Are They Just Ripping Off the Poor?

BY INCIDENTAL BLOGGER
Mar 07, 2011

Does microcredit really help the poor? And is Nobel Laureate Muhammad Yunus really the saviour he is made out to be? A Bangladeshi blogger has his doubts.

Without resorting to any research jargon let me start by saying that on a number of occasions I have had the opportunity to talk to ‘microcredit’ borrowers. Some of the stories they told were both enlightening and disturbing. Strangely, these stories reminded me of Shylock, the vicious money lender in Shakespeare’s Merchant of Venice.

No discussion on microcredit can proceed without reference to Dr Muhammad Yunus and his Grameen Bank. In my opinion, neither of them ever faced the necessary level of scrutiny as the nature of their activities would warrant. Rigorous scrutiny is essential given that Grameen Bank’s activities – which are largely corporate and commercial in nature – involve:

(a) operations in the poverty reduction sector which concerns crucial policy choices of public nature; and

Just because Dr Yunus happens to be our one and only Nobel Laureate, there seemed to exist an unwritten policy in the Bangladesh media to remain uncritical of Yunus and his organisation no matter what.

(b) transactions with borrowers who are mostly around and below the poverty line and whose bargaining powers are alarmingly inadequate compared to Grameen’s corporate strength. In the absence of an appropriate regulatory body or a strong consumer group balancing these uneven positions, the issue of appropriate scrutiny becomes even more pertinent.

Regrettably, just because Dr Yunus happens to be our one and only Nobel Laureate, there seemed to exist an unwritten policy in the Bangladesh media to remain uncritical of Yunus and his organisation no matter what. This is something that can only be compared to a Tagorian (Rabindrik) ‘pledge of perpetual forgiveness’ in a je tare dekhibare pay osheem khomay kind of way. Hopefully, that time has now passed.

472 Nobel Laureate Muhammad Yunus, founder of the microfinancing Grameen Bank. (Photo credit: vipez on Flickr)

In my opinion, with his newly gained social capital (thanks to the Nobel Committee in Sweden), Yunus’s capacity to harm the country and its poor has probably increased manifold. Nowadays, almost every week there are revealing items in the news on micro-credit which even the Yunus-friendly media cannot ignore any longer. These are the stories of suffering farmers, of the bankrupt, of the people who committed suicide because of Grameen Bank’s pressures.

A number of studies have been conducted to critically examine the impact of microcredit. The evidence is there for everyone to see. The problem is, in our desperate need for a ‘poster boy’, we have chosen to look away. Well-researched but largely overlooked criticisms exist, such as this one:

The public transcripts represent microcredit not only as an innovative approach that empowers the poor – and poor women in particular – but also as an alternative to neoliberal policy prescriptions. It is often thought of as a ‘local’, bottom-up approach that results in self-sufficiency, rather than dependency. Thus, microcredit has been, and continues to be, a panacea for poverty reduction.

However, against the public transcripts of its ‘virtuous’ outcomes are rich ‘hidden transcripts’ regarding the poverty impact of microcredit. These hidden transcripts comprise the less publicly known facts about the adverse poverty impacts that also result as a consequence of implementation of microcredit programmes.

The hidden transcripts substantially challenge the salience of microcredit as an effective approach to poverty reduction globally. For many of its targeted recipients, microcredit is, in practice, reinforcing poverty and survival insecurities rather than ameliorating these conditions or resulting in self-reliance through self-employment as the public transcripts maintain.

Heloise Weber, ‘Global Governance and Poverty Reduction: The Case of Micro Credit’ in Rorden Wilkinson, Steve Hughes (eds), Global Governance: Critical Perspectives (Routledge, London 2002), pp.133-51 at 135.

 

For some years now, microcredit has been slowly gaining ground in the development debates as a possible poverty reduction tool. And then came this whole ‘hoopla’ with the Nobel Prize. A new band of opportunists mushroomed in all corners of the civil society — desperate to get some piece of action, to cash in while there is still time — by teaming up with Yunus (or his affiliates) in various dubious social-business schemes.

Money can be made even from the destitute, using their entrepreneurship, exploiting their dreams – while at the same time making sure that their real condition never improves, at least not above the limit Grameen executives set for them.

I do understand the reason behind capitalist West’s huge enthusiasm about Yunus. The conventional banking system was a system which could only exploit the rich. Traditionally, banks were the institutions from which one could only ‘borrow umbrellas on sunny days on condition that they must be returned when it rains.’ So the conventional banks’ exploitative dragnet only caught the rich of the society, never the poor.

Yunus showed the capitalist banking system that money can be made even from the destitute, using their entrepreneurship, exploiting their dreams – while at the same time making sure that their real condition never improves, at least not above the limit Grameen executives set for them.

No wonder that the West became too anxious to award him the Nobel prize, perhaps to add an aura of nobility to this new brand of exploitation, deceptive but pretty effective. We know that Grameen’s interest rates are higher than all other commercial banks.

What a formula! Make billions (exploiting the poor) and at the same time have plenty of cheer leaders in the global civil society cheering you on as one of the good guys. Wow! Disturbingly diabolical but quite impressive nevertheless!

It is just my opinion, but sometimes I cannot help but think that “Microcredit” and “Social Business” are two of the greatest frauds of our time.

 

This post was originally published on e-Bangladesh in May 2008.

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