his wife also stay in the house of Saima but have their own room. Saima took a micro-credit to buy a goat. She sells the goat milk and also uses it for her own family. She is a member of a money saving club consisting of six women who all pay a small amount of money and via a rotation system every single woman gets the deposits.





The case of Saima shows male power in the form of norms and rituals not even being questioned by the women themselves. Early marriage, FGM as well as discrimination against girls in educational issues are reproduced. The lack of formal identity proofs (birth certificate, identity cards etc.) plays a crucial role at the symbolic level as well as at the legal level.

All of these presented cases show that the beneficiaries strongly ask for a “poverty reduction approach”. Since most women suffer from their structural living conditions, economic capital is a first step to improve their individual situations, but clearly they also require accompanying measures such as alphabetization, courses in nutrition, health, human rights and the like.



Chapter-5
CASE STUDY

5.1 Case-1
5.2 Case-2
5.3 Case-3
5.4 Case-4
5.4 Case-5

Chapter-6
Findings of the study

6.1 Limitations of income generating program in Bangladesh

6.1.1 Poverty Alleviation, Metrics, and Relationships Between Mfis And Borrowers

6.1.2 Income generating program and Gender Relations

6.2 Limitations of Grameen Bank:


6. Findings of the study


6.1 Limitations of income generating program in Bangladesh
Since its emergence in the 1970s, Income generating program has grown in popularity as a tool for development. Today, Income generating program organizations have assets well in excess of $22 billion USD and serve more than 113 million clients. Income generating program has enormous potential as a tool for poverty alleviation. Yet as this strategy moves into the development mainstream there is an urgent need to reflect on its role in market-led development initiatives and its limitations, as well as its historic successes. There is significant risk in Income generating program’s often uncritical adoption. This risk is compounded by the systematic failure of many microfinance institutions (MFIs) to engage the communities where they work in the process of designing and evaluating Income generating program programs. As with many development programs, the voices of communities and individuals who are the supposed beneficiaries of micro lending are conspicuously absent from the projects that seek to determine their futures. As debates over the pros and cons of Income generating program rage and donor support encourages rapid adoption, it is crucial to evaluate the impact of Income generating program from the perspective of those who have the most to gain and lose — the recipients.

This Backgrounder outlines the results of a study on the impact of Income generating program on recipient livelihoods in rural Bangladesh. It is a story that highlights the dangers of viewing Income generating program as a “silver-bullet” for development and the limits of employing purely market-led development approaches as strategies for poverty alleviation. Income generating program claims to improve the lives of recipients by providing them with small loans to purchase productive assets for entrepreneurial activity. Advocates  of microcredit argue that this helps  recipients break cycles of poverty,  reduce dependency on “charity” and  other forms of aid, and empowers  women as economic decision makers  within the homes by targeting women  as loan recipients. While microcredit has helped accomplish these goals in particular situations and contexts, it  also relies on economic integration as  the primary mechanism for development and assumes that all poverty is a  function of the inability to enter into  market relations.

While lack of credit is a critical issue in impoverished rural regions throughout the world, it is only one structural aspect of poverty. Food insecurity, lack of access to health and education, and gender inequality (not just in economic but also in social and cultural contexts) are realities for those living in rural poverty that microcredit may not be suited, in-and-of-itself, to address. Indeed, donor and practitioner enthusiasm for such market-based development strategies, at the expense of addressing these other critical issues, threatens to make conditions of poverty worse.

In Bangladesh, the “birth-place” of microcredit, microcredit is seen as a key strategy in overcoming many of the hurdles of rural life, including low per-capita land holdings, underemployment, poverty, and gross wage disparity. As microcredit has grown in popularity with funders, it has become relatively easier to fund microcredit projects in Bangladesh than other kinds of programming. Not only are many new NGOs forming specifically to deliver microcredit, but other organizations are increasingly   shifting their   funding away from social safety net programs and towards microfinance. This has led to a marked reduction in the diversity of services available in rural areas.

What follows is an exploration of what happens to recipients in an oversaturated microcredit market; a market in which microcredit has become the, as opposed to a, mechanism for poverty alleviation. In rural Bangladesh, microcredit is not achieving its core goals of poverty alleviation, financial independence, and gender equality. While this is very much a story about Bangladesh, we   stress that with  the   increasing global popularity of microcredit, it is also a cautionary tale for donors and practitioners alike. This research was conducted cooperatively with a group of landless laborers living in Arampur, a village in Northern Bangladesh.  Using digital voice recorders, they conducted unstructured interviews with their peers and neighbors, gathering life histories and experiences with microcredit. What follows is based directly on villagers’ words, concerns, experiences, and ideas.


6.1.1 Poverty Alleviation, Metrics, and Relationships Between Mfis And Borrowers
Proponents of microcredit frequently argue that high repayment rates — many report rates as high as 98% — indicate the success of microcredit on  the ground. Grameen Bank founder Muhammad Yunus, for example, has strongly argued that such high repayment rates indicate that recipients are both using their loans productively  and learning financial discipline by  adhering to repayment schedules to remain eligible for additional loans. This argument has been largely accepted within the microcredit community and repayment rates are the standard metrics for success used by practitioners and donors alike.

My experience in Arumpur leads us to   question   the   use   of   repayment rates as a proxy for measuring poverty alleviation. The vulnerable positions   of   people   living   in   poverty often make it easier to coerce, pressure, and extort them into repaying, often at the expense of their livelihoods. Where repayment rates are the primary metric by which MFIs are judged, they become a way to track job-performance of their field officers. As residents of Arampur reported in   countless   stories,   this leads to an inherently exploitative relationship. Residents reported that it was not uncommon for field officers — who are in charge of granting and collecting weekly payments or “installments” — to resort to violence in collecting on loans. Physical and sexual abuses were common. Unauthorized repossession of assets, including the very roofs off of recipients’ houses, was not infrequent.

Borrowers have little recourse in such events. They are forced to choose between protecting themselves, their homes, and their families and purchasing basic needs. As one recipient put it, “They use many kinds of force to get their money back… torturing people or dragging people… it is a serious injustice. Say I tell the field officer ‘I can’t give you the installment today, my child is sick.’ And then I bring the doctor to my house and he is sitting and giving my child medicine. Then the field officer comes and says ‘why can you buy medicine for your child, but you can’t give me the installment?’ What kind of a way is this to treat anyone?” Microcredit loan payments thus become a high priority among other household expenditures, including food and medicine. Rather than empowering individuals and communities, repayment creates an environment of fear and intimidation where recipients must regularly sacrifice basic needs to meet an inflexible repayment schedule.


6.1.2 Income generating program and Gender Relations
A central claim and goal of many MFIs is to empower women and promote gender equality by elevating women’s status in household decision making. However, while women were certainly the primary targets of MFI programs, women were more often conduits to, rather than end users of, credit. As one respondent told us, “Women take Income generating program as their husbands order them to do so. When their husbands fail to pay the installment, then NGO workers abuse the women a lot. Women have to bear the pressure coming from both sides.” In Arampur,   it   is   often   the   case   t h at women bear the risk of loans, but do not directly benefit from its rewards.

One of the early goals of Income generating program programs in Bangladesh was to free women and families from the burden of a dowry. Yet respondents in Arumpur report that Income generating program   is   actually strengthening the dowry system by precipitously inflating dowry prices. Numerous respondents used their loans to pay for their daughter’s dowries, often requiring multiple loans to cover the costs. One woman who earns 100tk (approximately $1.50) per day took a loan for 25,000tk (over $360) to pay for her daughter’s marriage. Another woman who took a loan to pay for her daughter’s dowry was forced to give up her home when she had no way to repay the loan after the loan money had been given for dowry.


6.2 Limitations of Grameen Bank:
Income generating program programs do nothing to change the structural conditions that create poverty. But Income generating program has been a success for the many banks that have adopted it. Of course, lending to the poor has long been a lucrative enterprise. Pawnshops, finance companies, payday loan operations, and loan sharks charge high interest rates precisely because poor people are often desperate for cash and lack access to formal credit networks. According to Sheryl Nance-Nash, a correspondent for Women's eNews, "the interest rates on microfinance vary between 25% to 50%." She notes that these rates "are much lower than informal money lenders, where rates may exceed 10% per month." It is important for the poor to have access to credit on relatively reasonable terms. Still, Income generating program lenders are reaping the rewards of extraordinarily high repayment rates on loans that are still at somewhat above-market interest rates.

Anecdotal accounts can easily overstate the concrete gains to borrowers from Income generating program. For example, widely cited research by the Canadian International Development Agency (CIDA) reports that "Women in particular face significant barriers to achieving sustained increases in income and improving their status, and require complementary support in other areas, such as training, marketing, literacy, social mobilization, and other financial services(consumption loans, savings)." The report goes on to conclude that most borrowers realize only very small gains, and that the poorest borrowers benefit the least. CIDA also found little relationship between loan repayment and business success.

However large or small their income gains, poor women are widely believed to find empowerment in access to Income generating program loans. According to the World Bank, for instance, Income generating program empowers women by giving them more control over household assets and resources, more autonomy and decision-making power, and greater access to participation in public life. This defense of Income generating program stands or falls with individual success stories featuring women using their loans to start some sort of small-scale enterprise, perhaps renting a stall in the local market or buying a sewing machine to assemble piece goods. There is no doubt that when they succeed, women and their families are better off than they were before they became micro-debtors.

But the evidence on Income generating program and women's empowerment is ambiguous. Access to credit is not the sole determinant of women's power and autonomy. Credit may, for example, increase women's dual burden of market and household labor. It may also increase conflict within the household if men, rather than women, control how loan moneys are used. Moreover, the group pressure over repayment in Grameen's loan circles can just as easily create conflict among women as build solidarity.

Grameen Bank founder Muhammad Yunus won the Nobel Peace Prize because his approach to banking reinforces the neoliberal view that individual behavior is the source of poverty and the neoliberal agenda of restricting state aid to the most vulnerable when and where the need for government assistance is most acute. Progressives working in poor communities around the world disagree. They argue that poverty is structural, so the solutions to poverty must focus not on adjusting the conditions of individuals but on building structures of inclusion. Expanding the state sector to provide the rudiments of a working social infrastructure is, therefore, a far more effective way to help women escape or avoid poverty. Do the activities of the Grameen Bank and other micro-lenders romanticize individual struggles to escape poverty? Yes. Do these programs help some women "pull themselves up by the bootstraps"? Yes. Will micro-enterprises in the informal sector contribute to ending world poverty? Not a chance.



Chapter-7

The way to overcome
7.1  Improve the financial market

7.2 Conclusion and Policy implications



7. Way to Overcome

7.1 Improve the financial market:
Fighting poverty is the overall goal of the MDG. Bangladesh has high percent of poor people in the world. In order to achieve the MDG poverty and development trends must take a new turn in almost Bangladesh. Microcredit is believed to be a way to overcome problems on financial markets in developing countries. Poor people would have better chances to improve their situation if they had access to credit. Development of financial markets is not one of the eight MDG, but if problems on the financial markets are overcome this could contribute to the accomplishment of all eight goals.

This study first looks at problems on financial markets. Financial markets in developing countries function inefficient mainly due to the high levels of asymmetric information and risk. Financial markets in developing countries are characterised by dual economies, segmented and fragmented markets and a lack of supporting institutions. Asymmetric information gives raise to problems with adverse selection and moral hazard and consequently problems with screening, monitoring and enforcement. Since poor people often lack formal forms of collateral, such as land or property, which normally is required by formal financial institutions, they become excluded from the formal financial credit markets.

Microcredit provides a possibility to take advantage of the different characteristics occurring on financial markets in developing countries. When the market is fragmented into different segments, there is often complete or nearly complete information in the different segments.
The construction of self-formed small groups within one segment gives members the possibility to obtain information that formal banks lack access to. Members of the group will be jointly responsible for each member’s loan; the group will act as social collateral. This reduces both the problem of screening and enforcement. Microcredit has the potential of being self generating. There have been indications that microcredits seldom reach the poorest segments in the society, partly this could be solved by putting an upper limit to wealth and income. It has showed that women are better at handling microcredits and invest the credit in a socially beneficial way.

The Grameen Bank has been able to construct a successful way of handling its loans and the system has served as a model in the microcredit sector. The Grameen system has a high 42 reliance on the social collateral and a strict system with weekly meeting. It has a large number of motivated staff responsible and in charge of the weekly meetings. Complementary factors contributing to the success is the high population density, the poor and relatively homogenous population and the institutional set-up that provides support to the Bank at an early stage. Another important factor that has to be taken into account is that the initiator of the Grameen  Bank is the Bangladeshi professor Mr Yunus and he has been a strong motivating power for the Grameen Bank.


7.2 Conclusion and Policy implications:

Development economics and development politics deal with questions of the support and development of the so-called “Third World”. Within these politics micro-credits are considered important tools in fighting poverty. Nevertheless, questions of sustainable social change and the empowerment of women are raised in particular in the light of decreasing budgets. The “financial system approach” seems to be rather promising with respect to strengthening economic power. There is no doubt that micro-credit systems are important, even if – as the interviews with financial experts showed – there is space for improvements. This approach focuses on bankable people. But from a development politics point of view one has to keep in mind that there are still “non-bankable” groups, in particular women, who are not in a position to apply for loans. In terms of economic capital, social capital, and cultural capital these women are without resources. To make them bankable, without putting them at risk of “loan bicycling” or other possible negative effects of micro credit systems, means to offer educational programs, awareness classes, knowledge on nutrition, hygiene and basics of financial management. Evidently those qualification programs are needed anyway, but as empirical studies have shown, women are often not allowed to participate in these programs or are not supported by family members. Micro-credits are an important incentive in this process: By binding the micro-credits to the educational program, family members can see the utility (higher family income) and are willing to allow or to support female beneficiaries to join various activities. Therefore combined programs (education and micro-credits) are tricky ways to initiate the empowerment of women and to make them “bankable”. As already mentioned from the perspective of the division of responsibilities, it seems to be an interesting course to leave these programs to NGOs and to encourage banks to focus on bankable people. Furthermore it might be innovative to establish new institutional forms of saving clubs in order to foster the social capital of women. Development politics could therefore critically reflect on their funding priorities without giving up the most important task: to increase the economic, social and cultural capitals of women at least to a minimal level and therefore to initiate sustainable social change in the long-term as sketched in Chapter-4.


Chapter-8

References
8.1 Published Sources

8.2 Electronic Sources



8. References


8.1 Published Sources

Bernasek, A., 2003, Banking on Social Change: Grameen Bank Lending to Women,
International Journal of Politics, Culture and Society, vol. 16, nr. 3.

Besley, T., 1994, How Do Market Failures Justify Interventions in Rural Credit markets?,
The World Bank Research Observer, vol. 9, no. 1 (Jan 1994) p. 27- 48.

Bornstein, D., 1997, The Price of a Dream-The Story of the Grameen Bank, University of
Chicago Press Edition, Chicago.

Calomiris C. and Himmelberg, C, 1994, Directed Credit Programmes for Agriculture and
industry, Proceedings of the World Bank Annual Conference on Development Economics
1993, Supplement to World Bank Economic Review and World Bank Research Observer.

Daley-Harris, S., 2002, Pathways out of Poverty-Innovations in Microfinance for the Poorest
Families, Kumarian Press Inc, Bloomsfield, Connecticut, USA
Chapter 3, 2002, Dunford.

Eggertsson, T., 1990, Economic behaviour and institutions, Cambridge, Cambridge
University Press.

Elahi, K. and Constantine, D, 2004, Microcredit and the Third World – perspective from
moral and political philosophy, International Journal of Social Economics, 31:7/8.

Fidler, P. and Paxton, J.A., 1997, An inventory of Microfinance Institutions in Western and
west Central Africa, Washington D.C, The World Bank .

Fisher, T. and Sriram, M.S., 2002, Beyond Micro-Credit-Putting Development Back into
Micro-Finance, Vistaar Publication, New Delhi.
Chapter 1, 2002, Harper, Microfinance and development
Chapter 5, 2002, Harper, Micro-finance and people's organizations
Chapter 6, 2002, Fisher, Micro-finance and system-wide change

Gallardo, 2001, A Framework for Regulating Microfinance Institutions: The experience in
Ghana and the Philippines, The World Bank, The Financial Sector Development Department,
Washington D.C.
Greenhill, R. (2002): The Unbreakable Link: Debt Relief and the Millennium Development
Goals, mimeo, London: New Economics Foundation/Jubilee Plus.

Gibbons and Meehan, 2002, Financing Microfinance for Poverty Reduction, Microcredit
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Handbook of Development Economics, Volume I, 1988, edited by Chenery, H. and
Srinivasan, T.N., Amsterdam.

Chapter 16, Credit Markets and Interlinked Transactions, Bell, C.
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Srinivasan, T.N., Amsterdam

Chapter 36, Savings, Credit and Insurance, Besley, T.
Hulme, D. and Mosley, P., 1996, Finance against Poverty, volume 1, Published by
Routledge, London.

Janson, T., R., Westley, G, 2004, Principles and Practices for Regulation and Supervising
Microfinance, Inter-American Development Bank, Washington D.C.

Khandker, S.R., 1999, Fighting Poverty with Microcredit; Experience in Bangladesh,
University Press Ltd, Bangladesh.

Mosley, P. and Rock, J., 2004, Microfinance, Labour Markets and Poverty in Africa: A Study
of Six Institutions, Journal of International Development 16. 467-500
Otero, M, 1999, Bringing Development Back, into Microfinance, Journal of Microfinance,
vol. 1, no. 1, fall 1999.
Prahalad, C.K., 2005, The Fortune at the Bottom of the Pyramid – Eradicating Poverty
through Profits, Wharton School Publishing, Upper Saddle River, United States.

Robinson, M., 2001, The Microfinance Revolution-Sustainable Finance for the Poor, by the
International Bank for Reconstruction and Development, The World Bank, Washington, D.C.
USA.

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Stiglitz, J and Weiss, A, 1981, Credit Rationing in Markets with Imperfect Information, The
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Stiglitz, J., 1990, Peer monitoring and Credit Markets, World Bank Economic Review, vol. 4,
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Utrikesdepartementet.

The Economist, 2001, vol. 358, Nr. 8204, p. 43-48.
Yaron, J., McDonald, B. and Charitonenko, S. 1998, Promoting Efficient Rural Financial
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Zeller, M. and Meyer, R., 2002, The Triangle of Microfinance-Financial Sustainability,
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UN, 2005, Human Development Report 2005, New York.

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8.2 Electronic Sources

UN:
http://www.microcreditsummit.org/pressinfo.htm (06-02-19)
http://hdr.undp.org/statistics/data/ (2006-03-15)
http://www.yearofmicrocredit.org/docs/countryprofiles/Bangladesh.doc (2006-03-16)
http://www.yearofmicrocredit.org/docs/countryprofiles/Ghana.doc (2006-03-16)
http://data.unaids.org/Publications/Fact-Sheets01/Bangladesh_EN.pdf (2006-03-25)

Official Homepage of Grameen Bank:
http://www.grameen-info.org/bank/WhatisMicrocredit.htm (06-02-20)
http://www.grameen-info.org/bank/GBGlance.htm (06-02-25)
http://www.grameen-info.org/bank/WhatisMicrocredit.htm (06-03-25)

BBC:
http://news.bbc.co.uk/2/hi/africa/country_profiles/1023355.stm (06/02/19)