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  • The dust has thinned but not settled Print

    Friday, January 28, 2011 

    M. Adil Khan

       The political cacophony created by the Danish journalist Heinemann's documentary, "Fanget i Mikrogjeld" or "Caught in Micro debt" featured in NRK TV in December 2010 is astounding.

       One of documentary's allegations that microcredit has made poor poorer (the exact opposite of its professed goals) has found cheer leaders in unlikely places. But this assertion is nothing but a case of gross misreporting. I know. I have been there.

       Controversy over micro-credit's impact on poverty is not new. Detractors dismiss the accounts of its successes as anecdotal. But the narratives of 'failures' are also no less sensational.

       Also the recent intellectual ramblings whether microcredit is a 'business proposition' or a 'development paradigm' are equally vacuous - ask Younus, the inventor of the concept, he will tell you; at the borrower level it is a business proposition whereas at the collective level microcredit is a development concept and the latter entails not just the objective of income enhancement but also the mission of empowerment especially of women, in more ways than one.

        There are not much doubts that Mr. Heinemann's narratives of Grameen's 'failures' are real and represent stray cases only; but these cases, though sad do not do justice to years and volumes of serious and rigorous research done on Grameen Bank and other microcredit operations that portray a very different picture. These studies reveal, with empirical evidence, overwhelming positive outcomes of the initiative. These studies also highlight few failures but compared to the successes, the failures are vastly modest. 

       However, it is also true that in microcredit industry there are some bad apples ­ in India and in some African countries for example, commercialization of microcredit by private corporations have deflected the original intent and thus the outcomes of these operations caused poor to suffer. Neither microcredit (as it was conceptualized originally) nor Younus can be blamed for these misdirected self-seeking distortions.
       My direct involvement with the microcredit took place first during 1997-1999 in Myanmar.
       As the UNDP Senior Advisor, I was assigned among other activities, the supervision of UNDP's pilot micro-credit programme in the country. We recruited three international NGOs including Grameen Bank to implement the programme. These three NGOs were given three different areas; Grameen was assigned Delta, one of the poorest areas of Myanmar.
       All the three NGOs but one did credible job ­ the one NGO that strayed tempered with the Grameen operational concept and thus suffered.

        The Grameen managers in Myanmar made themselves distinguishable by their unique management style. Firstly, unlike other two NGOs whose managers operated from Yangon (the then capital city), the Grameen managers went straight into the rural locations and based themselves in the programme area; they also learnt the Myanmar language within three months of their arrival and immersed themselves fully among the rural poor especially among the borrowers. It was also noticeable how within a very short period of time these borrowers, mostly women who never had access to resources got fully energized and started to transform their lives by their own accord with the help of microcredit.

        However, as is evident in almost all microcredit cases, the operation attracts tremendous amount of attention of all. Every Tom, Dick and Harry becomes an overnight expert on the subject and a lover of the poor and deluges the scene with free advices. Myanmar was no exception.

        Within six months of introduction of the programme in usual complains (not from the borrowers though) concerning loan amount ("too little"), weekly repayment ("too frequent"), interest rate ("too high") etc. started to emerge and these came to such a pitch that one day I was summoned by the concerned minister to explain. After explaining to the minister the rationale behind various operational modalities of microcredit I simply told him that as a Minister he ought to leave the operations to the experts and to track progress he should simply focus on one or two macro indicators - the repayment rate (which was 98%) and drop-out rate (which was zero percent) and then told him that if indeed the complains were right and borrowers were suffering why would they be repaying (almost 100%) and remain in the programme, in full. The Minister got the message and since that meeting we were never bothered by uncalled for and uninformed interventions.

        When I left Myanmar in 1999 I was amazed to see the transformation that had taken place in microcredit villages - diets of micro households had improved, more female children attending schools and most importantly, borrowing women looked vastly more self-confident than before.

        Currently, at the University of Queensland (Australia) I am also supervising a PhD student who is looking at the impacts of Grameen and BRAC initiatives in Bangladesh. Over a period of six months this student has interviewed over 600 borrowers, through structured questionnaire, in the South Western part of the country. Analysed data reveals following trends: 91% of the borrowers (100% women) fall under the following categories: 'absolute poor' (45.8%), 'moderate poor (18.5%), 'non-poor' (26.7% - these include those who are marginally above the national poverty line income) and what can be categorized in Bangladesh rural context as rich (9%); 95% of the borrowers reported to have benefited from the programme and are committed to continue and that among them 'non poor' and the 'rich' have benefited more than the 'absolute' and 'moderate' poor. About 6% of the borrowers failed completely and in some cases, have become worse off by participating in the programme. But these failures are not due to defects of microcredit but owing to unproductive use of loan money.

        Our research also indicates that while the progress with income improvements of the borrowers have ranged from marginal (mainly in case of 'absolute poor') to significant, developmental impacts or non-income benefits of microcredit have been outstanding and these include, among other things, improvement in self-esteem, access to the market and the economy and memberships of formal institutions like banks etc. For a rural Bangladeshi Muslim woman these accomplishments are phenomenal. Even my late mother, wife of my civil servant father, did not have her own bank account.

        Mr. Heinemann seemed to have missed these points. It appears that Mr. Heinemann confined his consultations with sceptics mainly. This is unfortunate. His failure to consult protagonists has no doubt dented the objectivity of his reporting. But then these days objectivity in international journalism is somewhat of an illusion.

        Microcredit's current challenges stem not from its conceptual demerits but from the way the society has evolved since its inception in late 1970s. Microcredit's success depends, among other things, on the economic, social and political environment within which it operates. Since its inception, the world has changed drastically (so has Bangladesh) and has become more complex. New challenges confront these operations.

        In this changing environment, the operating modalities of microcredit seemed to have remained vastly unaltered and its emerging challenges unattended. This is a problem. Also thanks to donor patronage and participation of profit-seeking private corporations, proliferation of microcredit operations with little or no commitment to rather, distortion of its original intents seem to have added to some of its current woes. Massive and rapid scaling-up of the initiative without adhering to its basic principles have compromised both the direction as well as the quality of management of these operations.

        All said and done and though flawed, Mr. Heinemann has done one good thing. His documentary has generated much needed debate on this important poverty alleviation tool. His documentary has also done another favour ­ among others it has drawn into the debate and thus exposed the disgruntled politicians, disinterested ideologues and an embedded media. These people remind me of what Tagore had once said of fly-by lovers of poor, "This world would have been a much happier place if it could save itself from the tyrannies of its disinterested well wishers".

        Nobel Laureate Prof. Muhammad Younus may be faulted on many things (not that I know of some) but one thing is certain, he is not a "disinterested well-wisher!"

        M. Adil Khan is a Professor at the School of Social Sciences, University of Queensland (Australia) and a retired senior UN official


  Banker to the Poor Banker to the Poor GF USA