a bimonthly publication of
the forum of indian leftists

Volume 1: Number 1                    May 1, 1997

In this Issue...
Facilitating Genocide Niraj Pant
Gendered Boundaries Richa Nagar
Intervening Carefully Ashwini Tambe
Beauty Contest Debate K.Philip and P.Gopal
Debate: Politics of Resistance Shishir Jha
Foil Briefs

Disciplining the Mother: Micro Credit in Bangladesh

Jude Fernando

Women have emerged as an important constituency in the development discourse in the 1990's, to the extent that they have replaced the "poorest of the poor" as the primary target of development intervention. Of the many different kinds of projects undertaken to "empower women," micro-credit based income generation projects have become a well established orthodoxy in economic development. In this sphere, Non-Governmental Organizations (NGOs) are said to have a comparative advantage vis-a-vis the state because of their ability to reach the marginalized segments of the population, their flexibility, their minimal bureaucracy and their capacity to mobilize broad based participation and local resources. These claims have progressively elevated the status of NGOs as alternative institutions that enable the marginalized to improve their social, economic, and political status.

What follows is a preliminary set of questions and analyses aimed at engaging the above claim of NGO's. I spent two years in Sri Lanka and Bangladesh researching the specificity of NGO formations in these two countries. However, in this article I focus primarily on my experiences in 4 villages of Madhupur Thane in Tangail district of Bangladesh with micro credit programs run by three NGO's active in these villages: Association for Societal Advancement, Grameen Bank and Buro Tangail. As we engage with the claim of NGO's that they represent alternate institutions for social and economic change, a few questions emerge: First, how do we explain the emergence, at this conjuncture, of NGOs as dominant actors in development and micro-credit as the new panacea for empowerment of women? Second, what are the implications for women in micro-credit programs? And finally, to what extent do NGOs actually assist women to overcome institutional barriers for improvement of their social, economic and political status?

It is probably best to begin with a brief description of the suggested connection between empowerment of women and micro credit as presented by development orthodoxy. The notion of empowerment is an outcome of several important critiques of development, particularly, those raised by feminist groups.
The intervention of NGOs reproduces and sustains the very same institutions that they aspire to transform

The term "empowerment" in this discourse refers to the transformation of institutions that perpetuate and legitimize discrimination and inequality of individuals and groups. This process needs to begin with marginalized groups becoming aware of the systemic forces that perpetuate and legitimize their subordination. Such awareness, it is then posited, would be followed by reversals of values, attitudes, indeed, their entire world view. This necessitates simultaneous transformation of individuals and the society at large. However, such demands, it is argued, do not spontaneously emerge under the conditions of subjugation due to their lack of self-awareness and the absence of institutional mechanisms to articulate and express their concerns. Hence, as per this logic, the need is to be induced by external agencies, namely NGOs.

The argument goes on further to suggest that in situations of abject poverty the improvement of economic status is an essential prerequisite for achieving broad base institutional change. Thus, marginalized groups are unlikely to be motivated to break away from the existing institutional arrangements that meet their needs unless NGO interventions promise sustainable alternatives. Micro-credit, combined with educational programs, is seen as an effective means to empowerment, especially for women whose participation outside the domestic sphere is restricted. Credit is non-threatening to the institutional environment within which women live. Credit programs are gaining increasing legitimacy both as pragmatic and strategic means that allow simultaneous change in both individual and collective needs of women. Consequently, it is not only becoming difficult to find a NGO without a credit component but also donors who are willing to assist NGOs opposed to credit.

What is more, NGOs have been successful in enlisting the participation of millions of women in credit programs. Indeed the increasing participation of women along with the much publicized high rates of repayment of loans are often the basis of declaring the success of micro credit programs. However, final outcomes of credit programs such as rates of repayment of loans do not explain the process through which such out comes are achieved.

The first thing to note about credit NGOs in Madhupur is that all aspects of the credit programs were finalized prior to NGO workers entering the locality. NGOs officers recruited by the central office were assigned areas. They were given targets as to how many groups they were expected to form within a given period. They rented office space in the area that was generally owned by money lenders, traders, school teachers etc. The average rents that these NGOs paid were much higher than the what was paid by the government officers and the traders in the bazaar. The land owners thus considered renting to NGOs as a good guarantee of cash-income. Initial contacts with people were then made through influential persons in a given locality. Based on their recommendations, contacts with women were made and a meeting was organized in one of the households. During this meeting, the goals of NGOs were presented as "primarily for women" (Aas international donors makes funds available mostly for programs for women"). Further, it was made clear that the NGO did not intend to "violate religious and cultural traditions." NGO workers argued that this was a strategic way of initiating work in women's space that are normally restricted to outside interventions. For most men, NGO interventions did not bring conflict with their religious/patriarchal values as the meetings were held within the baris and success of income generation programs ensured that the women stay within the domestic space. This in turn, was seen as enhancing the family's social status and the prospects of their daughters being married to good husbands.

Ordinarily, at the first meeting, an influential and `respectable' woman would be elected as the group leader. She was responsible to the NGO for collecting savings and repayments. NGO officers mainly interacted through the group leaders who in some cases used their husbands as arbitrators of conflicts between the members. Group members were expected to maintain approximately three months of savings to become eligible for credit. As a policy NGOs relied on "peer group pressure" used as a substitute for collateral.

However, a closer analysis of criterion used by the group to select credit worthy borrowers indicates that peer group pressure had been effective because of its ability to create types of collateral similar to conventional ones. For example, to become eligible for credit, NGOs required group leaders to provide information on sources of family income, employment of the male members, possibilities of alternative borrowing sources, possession of physical collateral such as bicycle, radio, rickshaw, flash lights etc. And indeed these assets were sold in an event of default. Unmarried women were discouraged from becoming members, as they were unlikely to remain within the household after marriage. Recruitments to groups were based on existing individual and group loyalties. Some members were forced into groups by their creditors. In such situations, the loans were immediately transferred to the creditors while the borrowers held responsibility for repayment. This was common where the groups were constituted of members from interior parts of the village.

The NGOs themselves were concentrated in a small area where government had developed infrastructure and is generally an area that is economically more productive. Not a single NGO covers even 1% of the total population in a given locality. 85% of the members borrow from more than three NGOs. Within the same household participation in different NGO's is consciously divided among members.

During the period of their participation in credit programs, the entire consumption patterns and social, economic and political relations were disciplined to ensure required rates of repayments. From the perspective of NGOs, this was evidence of the efficiency of women in managing the domestic economy. One NGO leader noted, "who but our mothers can run the family. She is the one, not father or the children who forgo their meals in order to meet the needs of the family." However, there was much resentment among women to the consequences of participating in the NGO projects. Some pointed out that "after we joined NGOs our neighbors can tell us what to eat, drink and do. They will keep on bothering us and force us to do many difficult things to pay installments. They ask, `why did you eat chicken? Why did you send your son for a movie? Why are you arranging your daughters marriage? From where did you get money to pay for the dowry?" The antagonisms resulting from this process fed into the existing factional disputes. The intervention of NGOs reproduces and sustains the very same institutions that they aspire to transform.

Further, there was much uneasiness about the differences between the official and actual interest rates of NGOs. There are multiple explanations for this: First, the NGOs retained, at the very beginning of the credit arrangement, certain amount from the loans sufficient to cover the repayments during the gestation period of the project. 3-5% of the loan is also allocated for emergency requirements, group funds, and compulsory savings. However, the interest rates were calculated on the principal. Second, in many cases rates were not calculated on a declining balance, which meant that at the end of 52 weeks women ended up paying much higher interest rates than if calculated as in generally accepted terms. I have documented three cases where the people were forced to sell their houses after failing to repay. Third, a person was eligible for only for one loan per year. Majority members received constant amounts during last the four years prior to my study. The possibility of withdrawing one=s savings or leaving the group after completing repayment was restricted until the entire group had done the same. This did not happen often because approximately 60% of the people used additional loans to cover their outstanding debt. Fourth, in determining the amount of loans, economic feasibility of the projects and fluctuations in the market prices of cows, goats, chickens and institutions from which people could obtain them on easier terms were not taken into consideration. This led to a number of consequences. When the amount allocated was insufficient to start their income generation projects, women covered their deficit by borrowing from money lenders. Finally, a majority of the women had begun their income generating activities prior to obtaining loans from NGOs, with the assistance of money lenders who use NGO loans and the income generation project as substitutes for collateral. Here, people ended up paying interest to both NGOs and the money lender and often lost complete ownership of the project. As NGO loans do not meet all credit requirements of the families the loans (pass book) and the output from the income generation projects were often used as collateral for additional borrowing. Women did not necessarily consider this a bad arrangement, since the money lender did not require the entire amount obtained from the NGO to be transferred to him and his repayment methods were negotiable.

All this seems to fly in the face of that one statistic: high repayment rates. It is almost impossible to get accurate data on the income levels of families corresponding to NGO intervention. However, we must note here that through the 1990's the agricultural sector of the Bangladesh rural economy has continued to stagnate and availability of off-farm employment and rural wages have declined. In the face of such a situation, the credit programs and their operation take on a significance for the entire economy and not just women. NGOs are one among many institutions in a given locality. They are new institutions compared to those that have been in existence for a long period of time and are deeply implicated in the social relations people are embedded in.

As already discussed, the group leaders withheld portion of the loan to cover the repayments in emergency situations. When funds were exhausted, other borrowing, either from the NGO or from the money lenders took place. Some of the group leaders were them-selves money lenders. Often lending took place with the knowledge of the members of the group. Some loans were transferred to the traders as a form of investment in their business but there was no recorded evidence of payment of interest for such investments. What we therefore have is a situation where the loan enters into the larger economy both as collateral and as investment.

The implications of credit networks for money lenders and traders is apparent from their comments on micro-credit. The land lords argue that their earnings have declined mainly due to increasing prices of agricultural inputs which is itself seen as coming out of the removal of governments subsidies for agriculture. Traders also point out that their incomes have declined because of a decrease in the purchasing power of the people in the rural economy. From their perspective, the NGOs are helping people at least get some cash income into their hands and by extension into the economy.

This analysis suggests that a considerable portion of the loans obtained from the NGOs are transferred to money lenders and traders. In the present institutional context this appears to be the most efficient arrangement for both the women and money lenders. NGOs are unlikely to disturb them as the successes of their interventions are measured in terms of profits earned from lending. The funds acquired by the money lenders are not invested in increasing production and employment in given localities. They are mostly invested in real estate, trading, savings, and children education. In other words, there were no noticeable changes in forces of production and relations of production. However, these processes connect modes of accumulation at local, national and international levels through privatization of agricultural inputs, removal of government subsidies on basic necessities, funds transferred by NGOs from one area to another and payment of the salaries of NGO staff from the earnings from a given loan program. In addition, NGOs are becoming increasingly dependent on loans given by the international donor agencies. These loans are guaranteed by the government, in which case NGOs become the link between the village and the government and international donors. This is the reason for the increasing emphasis of international donors for collaboration between the government and the NGOs. The increasing interdependence between NGOs and the State has forced them to operate within similar cultural and political boundaries. Consequently, we see how the state continues to be implicated as the dominant institution in the development enterprise. Thus, the emergence of NGOs as dominant actors in the development scene points to a new articulation of relations between the state and the society. The ideological underpinnings of this new state formation show much evidence of a continuation of the neo-classical model of development in which the state as the dominant institutions continues to be implicated. NGO's and their micro-enterprises are an attempt to incorporate the complex interrelations of social, economic, political and cultural practices into a highly dynamic, aid dependent economy. This economy is potentially crisis ridden and hence unstable; NGOs help it acquire a sufficient semblance of order and stability so that it can function as coherently as possible. In this regard, as Escobar argues, micro-enterprises should not be seen, "as a matter of scientific knowledge, a body of theories and programs concerned with the achievement of true progress, but rather a series of technologies intended to manage and give shape to the reality of the third world."

I have argued that the successes of micro credit programs are the result of the reproduction of cultural, political and economic institutions that are considered to be responsible for the marginalization of women. In other words, the intervention of NGOs reproduces and sustains the very same institutions that they aspire to transform. These institutions continue to persist as a result of mutually sustaining networks of social practices and constraints where the NGOs have become dependent on them. The local institutions such as money-lenders and traders have become an indirect beneficiary of the credit programs as their services are important for efficient functioning of micro-enterprises. Perhaps this is why the women refer to NGOs as the "New Zamindars," the "New "East India Company" or as the "Foreign Money Lenders."

[Jude Fernando is a student of Economics and Anthropology at the University of Pennsylvania, Philadelphia]

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