April Marie Canillo

Analyzing NGOs role in Women and Microfinance: A successful strategy historically designed to sustain a dependency between the rural poor and foreign donors

Microfinance has become the most common approach to alleviating poverty in developing countries (Md Aslam and Chandran, 2016). The presence of microfinance in Bangladesh is the strongest in the world – dating back to 1978 and covering more than half of the rural population while increasing its proportion in the urban population (Raihan et al. 2017). Despite the promotion of microfinance institutions (MFIs) by International Development agencies such as the World Bank and the United Nations (Md Aslam and Chandran, 2016), and the Grameen Bank of Bangladesh claiming a 98% rate of loan recovery from their female borrowers, the country still remains ranked 140th among all countries on the Human Development Report – representing a knowledge gap between what the public knows about these institutions from their published research and their actual practices (Karim, 2011). Originally a non-profit driven initiative, MFIs grew into a major global network business offering financial services such as credit, savings, and micro-insurance (Md Aslam and Chandran, 2016). These social businesses aim to combine profits with social grants, presenting microfinance initiatives as “win-win” situations explaining that the poor are poor because of the lack of access to resources, and assumes the eventual adoption of the richer clients’ consumption norms (Raihan et al. 2017) (Karim, 2011). Due to the conflicting evidence between financial development and growth, current research has recognized that microfinance alone cannot eliminate poverty; this poses the question of whether microfinance is an effective agent of change, especially in the lives of poor rural women (Raihan et al. 2017). I argue that the corporate-like organizational structure and function of Non-Governmental Organizations (NGOs) in rural Bangladesh, and their collaborations with Western corporations, create a relationship of long-term dependency, promotes neoliberalism, and regulates the behaviour of the poor through its women (Raihan et al. 2017). 

This paper will begin by discussing the historical background of the role of NGOs and microfinance institutions in Bangladesh, then analyze the roles of current major institutions with active microfinance projects such as Grameen Bank and the Building Resources Across Communities (BRAC), and finally describes how MFIs and NGOs shape the behaviours of the poor through what Karim calls, “the economy of shame” (Karim, 2011). By critically analyzing the different lenses and interpretations of scholars in addressing the successes and failures of development interventions implemented by the discussed organizations, while keeping in mind the global environment during the time that enforced the framing of women’s issues as central to development, this article aims to illustrate NGOs and Western development organizations as a mutually-reinforcing relationship focused on a rationale that the poor are capable of raising themselves out of poverty without changing the existing power structures in rural society – hindering rural development (Raihan et al. 2017). 

In Bangladesh, the relationship between the State and NGOs have been shaped by three factors – the military state (1975-1990), early market deregulation beginning in the late 1970s, and democratization in the 1990s (Raihan et al. 2017). The transition to democracy resulted in the open politicization of NGOs in the 1990s, with many NGO leaders joining the anti-military rule movement (Raihan et al. 2017). Under military rule, Bangladesh entered a new regime of economic liberalization (Raihan et al. 2017). NGOs were unwilling to engage in open criticism of military led market reform policies because NGOs depended on the patronage of the military rulers, who allowed them easy access to funds from overseas and did not hinder their work in rural development – freeing the military to concentrate on the urban population to consolidate their power base, and freeing NGOs to follow their own strategies of rural development without being monitored by the state (Raihan et al, 2017). The growth of the NGO sector also helped the military to suppress left political parties in rural areas, with many of its leaders being former activists (Raihan et al, 2017).Through the NGO, the military state was able to depoliticize rural people away from left politics and induct them into a neoliberal logic of development that focused on entrepreneurship and self-help (Raihan et al, 2017). With the onset of privatization in the 1990s, the Gareem Bank effectively became its own regulator due to government ownership only being worth 5% of its shares, and with 8 million borrowers, and the banks being located in almost every village, they could easily mobilize its subscribers to vote for its candidates in elections (Raihan et al. 2017). The war of independence, military rule, and the leadership of a small number of Christian missionaries in the 1970s , defined how the NGOs developed in the post-war years (Raihan et al. 2017). In the absence of public trust in their government officials, and lack of state provision of employment and resources for the rural population (Raihan et al. 2017), the NGOs became the “shadow state”; and with the partnership of Western sponsors have become the alternative provider of services to the poor and spokesperson for privatization, neoliberalism and development (Karim, 2011).  

There was a global trend toward NGOs as preferred institutions for aid disbursement, with Western development organizations disbursing a large percentage of overseas development funding through the NGOs in Bangladesh (Raihan et al. 2017), with the Grameen Bank and its NGOs accounting for 86% of the microfinance lending (Karim, 2011). The four major microfinance institutions in the world are the Grameen Bank, BRAC, the Proshika Human Development Center, and the Association for Social Advancement, all of whom have close ties with international aid organizations and multinational corporations that promote neoliberal notions of privatization and values the maximization of profit (Karim, 2011). The longstanding presence of NGOs in Bangladesh enabled them to become embedded in rural society, with heavy dependencies in the 1980s and 1990s between NGOs and Western state mandates, and NGOs the rural population (Raihan et al. 2017). By the 1990s, donor agencies moved into an agenda that focused on democracy and human rights training and funds became available for training poor rural women (Raihan et al. 2017). 

Women and men experience the state of poverty differently and often unequally and become impoverished through processes that sometimes diverge (Kabeer, 2015). The idea of a hierarchy of needs among the poor, is the sense that the basic survival needs of the present had to be satisfied before making plans for the future (Kabeer, 2015). According to Kabeer, historically women in Bangladesh were largely dependent on male earnings, phrasing women as “the poorest of the poor” – this rhetoric fueled the “feminization of poverty” and inevitably represented the presence of households headed by women as an indication of poverty (Kabeer, 2015). This is based on the notion that recognizes women as being less likely to have paid work or are paid less than men, and as a result, households that rely primarily on female rather than male earners are likely to be poorer on average (Kabeer, 2015). About 99.4% of the loans being borrowed were by those who were married between 15 to 55 years of age, 67.1% of these were given to borrowers between the ages 25 and 35 years old (White and Alam, 2013). Although Grameen Bank claimed that poor women were the bank’s “real owners”, 95% of borrowers owned shares – all of them being women who did not understand what it meant to be a shareholder, and was not aware of the meaning of owning shares, nor did they have knowledge that they were not allowed to sell their shares – a resource they were dependent on the bank to refund to them (Raihan et al. 2017). The idea of women borrowers as shareholders and entrepreneurs, garnered widespread support in the global media, however major outlets like the NY times that did much of the publicizing, failed to investigate the extent to which these women who were sold these shares would actually control those shares to determine their economic future (Raihan et al. 2017). 

Due to women’s status as bearers of family honor, rural life is guided by their proper conduct (Karim, 2011). The “economy of shame” occurs when a women is unable to pay her loans, and so NGOs use the group of women to shame the woman and her family to recover the outstanding balance – this practice of public shaming haunts the lives of rural men and women, a strategy used by NGOs to control behaviour (Karim, 2011). The irony of the feminization of microfinance are the female borrower’s choices as being restricted to her kinship obligations (Karim, 2011). If her male relative demands access and control of her loan, she is obliged to cooperate – therefore the idea that women are autonomous and rationale free-choice makers in the market, fails to realize the lived realities of these women, whose economic activities are restrained by social and kin obligations and reciprocities (Karim, 2011). 

Critics have questioned the business model in poverty alleviation, arguing that it continues to inform the contradictory “win-win” assumption of making a profit while helping the poor (Kamir, 2011). The microfinance revolution rather has led to the obscurity of unequal power relations, and depoliticizes the economic sphere when relying solely on market-based measures to alleviate poverty (Banjeree and Jackson, 2017). Qualitative indicators of poverty, such as vulnerability, deprivation, and helplessness that arises from income poverty and the inability of the poor to leverage resources required to fulfill their basic needs are not reflected in current researching assessing the effectiveness of poverty alleviation strategies (Banjeree and Jackson, 2017), rather the knowledge reproduced by MFIs, NGOs and Western neoliberal donors is the idea that the poor will eventually adopt the consumption norms of its richer clients – “empowering” the poor to pull themselves out of poverty (Karim, 2011). This is also known as the ‘poverty trap’, where vertical inequalities of income and wealth are overlapped by horizontal inequalities such as marginalised gender identities, exacerbating multiple forms of disadvantages that continue to be reproduced over time (Kabeer, 2015).

Microfinance is touted as one of the most effective, flexible and innovative tools in the fight against poverty (White and Alam, 2013). BRAC is one of the many large microfinance programs that targets women, offers loans without requiring collateral and uses group lending mechanisms to promote repayment(White and Alam, 2013). The Grameen Foundation has proclaimed to have “helped millions pull themselves out of poverty” through “local microfinance institutions and other poverty-focused organizations” (Banerjee and Jackson, 2017). Independent research findings however have shown that market-based approaches to poverty reduction in developing countries has led to increased levels of indebtedness among already impoverished communities and exacerbated economic, social and environmental vulnerabilities (Banerjee and Jackson, 2017). At the global level, there are about 1.5 billion people living in extreme poverty and microfinance operations in more than 60 countries, promising more than it has delivered and creating more problems than it has solved (Banerjee and Jackson, 2017). According to many scholars and policy makers, microfinance aims to encourage entrepreneurship, generate income, and empower poor rural women, as well as increase access to health and education (Banerjee and Jackson, 2017). However, statistics show that the inability to repay microfinance loans have been linked to “hundreds of suicides” among borrowers in India and organ trafficking in Bangladesh (Banerjee and Jackson, 2017).  Economic measures of poverty may reflect the structural aspects of poverty, but they do not capture the cultural, social and psychological dimensions of poverty, and impedes any kind of agency to the poor by ignoring their survival strategies, social relations and resistance efforts (Banerjee and Jackson, 2017). The approach to tackling poverty requires a holistic approach to development, whose criteria for success lay not on repayment loan rates, profit, or other economic success indicators but rather on sustainable growth across all sectors – gender, familial, societal, cultural, class, etc – and government involvement in social policies that are focused on the collective needs of its people.

REFERENCES

Banerjee, S.B., Jackson, L. (2016). Microfinance and the business of poverty reduction: Critical perspectives from rural Bangladesh. Human Relations, 70 (1): 63-91. doi: 10.1177/0018726716640865. 

Karim, L. (2018). Reversal of fortunes: Transformations in state-NGO relations in bangladesh.  Critical Sociology, 44(4-5), 579-594. doi:10.1177/0896920516669215

Karim, L. (2011). Microfinance and its Discontents: Women in Debt in Bangladesh.
Minnieapolis: University of Minnesota Press. 

Md Aslam, M., Chandran, V.G.R. (2016). Measuring Financial and Social Outreach
Productivity of Microfinance Institutions in Bangladesh. Social Indicators Research.
127 (2): 505-527. DOI: 10.1007/s11205-015-0979

Raihan, S., Osmani, S. R., & Khalily, M. A. B. (2017). The macro impact of microfinance in bangladesh: A CGE analysis. Economic Modelling, 62(Complete), 1-15.
doi:10.1016/j.econmod.2017.01.002

White, R., Alam, S.A. (2013). Asset Ownership and Microloan Repayment: Examining Data from Bangladesh. Development Policy Review. 31 (3): 343-368.
https://doi-org.myaccess.library.utoronto.ca/10.1111/dpr.12010