 |
The seemingly benign attempt to foster entrepreneurship among impoverished women has attracted intense criticism, writes Patrick Bond
The central problem caused by the recent Nobel Peace Prize award, I sense, is the enormous expectation now placed upon civil society to make up for failing states in not only social service delivery, but also basic financial survival.
Consider the advice of one free-market ideologue, who would use poor people's desire for credit to justify shrinking already beleaguered welfare policies of Third World states: I believe that 'government', as we know it today, should pull out of most things except for law enforcement and justice, national defence and foreign policy, and let the private sector, a 'Grameenised private sector', a social-consciousness-driven private sector, take over their other functions.
Grameen is Bangladesh's barefoot bank specialising in group loans to low-income women. And the Vanderbilt University-trained economist who provided that brutal advice, Muhammad Yunus (in his autobiography Banker to the Poor), has just won the Nobel Prize.
Yunus has a grand self-image, telling a Dhaka press conference last week: Now the war against poverty will be further intensified across the world. It will consolidate the struggle against poverty through microcredit in most of the countries.
Yet this seemingly benign, three decade-old attempt to foster entrepreneurship among impoverished women has attracted intense grassroots - and also professional - criticism.
On the one hand, the Wall Street Journal profiled Yunus on its front page five years ago: To many, Grameen proves that capitalism can work for the poor as well as the rich, having helped inspire an estimated 7 000 so-called microlenders with 25 million poor clients worldwide.
On the other hand, looking more closely, the Journal's reporters - including the late Daniel Pearl - conceded the prevalence of Enron-style accounting. A fifth of the bank's loans in late 2001 were more than a year past-due: Grameen would be showing steep losses if the bank followed the accounting practices recommended by institutions that help finance microlenders through low-interest loans and private investments.
Reschedule A typical Grameen gimmick is to reschedule short-term loans that are unpaid after as long as two years, instead of writing them off, letting borrowers accumulate interest through new loans simply to keep alive the fiction of repayments on the old loans.
Not even extreme pressure techniques - such as removing tin roofs from delinquent women's houses, according to the Journal report - improved repayment rates in the most crucial areas, where Grameen had earlier won its global reputation among neoliberals who consider credit and entrepreneurship as central prerequisites for development.
By then, even seasoned microfinance industry professionals felt betrayed. Grameen Bank had been at best lax, and more likely at worst, deceptive in reporting its financial performance, wrote leading promoter J D Von Pischke of the World Bank in reaction to the Journal's revelations.
Agreed Ross Croulet of the African Development Bank: I myself have been suspicious for a long time about the true situation of Grameen so often disguised by Dr Yunus's global stellar status.
Several years earlier, Yunus was weaned off the bulk of his international donor support, reportedly $5 million (R37 million) a year, which had until then reduced the interest rate he needed to charge borrowers and still make a profit. Grameen had become sustainable, self-financing, with costs to be fully borne by borrowers.
He had also battled backward patriarchal and religious attitudes in Bangladesh, and his hard work extended credit to millions. The secret was that poor women were typically arranged in groups of five: two got the first tranche of credit, leaving the other three as chasers to pressure repayment, so that they could in turn get the next loans. Click here!
But at a time of new competitors, adverse weather conditions and a backlash by borrowers who used collective power of non-payment, Grameen imposed dramatic increases in the price of repaying loans. And it is here that Grameen Bank's main philosophical position - We consider credit as a human right - was reduced merely to an argument for access, not affordability.
In that regard, Yunus is entirely different from all the rights-based social movements - especially in Durban - which have demanded rights in terms of a decent environment and free lifeline access to healthcare, education, housing, land, water, electricity and the like.
Although criticism of Grameen is still a minority view, according to Munir Quddus, who chairs the Department of Economics and Finance at the University of Southern Indiana, the hype needs more investigation: The very nature of setting up groups leaves out the very poor who would be perceived by fellow members to have no ability to generate income and therefore high risk.
In 1995, the highly-regarded magazine New Internationalist probed Yunus about the 16 resolutions he required his borrowers to accept, including smaller families. When asked if this smacked of population control, Yunus replied: No, it is very easy to convince people to have fewer children. Now that the women are earners, having more children means losing money.
Commodity In the same spirit that everything is a commodity, Yunus set up a relationship with Monsanto to promote biotech and agrochemical products in 1998, which generated a storm of criticism and resulted in Yunus backing down.
As Sarah Blackstock reported in New Internationalist, Away from their homes, husbands and the NGOs that disburse credit to them, the women feel safe to say the unmentionable in Bangladesh - microcredit isn't all it's cracked up to be . . . What has really sold microcredit is Yunus's seductive oratorical skill.
But that skill, Blackstock explains, allows Yunus and leading imitators to ascribe poverty to a lack of inspiration and depoliticise it by refusing to look at its causes. Microcredit propagators are always the first to advocate that poor people need to be able to help themselves. The kind of microcredit they promote isn't really about gaining control, but ensuring the key beneficiaries of global capitalism aren't forced to take any responsibility for poverty.
Though I have never been to Bangladesh and have only discussed these problems with Yunus once, more than a decade ago when he visited Johannesburg, microfinance gimmickry certainly did damage in Southern Africa.
For example, in 1998, when the emerging markets crisis raised interest rates across the Third World, a 7% increase imposed over two weeks as the local currency crash drove many South African borrowers and their microlenders into bankruptcy.
So why then did Norway's Nobel committee give Yunus the award? Colleagues in Oslo point out to me that that he was strongly supported by friends in the Norwegian elite, including a former top finance ministry bureaucrat and leading officials of the national phone company, Telenor, which owns 62% of lucrative GrameenPhone, a company in control of 60% of Bangladesh's cellphone market.
Persistent poverty, shrinking states, accounting gimmicks and friends in high places appear as crucial ingredients in Yunus's successful formula - and all are threats to serious civil society activists.
Patrick Bond is Director of the Centre for Civil Society and author of Looting Africa: The Economics of Exploitation, published recently by UKZN Press.
|