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An Anthropological Critique of Microfinance in Bangladesh

An Anthropological Critique of Microfinance in Bangladesh

Microfinance and Its Discontents: Women in Debt in Bangladesh by Lamia Karim (Minnesota: University of Minnesota Press), 2011; pp 296, $25.

An Anthropological Critique of Microfinance in Bangladesh

K Kalpana

M
icrofinance programmes executed by large microfinance institutions (MFIs) in India, are in the eye of a storm on account of reported overlending by financial institutions,

book review

Microfinance and Its Discontents: Women in Debt in Bangladesh by Lamia Karim (Minnesota:

University of Minnesota Press), 2011; pp 296, $25.

spiral ling indebtedness of poor borrowers, coercive and abusive loan recovery tactics deployed by field staff of lending agencies and reported incidents of suicides by poor borrowers. These crises have engendered grave scepticism regarding microfinance’s claims of addressing poverty and social marginalisation of women.

Lamia Karim’s study of the Grameen Bank and the non-governmental organisations (NGOs) of Bangladesh such as Building Resources Across Communities (BRAC), Association for Social Action (ASA) and Proshika helps us make sense of the current microfinance crisis in India by weaving an interesting tapestry of the “discourses, policies and practices” of the predominant players in the microfinance landscape of Bangladesh. While these institutions target their products (whether microfinance services or consumables marketed through tie-ups with multinationals) at the rural poor and the new markets they represent, they are not, as Karim reminds us, institutions that are either created or controlled by the poor. In a development context in which 20 million rural Bangladeshi women are clients of over 23,000 registered NGOs and 95% of NGO borrowers are women, Karim seeks to understand how microfinance NGOs regulate the fiscal behaviour of the poor by directing client behaviour towards NGO-determined ends, foster the ideal of the citizen as consumer and entrepreneur and thereby function as instruments of a culturally-coded governmentality.

Rise of the Shadow State

Karim traces the emergence of the NGO as a shadow state in Bangladesh, in the

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context of the political history of the Bangladeshi state, the rightward turn to policies of privatisation and the growing hegemony of global capital following the 1971 War of Independence. As Karim shows, the promotion of the NGO sector by the two military dictatorships of Muhammad Zia-ul-Haq and Hussain Muhammad Ershad reflected realpolitik compulsions of securing the goodwill and financial support of powerful western donors and in the case of Ershad, of bypassing the two major political parties as well as of projecting the image of a benevolent dictator.

The position of NGOs was further consolidated after the 1987 floods, when the western donors insisted on releasing financial aid through them and when a conflict between leading NGOs and the state’s NGO Affairs Bureau in 1992 culminated in the taming of the latter and the whittling down of its role from watchdog to facilitator of non-government interventions. The layered picture that Karim paints of the ascendance of NGOs against the backdrop of both conflict and accommodation between the Bangladeshi state, the NGO sector and the clergy sets the stage for her ethnographic investigation of the leading microfinance NGOs in the country.

The rural component of Karim’s field study, conducted in two phases (the first in 1998-99 and the second in 2007), is focused on exploring the interfaces between NGOs and their female borrowers and the contours of the interdependent relationships that emerge between NGO lenders engaged in microfinance, traditional moneylenders, the new female moneylenders and women microfinance

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borrowers. Given that the commercial success of group-based microfinance hinges on making peer groups of borrowers jointly liable for loan recovery, Karim’s work is important as it adds to a growing body of literature that chronicles the micro-dynamics by which village-level borrower groups act to enforce repayment discipline and produce desired programme outcomes.

Karim’s finding that the peer pressure exerted by small borrower groups can have deleterious consequences for the dig

nity, well-being and livelihoods of the poor who become loan defaulters, is not new. Since the mid-1990s, a few critical studies have drawn attention to the punitive pressures inherent to the operational logic of joint-liability lending and to the overarching design of Grameen-modelled programmes that exacerbate such pressures. Karim’s work is nonetheless important for the systematic exploration of how NGOs manipulate rural codes of honour and shame, create an “economy of shame” to regulate fiscal behaviour of the poor and how the social disciplinary technologies by which poor women police each other come to pervade the practices of daily life, which she argues, constitute the sites of supervision and surveillance, even more than the loan centre meetings.

Economy of Shame

Karim finds that microfinance NGOs have successfully commandeered the traditional power of the community (through NGO conduct of the shalish, or the village adjudicating board of rural elites, to enforce their decisions) as well as the repressive powers of the State (by successfully mobilising the courts and the police) to enforce repayment obligations. The NGO’s recourse to law appears to be normalised as is evident from her finding that Proshika had filed charges against 74 loan borrowers in the sub district administrative unit in which her field study was conducted. In one village, Proshika’s attempted prosecution of 13 women resulted in their husbands sending them to their natal homes after the “shame” of the women’s appearance in court. The traditional practice of “house breaking” used by rural landlords

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against tenants have also been appropriated by group members and NGOs who dismantle houses and sell building material in order to recover loans. NGOs routinely invoke the discourse of filial obedience (“respect NGO as much as one’s parents”), remind borrowers that loan payments have to be made even in the case of a death in the family and before a dead person is buried and are known to take away the rice (cooking) pot and utensils, as part of a repertoire of shaming strategies, to underscore the “beggar” status of a potential defaulter.

In a context in which it was not uncommon for individuals to be simultaneous members of five-six microfinance NGOs, all of them were seen to descend on a family and make competitive claims to household assets, if it was known that a default or insolvency was likely. However, as the book suggests, “the economy of shame” is not static but reconfigured by ongoing NGO intervention which effects changes in who may shame whom and in what contexts. The archetypal “female entrepreneur” that Karim finds in the study region, the women moneylenders (NGO members themselves) who profitably invest their loans by lending at market interest rates to their kin, local traders and richer farmers and other microfinance borrowers are seen to use public shaming strategies on non-kin people to recover investment.

Karim’s observation that not all women are able to use loans profitably reinforces existing literature on the classdifferentiated outcomes of access to microfinance (and the use of loans for microenterprise purposes in particular) for poor communities. Karim’s case studies suggest that the women (like the successful female moneylenders) who put their loans to productive use are more likely to be household heads, already own and operate small businesses, enjoy a certain independence and manoeuvrability in their marital relationships and communities, and possess know-how and self-confidence. And, yet, despite their relatively privileged position in their communities, the much-celebrated entrepreneurial women such as the Grameen phone ladies and the breeder chicken-rearing women of BRAC – the willing “market subjects” that the large microfinance NGOs are eager to construct

– remain powerless to negotiate favourable terms with the NGOs on pricing of products and services, the retrieval of security deposits or access to realistic information from NGO officials about volatility in uncertain markets.

Political Economy of Knowledge Production

Karim’s book also critically examines the institutional context in which knowledge or “developmental truths” about microfinance are produced in Bangladesh and whether the dominant discourse, generated by NGO-sponsored research establishments, silences voices of critique and dissent.

Examining the research practices and documents of Grameen Poverty Research and BRAC’s Research and Evaluation Division (RED), Karim observes that research production is the outcome of interdependent ties between large NGO actors and local consultants, with lucrative contracts and projects securing valuable additional incomes for researchers, including university professors. The latter on one occasion were officially reprimanded by Dhaka University for negle cting university responsibilities in favour of NGO consultancies. Drawing on her interviews and interaction with urban researchers based in Dhaka, Karim makes an important observation that the identity of “scholar- consultants” or local scholars who routinely work as NGO consultants is pervasive enough to preclude any self-critical appraisal of how this may impinge on their position as knowledge producers.

Greater Engagement with Microfinance Literature

What is perhaps not as well-analysed in the book are the results of the survey of 158 women borrowers in a cluster of seven villages, carried out as a follow-up to the ethnographic study. For instance, Karim finds that among the overwhelming majority of women interviewed (95%), husbands and other male kin controlled the use of loans, although women remained responsible for loan repayment.

Karim’s reference to the use of women’s loans by men remains somewhat uninformed by the extensive literature on the contested index of “control” of loan use. The survey appears to have captured male expenditure of women’s loans without investigating whether women nevertheless contributed to making decisions and having a say in how loan finance was to be used or on the contrary whether such loan use remained completely outside women’s knowledge and consent. Arguably, exploring the intra-household dynamics that inform decision-making relating to loan use (akin to Karim’s detailed

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observation of some dimensions of MFI practice) is necessary before ruling out the possibility that women may exercise agency and have their preferences respected even when men appear to take charge of loan use.

Overall, the book makes a compelling case in defence of its key argument – that microfinance operations in the political, economic and cultural context of Bangladesh appear to reinforce the fundamentally unequal relations between powerful creditors and relatively disempowered debtors. What struck me in particular

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in the book’s rendition of how microfinance debt mediates rural social relations was the effective silence of the state apparatus in the face of NGO excesses and in the region of study, the local government’s co-option by the large NGOs in their efforts to enforce their writ, as evident from the union council chairman’s presence at NGO-organised shalish events.

Even as several state actors in India (ranging from the government of Andhra Pradesh to the Reserve Bank of India) are currently grappling with and attempting to respond in different ways to the

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-reported abuses of the poor by some sections of the commercial microfinance sector, Karim’s book serves as a stark and timely reminder of the value of ethnographic research in offering a deeper understanding of how developmental interventions in specific institutional and local contexts may reproduce or even exacerbate structural inequalities, and also in informing the strategies that seek to counter these inequalities.

K Kalpana (mythkalpa@gmail.com) is with the department of humanities and social sciences, IIT, Madras, Chennai.

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Economic & Political Weekly

EPW
August 27, 2011 vol xlvi no 35

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