One of civil society’s great hopes, that women’s access to microcredit would help eradicate poverty, has been dashed – both top-down with a fallen guru, and bottom-up with unaffordable interest rates in a context of patriarchy.
Last week, the Bangladeshi Supreme Court confirmed government firing of the founder of the Grameen Bank and the most important spokesman for microcredit, 2006 Nobel Peace Prize laureate Muhammad Yunus. The court called Yunus “a squatter or a trespasser or a usurper” and bluntly denied his appeal, on grounds that at 70, he was ten years over the limit for managing a Bangladeshi bank.
But after mass Indian suicides by small borrowers, Yunus was already on the defensive about the direction microcredit had taken. The industry’s drive for profit-seeking was, he admitted toNew Age newspaper last week, “a terrible wrong turn.”
In South Africa the same disillusionment is setting in: although ABSA claims to have ‘impacted’ 30 000 small-scale borrowers with no previous credit history, its current microfinance clientele is just 4000. The main problem, it appears, is that the average cost to ABSA of debt collection from defaulting clients is R6000, but according to Bongiwe Tindleni, the head of ABSA’s microfinance division, “The loans range from R1000 to R15,000.”
As a result, private sector profitability and the state regulatory infrastructure are not yet aligned to local needs, Tindleni says. “The environment in which we operate talks to the formalised financial services sector and does not necessarily work in the lower end of the spectrum. I don’t believe we have found the right model yet.”
One problem is ABSA’s high interest rate, at more than 30% per year, in the same range as Grameen. The local Womens Development Banking (WDB) chapter, founded by Zanele Mbeki, charges an effective annual interest rate of more than 50%, once fees are included.
According to the WDB, one of the bank’s success stories, a mother and spaza shop owner, received a R3000 loan at the beginning of the year, and pays back R932 monthly. As of March 31, she had repaid R2796.00 but still owes another R932 to clear the debt. A WDB official appeared to admit that she remains trapped below the poverty line: “She makes an income of R600.00 in some months. The income varies depending on her business profit for each month.”
It’s a common scenario, according to new book by University of Oregon anthropologist Lamia Karim, Microfinance and Its Discontents: Women in Debt in Bangladesh. Her work demonstrates “how NGOs use social codes of honour and shame to shape the conduct of women.”
Karim charges that “these unwritten policies subordinate poor women to multiple levels of debt that often lead to increased violence at the household and community levels, thereby weakening women’s ability to resist the onslaught of market forces.”
In a recent interview, she explained her passion for looking beyond the trendy: “I am a native of Bangladesh. I studied the microfinance practices of the Grameen Bank and three of the largest NGOs in the country.”
Karim points to three main findings: “First, women give the loans to their husbands. Women are the conduits for the circulation of capital in rural society. This has resulted in increased domination and violence for indivdual women both at the household and community levels.”
“Second, women operate as the custodians of honor and shame in rural society. By instrumentalizing these codes, NGO shame rural women to recover their defaulted sums of money.”
“Third, money is transferred from poor borrowers to the rural middle-class thru proxy membership, moneylending, and by NGO officers allowing richer clients who they consider to be more credit-worthy.”
Karim is fed up with the big money-lending NGOs: “Many of these organizations operate like loan sharks! The idea that the poor are bankable and they pay back their loans at 98% is like music to the ears of donors and large corporations. Grameen Bank exemplifies neoliberal ideas of development: individual entrepreneurship and competition.”
But, I asked, aren’t Grameen’s women borrowers said to be amongst the world’s most successful microentreneurs?
“No”, she replied. “Please remember that stories of success largely come from their sponsored research, and by individual researchers in Bangladesh who largely work as highly paid consultants for these NGOs. People don’t bite the hand that feeds them.”
My attempts to get deep-rooted details from WDB were also foiled, leading me to doubt that the successes are genuine. As Karim continued, “In the majority of cases, poor borrowers are paying interest rates or service charges for loans. These charges pay for overhead costs of running NGOs and paying the salaries of their workers. Who is going to complain?”
Here in South Africa, almost 40% of microloans are used by adults simply to buy food. As Karim confirms, “Once they have the money, people will use the loans for things they consider to be vital for their existence. I found that people used the loans primary in three categories: repayment of old loans; consumption; and then in their businesses that are run by husbands.”
So when some in civil society follow Yunus in arguing that “credit is a human right”, Karim replies, “Let’s replace the word credit with debt. Debt as a human right? How does that sound? Debt is a relationship of power and inequality between the loan institution and the borrower.”
All fads come to an end, and for those women at the losing end of power and inequality, the questioning of the microdebt craze is long overdue.
(Khadija Sharife is a visiting scholar at the University of KwaZulu-Natal Centre for Civil Society.)