Grameen Bank's delivery mechanisms for women

M. A. Obaydullah

One of the main factors behind the low per capita income in Bangladesh is the high dependence ratio resulting from a very low participation of women in economic activities. According to the 1981 population census (Bangladesh Bureau of Statistics, 1984), the labour force participation rate is 27.1 per cent for the entire population and 40.5 per cent for the age group of 10 and above. The participation is abnormally low compared to other developing countries where about 37.5 per cent of their population takes part in economic activities.The low participation rate is mostly the result of the virtual non-involvement of women in the labour force. According to the said population census, about 74 per cent of the male population aged 10 and above participate in economic activities, a rate similar to other less developed countries which is estimated at 75.6 per cent for 1970. But the female participation rate is only 4.3 per cent in rural areas and 7.5 per cent in urban areas. Hence, Bangladesh could apparently increase its per capita income significantly even without an increase in labour productivity if some of the women, who number half the population, were brought under the umbrella of economic activities.The Grameen Bank was set up in Bangladesh in 1983 (as a result of an experiment by its founder Dr. Muhammad Yunus in 1976) to organise the rural people through a credit programme so that they could generate productive self-employment for themselves. That most women in the country are doubly exploited in the sense that they are exploited within the family and that they belong to families which are exploited, the Grameen Bank has taken the poor women as its special target group. The Bank recruits nearly half of its Bank workers from women for organising poor women separately from men. In Bangladesh, like many other developing countries, micro-credit is increasingly being considered a tool of poverty alleviation. The expansion of micro-credit programmes has come with an accent on achieving high repayment rates and promoting financial sustainability. But components such as social and political consciousness, literacy, and skill development are learnt to have been downplayed. And yet many minimalist micro-credit programmes have been successful in providing financial services for poor rural women on a large scale.Critics of the minimalist programmes have argued that because of the patriarchal structure of the rural Bangladesh, micro-credit programmes with minimal training or other supplementary services do not contribute to the empowerment of women, and may even worsen their situations. Advocating more holistic approaches they maintain that strategies such as non-formal education and social and political consciousness building are needed to confront patriarchal power structures.This article seeks to concentrate on the Grameen Bank using the context of Bangladesh because the Bank is considered the architect of micro-finance and its activities are limited to the territory of Bangladesh although replicated in many countries of the world. The article will try to present a critique of the micro-credit delivery mechanisms developed by the Bank, to see whether these act effectively or not and whether micro-credit programmes have any impact on the empowerment of poor rural women.Micro-credit delivery mechanisms: The Grameen Bank has become a major micro-finance institution which provides micro-credit mainly for poor rural women, and it is said that this has been possible because the Bank is armed with some remarkable delivery mechanisms. Where conventional credit institutions have largely failed in reaching the huge disadvantaged groups of Bangladesh, the Grameen Bank has evolved the mechanisms which are designed exclusively for them. The total number of its members is expected to reach four million by the end of 1999 (Yunus, 1994) with more than 95 per cent of them being women.According to Gibbons et al (1990), delivery by Grameen-style means taking credit to the very poor in their villages by means of the essential elements of the Grameen Bank's credit delivery system. I will skim across the main features of the Grameen version of delivery mechanisms (Shams, 1995) before skipping over to a critique. These are as follows: * Poor women need not come to the bank, instead the bank goes to the poor. A constant interaction between borrower and banker is behind the Grameen Bank's success.* Small amounts of loans are provided without any collateral, and special steps are taken through compulsory and voluntary savings to minimise the risks. * The Grameen Bank seeks to build up the social and political awareness of women, and encourage their involvement in planning and implementation of their housing, sanitation, safe drinking water, children's schooling, family planning, homestead gardening for improved nutrition, and cleaner environment.* The organisational and management system of the Grameen Bank has evolved through a structured learning process, that involves trials, errors and continuous adjustments. Instead of the organisational pyramid growing hierarchically, the decision making and operational authority have been decentralised.* General credit leads to increases in income and generates demand for other basic needs like housing, sanitation, and safe water. Other loans are for (1) housing, (2) sanitary latrines, (3) tube-wells for pure water, (4) seasonal cultivation, and (5) joint enterprises for the cultivation of high-yielding rice.However, many rationalists, such as Fernando (1997) and Mayoux (1998), say that there are many limitations and flaws in the Grameen Bank's delivery mechanisms, to the extent to which women benefit. These can be outlined as follows:* The Bank is women-biased because they are said to be more reliable and responsible than men. But the main reason is that they are more sensitive than men to peer group pressure and easier to control. In terms of poverty alleviation, this approach shows its limitations in an inability of the average woman to expand business because money borrowed by women is utilised for petty businesses like rice husking or poultry rearing, and for areas like selling vegetables or buying rickshaw, from where women are excluded.* That micro-credit is exclusively focused on the poorest of the poor in the community is not wholly true. It does not reach the hard-core poor who have nothing to fall back upon. Hasan (1999) observes that only those worthy of repayment' have access to it. Widows and unmarried are excluded unless someone acts as guarantor for them.* Women's responsibility for expenditure on household consumption and for unpaid domestic work limits the resource and time they can invest in economic activity.* One of the crucial issues for women empowerment is control and targeting of credit (Kelly, 1999). When women have control of loans and the loans are properly targeted, then domestic violence lessens; otherwise the situation worsens over repayments. But in many cases, significant numbers of women do not control loan use, and 75 per cent of loans are used by men. * A borrower is required to begin repayments only a week after obtaining the loan, even though it is doubtful that her investment begins to yield income by then; therefore, repayments sometimes have to come from sources other than income from investment, and when she cannot pay, she is in sour relationship with her husband.* Micro-credit sometimes increases domestic tension as men withdraw their own incomes once women begin to earn or struggle to retain control of their earnings. There are many instances that this kind of situation has led to domestic violence and even divorce.* Most members treat peer group pressure as more than a collateral', and dislike the way it is applied in loan repayment, and it sometimes creates tension between them.* The Bank's official interest rate is 20 per cent (Wahid, 1994). But the repayment method that requires a borrower to pay back her dues in 50 instalments (principal plus interest) once every week (week-in week-out for 50 weeks) and the deduction of 5 per cent of loan money for the Group Fund and 1 per cent for the Emergency Fund at the time of disbursement indicate that the actual interest rate would be much higher than the official rate.* Often, women claim that their main concern is to increase their own incomes and welfare of their own families rather than wider social and political activities because they are placed under enormous pressure to maintain existing modes of social relations on which depend not only the high repayment rates but also the survival of families.These limitations and flaws point to the widespread need for more explicit measures to address gender subordination both at the enterprise and household levels. They also indicate that women's own perceived needs must be addressed along with underlying gender needs.(To be continued)

ONE of the methods used to measure the success of the Grameen Bank's micro-credit programmes on village women is village-level wage impact analysis. Given that rural wage is an indicator of rural poverty, we can identify whether Grameen Bank programmes exert impact on women in terms of poverty alleviation and empowerment by looking at their effects on village level wage. Khandker et al (1995) observes that an immediate effect of enabling self-employment is to reduce the labour supply and thus raise the wage, given the local demand for labour. Wage remains at higher level if a programme induces large demand for food and other local produce. This, in turn, may spur an additional increase in labour demand, further raising the wage. But Mortoza (1998) contends that although micro-credit can increase incomes, it must be remembered that income distribution by household is not the same as wealth distribution by household. Therefore, raising incomes may not be able to solve the problem of the unequal distribution of wealth. Osmani (1989) argues that the Bank's micro-credit programmes may not contribute to the growth of a predominantly agricultural economy, because of its support to landless workers who try to make a living from the rural non-firm sector which can only exist with the support of agricultural growth. A study by Roy (1987) claims that with the help of loans from the Grameen Bank, most borrowers have been able to improve their living conditions within a short time and that with overwhelming majority of borrowers comprising women from the poorest households, there is evidence that the Bank is reaching the bottom poor. Another study (Bangladesh Bank, 1998) suggests a 58 per cent increase in the income of Grameen Bank borrowers within two years of availing credit. This amounts to an annual income gain of 6 per cent on top of per capita GDP growth. The study indicates an increase in both fixed assets and working capital employed by borrowers. There are simply no commonly accepted measurements of the Bank's success, nor is there any agreement on the most important and expected outcomes. Many rationalists acknowledge that individual incomes and situations have improved through the introduction of microfinance services but raise notes of caution about the long-term benefits of such interventions. Among such rationalists are Pitt et al (1998) who look at three elements of income, production and employment at the village level and suggest that microfinance has had positive impact upon rural economy but the lack of other interventions undermines any long-term sustainability of improved production and employment.Impact of microfinance on women: According to Wahid (1994), much of the impact assessment of micro-finance provided by the Grameen Bank for its women clients focuses on the high repayment rate (more than 98 per cent) and on the extent to which the Bank relies on subsidies for its operation. Hasan (1999) is bewildered to note that the high rate of recovery is being used by the Bank as a success indicator. He comments that when the output of a development intervention is measured through the financial balance sheet of a service providing organisation, it matters little what happens to the everyday life of clients or what they think or feel. Assessments which focus on the impact of micro-finance upon the lives of women vary. The claims over the impact on rural women fall into three categories. The first claim says that micro-credit has successfully targeted and improved the lives of poor women, and suggests that it as a tool of poverty alleviation (Hashemi et al, 1996). Given the precarious condition of rural women in Bangladesh, it has contributed a lot to their empowerment. With microfinance they are able to access financial services, make choices about their life and gain some control over resources and decision making.The second claim, made by a number of commentators including Ackerly (1995) in a critiquing way, suggests that empowerment is a difficult process and must be deliberately targeted instead of assuming it to be a natural by-product of micro-finance services. She has cautioned programme designers not to mistake the means (lending to women) for the ends (empowerment of women). An aspect of the second claim, extreme in nature, says that micro-credit programmes have worked further to incapacitate and subordinate women. One of the claimants is Fernando (1997) who asserts that by engaging in provision of micro-credit services, NGOs and other agencies are actually supporting the very practices and institutions they are trying to transform. Moreover, after privatisation of the supply of agricultural inputs and produce, local accumulation processes are gradually linked with those in national and international centres, resulting in the outflow of capital generated locally, and thus local practices of accumulation are incorporated into the global economy through increased borrowings from commercial banks at commercial interest rates with NGO performance being evaluated by criteria similar to those used for the performance of the private sector financial enterprises.The third claim is in between the two extreme viewpoints. There are some who try to assess the impact of microfinance for poor women in a non-partisan way. According to a study by Bennett et al (1993), there are two models of microfinance provision for women: minimalist (offering few services), and integrated (offering a number of services). Claimants of the group have discovered that both models having clear impacts in a given situation, the key to effectiveness in either model is the presence of social intermediation services for clients which means encouraging them to organise into self-help groups.


The writer is a teacher at Manarat Dhaka International College

Source: The Daily Independent, Dhaka, July 26, 2000

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