Increasing Micro-credit Efficacy in Poverty AlleviationDear Members, Bangladesh has achieved tremendous success in expanding micro credit operations in the last few decades. There thousands of Non Government Organisations (NGOs) working in the country for disbursing micro credit to the hardcore poor. Besides, the government also has micro-credit programmes. Many countries are known to follow the Bangladesh model of micro-credit in poverty alleviation. There was a time when the hardcore poor did hardly have any mean of improving their economic condition by taking financial assistance from monetary institutions like banks. The expansion of micro-credit operations has given a large portion of the population access to loans and thus provided them with an opportunity to change their lives. However, there are facts that indicate that the organisations providing micro-credit operations are not contributing to poverty alleviation to the extent that they were expected or they are capable of. One of the incidents that inspired me to examine our micro-credit operations in a little more detail is this year's 'Monga' - a famine like situation in some part of the northern Bangladesh. Surprisingly that area has one of the highest densities of NGOs. Moreover, it is the area where the NGOs have been working for the longest period of time. My past working experience an NGO also encouraged me to carryout the study. I used to work in a leading NGO in Bangladesh during 1996-98. Then the NGO was preparing its Five Year Plan for the period of 1997-2002. It fixed a goal of making half of the country poverty free by the mid of 2002. There were much bigger NGOs than the one I worked for. So, if everything went according to plan, the country should have been made poverty free by now. The other facts that created an urge to investigate micro-credit efficacy in poverty alleviation is the fact that the capital has become more crowded with flood of homeless people from the remote areas in the recent years. You will five more beggars in the street of Dhaka, more slums in every area of the capital and more recently migrated rickshaw-pullers in the last several years than any time before. If the micro-credit operations were as successful in poverty alleviation as it is expected, there would be a reverse flow of people from the capital to the villages. We have to keep in mind that the country has been enjoying huge inflow of remittance, bumper crop production and pretty good earning from the garments factories in the last two decades. These made me take an initiative of doing a small and informal study. I utilised the last Eid vacation and went to my village. I talked to the people who were taking loans from NGOs and tried to get a picture of NGO activities in the area. Following are my findings in this regard: 1. A number of very poor people have been able to change their fate by taking micro-credits from NGOs. Most of them invested the loan in buying rickshaw-van. The village is near a district town and many people earn their livings by pulling rickshaw-vans. Because of the availability of micro-credit, many rickshaw-van pullers have managed to have their own rickshaw-vans. 2. A number of families who had some agricultural land got the benefit of agricultural loans from NGOs. However they complained that they had to take at least double of the money they actually required as loan due to the fact that repayment starts from the next week of taking the loan. Some of them said that they spent part of loan money in their family expenditure. 3. I found several families who had to sell their agricultural lands for repaying their loans to NGOs. Some of them invested the loan money in a syndicate bank and lost it. Some other spent the money in things like giving dowry and bearing medical expenses etc. They adopted a peculiar idea for repaying the loan. Everyone became member of several groups belonging to several NGOs and taking loan from all of them and repaying the loan of one NGO from the loan of another. Thus they were trapped in a loan-net and finally had to sell their agricultural lands to get rid of it. 4. Two families were evicted from their houses because they failed to repay their loans. They had left the village. 5. None of the women I met took any loan in productive fields like poultry, fishery, nursery or beef fattening. 6. The women I met did not have any idea of taking technical support from the NGOs in implementing 'projects'. They did not view them any thing more than moneylenders. The study I undertook was not a structured one and may not be generalised due to inadequate sampling. However, I found it similar with my experience in working in a leading NGO of the county. Once I visited a well-established NGO in Charfashion, Bhola. I was interested to see the loan disbursement process. I met a village lady who took a loan of five thousand Taka. The register was showing that she took the loan in a 'Beef Fattening Project'. I asked her, "What will you do with this money". She replied, "I will spend it in my daughter's marriage". Most of the NGOs use a micro-credit plus system, which means that in addition to providing micro-credit they provide the technical assistance to implement the income generating projects. This means that if a poor woman receives a loan for poultry, she will also receive active technical assistance and supervision in establishing and maintaining the poultry firm. Many NGOs claim that they even provide assistance in marketing their group members' products. However, it seems that it largely remains in papers and seldom exercised. For most of the cases, NGOs focus only on disbursing loans and collecting repayments. The repayment pattern of most of the micro-credit organisations is not suitable for production-oriented projects. If someone wants to start a project of beef fattening and requires five thousand Taka for it, she must take a loan of at least ten thousand Taka because she has to start repayment of the loan only after one week of taking it. The interest rate is also very high. Although it is officially 15%, it goes to around 38% due to the nature of the repayment. For a loan of 5,000.00 Taka, you have to repay a total of 5,750.00 Taka in a number (usually around fifty) of equal instalments. You will have less than half of the money after six months of receiving the loan. Micro-credit is one of our major success areas. It has great contributions in increasing the buying capacity of the people, establishing a shining image of the country and creating employment opportunities. Time has come to consolidate its quantitative success and increase the quality of its services. Both the government and the civil society (media, intellectuals, research organisation etc.) need to have a closer look on the activities of the NGOs and ensure that it does not work as modern day 'Kabuliwalas'. There should be strong pressure on them to reduce their interest rates, to revise the repayment style and to provide active technical and management assistance in production-oriented projects. The NGOs are reluctant to consider lowering the interest rates with the excuse of self-sustainability. They are in fact doing lucrative business of money lending. What on the earth will give you such a big profit margin of 38%? That the NGOs are doing very profitable business is obvious from their investment in commercial ventures. All of the national NGOs have very large commercial outfits. They are running commercial banks, universities, cell phone companies and many other business organisations. Certainly this money comes from the profit they are making from the poor. Most of the NGOs are selling a negative image of the country to attract foreign donations. Even an NGO like the Grameen Bank is trying to portray a fanatic picture of the people and seeking foreign donation to curb it. I have seen numerous NGO reports that portray a totally wrong picture of the country. Some of them were quite absurd. One such report on violence against women claimed that in more than 50% cases husbands in Bangladesh hit their wives during sexual intercourse in slum areas. The government cannot disown it responsibility of safeguarding the interest of the poor and protecting the image of the country. The NGOs are dealing with the poor who do not seem to have any voice in our politics, media and intelligentsia. In a capitalist system like that of us, media is won by the rich and so naturally speaks for them. Politics is influenced by the rich and thus must protect their interests. The intellectuals depend upon foreign money and thus must not speak against their interests. In this situation, the government must look at the interest of the poor. After all, it is the government that is liable to the people. Although the government machinery in Bangladesh is largely corrupt and inefficient, experience shows that a lack of government control is disastrous. An example of it is the mobile phone call charge. The countrymen have to bear mobile phone call charge many times higher than that of the neighbouring country although a very respected and internationally reputed person like Dr. Yunus heads the biggest cell phone company in the country. Cell phone call charge is out of control because there is not government substitute for it. Kind regards. Aminul Mohaimen |