According to David Harvey, neoliberalism is the notion that “[h]uman well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets and free trade. The role of the state is to create and preserve an appropriate framework to such practices.”1 The role of the state should be to create an environment that unleashes these entrepreneurial urges and to withdraw from the management of public life. Bangladesh offers a paradigmatic site for an analysis of neoliberalism and women’s roles. It is home to some of the most innovative NGOs in the world, including 2006 Nobel Peace Prize recipient Grameen Bank, and BRAC, the largest NGO is the world.
Microfinance is the extension of small loans to start income-generating activities, and it is usually targeted at poor women. Microfinance, also known as the Grameen model, also promotes the figure of the celebrated rural female entrepreneur—the cell-phone lady, the chick breeder, the egg seller, and the dairy-cow owner. In rural areas, it is the men who control the loans, and it is rare to find a female entrepreneur, unless she already has some marketable skills.2 In this new climate of neoliberalism and shrinking funds, many NGOs are more driven by profit and financial viability than by concerns about the welfare of their poor female clients. This transformation from social work to for-profit motives, and NGOs use of their members as internal markets has been described as the NGO “poverty enterprise.”3 Thus, what started out as a project promoting the welfare of the poor has, over time, transformed into something advancing the capitalist welfare of NGOs.
When the US Congress passed the Percy Amendment in 1973, it required all USAID offices to integrate women into all aspects of their programs. The idea was to increase women’s participation in national economies and to reduce gender-related obstacles to education, work, healthcare, and legal rights. This was followed by the United Nations’ declaration of 1975 as the “decade of women”. For the next decade, the United Nations and its affiliates prioritized women in all spheres of their development efforts. NGOs were the first responders to this call for the integration of women into development policies; they worked in the rural areas with direct access to women.
In this new rhetoric of “women-in-development” (WID, later called “gender and development,” or GAD), the third-world woman was conceptualized as an autonomous, sovereign subject who freely made rational choices in the market. She was thrifty, hardworking, entrepreneurial, and a good manager of resources. The idea that NGOs were seamlessly introducing millions of marginalized women—the majority of them borrowers of microfinance—into the economy as “entrepreneurs” and “rights-bearing subjects” with very few adverse effects, fed into the aspirations of Western donors to create societies similar to European democracies. NGOs and their sponsors alike invoked this mantra of empowering poor women.4 Research from WID feminists also demonstrated that investing in women was an investment in children and families.5 NGOs were at the forefront of translating this WID idea into practice. Feminists addressed what has been referred to as the “add women and stir” approach, and critiqued this policy as essentially window dressing that did not challenge existing gender dynamics and inequalities, and in some instances even exacerbated them.
At an epistemological level, there was no discussion of what it meant to frame development programs and policies in terms of women and not gender. This “third world woman” was a “hyperreal” woman. Her abilities and incredible entrepreneurship were so celebrated and inflated by organizations like the Grameen Bank that the idea of this woman became a substitute for the real woman on the ground. In development discourse, little attention was paid to men’s social roles and labor or how South Asian women were embedded in social relations with their husbands, in-laws, and kin, and how those relations circumscribed their human possibilities. NGOs and their sponsors alike invoked this mantra of empowering poor women. What this rhetoric did not take into account was how inequality, caste, class, social hierarchies, and feudalism circumscribed and influenced social relations differently across the South Asian region.
The question of how power relations shaped women’s lives was restricted to a narrow analysis of rural patriarchy with scant attention to how NGOs themselves appropriated existing gender roles and power relations to exercise their will over their female members. Unlike rural men, women worked in the domestic sphere. They could join NGO groups and attend meetings, a regular feature of these rural development NGOs. They were also sought out as “creditworthy” and reliable members because they were easier to police and dominate than rural men. These facts remained largely unaddressed in NGO- and WID-sponsored research. As long as NGOs increased women members in their programs and hiring practices and publicly promoted their fight against gender discrimination, the money flowed in from their Western donors.
At the center of this global success story stands the lone female entrepreneur, often a poor, illiterate homemaker, who autonomously makes free choices in the market and excels with her entrepreneurial skills. The Grameen Bank model rests on the idea of the individual entrepreneur who, with the help of microcredit, becomes self-employed, owns private property (the assets she builds with the loans), and sells her labor on the market. This out-of-the-home entrepreneur links seamlessly with neoliberal ideas of self-help and an ownership ethic.
While new studies dispute the claims of microfinance proponents quite effectively,6 microfinance still continues to thrive and attract followers who are evangelical advocates for microfinance. Hence one often finds people who are employed by MFIs writing in support of the work of these same MFIs. Why has microfinance galvanized so many people around the world, and why does it continue to be such a powerful instrument of poverty alleviation?
The pioneering institution of microfinance, the Grameen Bank, made its reputation through targeting poor Muslim women in Bangladesh. The targeting of women as entrepreneurs, especially Muslim women, has been key to the wide success of the bank and its microfinance program. Through its statistics, the bank has shown Westerners how poor and illiterate Muslim women form a bulwark against Islamic patriarchy. Here, patriarchy refers to Islamic notions of seclusion for women and religious proscription against women’s work in the public sphere. By dissolving the private/public distinction, women’s work can gradually begin to weaken the patriarchy from within and enable market forces to penetrate rural communities. Thus, microfinance becomes an instrument of remaking Muslim societies into market societies that are similar to Western societal norms. The important role of Muslim women in the Grameen Bank/microfinance story must not be underemphasized. In addition to this, there are three key reasons for the story’s wide reception which are both economic and ideological.
The Female Entrepreneur
Microfinance is based on the idea of individual female entrepreneurship, and it makes the individual, not the state, the driver of economic change.7 The microfinance model seamlessly links up with current neoliberal ideas of development that see the role of the state as limited. If we replace the term credit with debt, microfinance is reconfigured as a relationship of power and inequality between the creditor (the lender) and the financially strapped woman (the borrower). Let us now ask: What happens to poor women when they are entangled in relations of debt? What are the social realties within which these women and loans operate? The majority of women borrowers live in extended family structures with social and kinship obligations. These women’s identities are relational, shaped by a number of factors such as marital, kinship, ethnic, and tribal allegiances. However, the microfinance literature tends to conceptualize women borrowers as autonomous subjects who independently make choices in the market.
There are several categories of women who can use microfinance loans productively. They are usually women who have marketable skills, own small businesses, have a certain market savvy, or who are widows, abandoned, or divorced; that is, they do not have husbands who will lay claim to their income. Yet these groups account for an insignificant number within the vast pool of borrowers. Women, even if they have marketable skills, often find themselves beholden to their husbands and male relatives if they lack market access. Thus, microfinance has to be located within the social constraints that poor people—and particularly poor women—face. Often when women receive loans, their male family members take the money.
Although the women were the borrowers, I found that in almost 90 percent of cases, men controlled the use of the loans, often with adverse effects on women. Moreover, they borrowed from five to six MFIs, which led to an accumulation of debt that many could not manage over time. When defaults occurred—and they occurred routinely for a variety of reasons—it resulted in heightened shame and pressure on the defaulting woman. Women who could not pay due to unforeseen circumstances (illness, poor investment decisions, theft of property) were subjected to public shaming by group members who were pressured by microfinance institutions to recover the money. MFI managers would threaten group members that if they could not recover the defaulted sum, either they would have to pay, or they would lose future loans. Thus, the defaulter would face the ire of the community, who now saw her as a person who had broken faith with the group. Instead of developing social solidarity among the members, these loans led to an increase in intragroup friction. In a face-to-face society like Bangladesh, the conduct of women is strictly controlled, and women are the custodians of family honor. Public shaming of women brought dishonor to the men, and by extension to the family. Hence, poor women bore the social costs of microfinance, often with negative consequences.
In Bangladesh, an innovative entrepreneurial subject who has emerged from this contact between loans and women is the petty female moneylender. In this case, instead of becoming small-business operators, women stay at home and lend to traders, richer farmers, and others in the community. In fact, there are very few entrepreneurs. In the majority of cases, the women’s husbands use the loans. Thus, loans circulate from the women to a wider group of people, and, if the loan recipients can invest successfully, they repay the female moneylender the principal—plus interest. Thus, instead of creating entrepreneurs, microfinance in Bangladesh has reproduced moneylending as a profitable and less risky option for these rural women, which was not the intent of the Grameen Bank and other MFIs working in this area.
The 98 Percent Rate of Loan Recovery
The Grameen Bank with its much-celebrated 98 percent rate of loan recovery has effectively demonstrated to the financial community that the poor are “bankable;” that is, the poor form a large pool of credit-strapped people who desperately need access to capital and who will repay those loans. In other words, it has demonstrated that the poor constitute a viable market for commercial banks.
MFIs, through high rates of loan recovery, have shown that the poor have a need for loans, and that they pay back their loans. This has led to a profusion of dollars from aid organizations, corporations, and investors who see MFIs as combining profit with social good. Yet many MFIs depend on high interest rates and fees, often with many hidden costs, to sustain their operating costs. Thus, the poor borrowers pay for the salaries and overhead costs for many MFIs through the fees and interest charged to them. Often these overhead costs are out of sync with local community standards, and one sees jarring images of MFI officers driving in SUVs, while their borrowers walk with bare feet.
A key function of loans is consumption smoothening for its borrowers, and often loans do not go into the activities that they are intended for. In fact, many borrowers pay for things like medical expenses, wedding dowries, and home repairs with loans. Yet loans continue to be recovered at phenomenal rates, and these MFIs operate successfully. So, what is the story behind these phenomenal rates? First, it is important to make a distinction between loan repayment; that is, loans that are voluntarily given, and loan recovery; that is, loans that are recovered by applying pressure on the borrower. In many instances, MFIs force their borrowers to repay by applying pressure through community members and other tactics available to them.8 In face-to-face communities, people fear social shame, and try to manage their affairs to keep public humiliation to a minimum. Often when women cannot pay, they will borrow from other sources: from one other, from the traditional moneylender, or from kin to cover the default sum.
Constructing Markets
Microfinance connects the most intimate sphere of private life—the home and women—with the larger world of markets. Through these loans, money, commodities, and ideas circulate within communities, integrating the local economy with the global. For example, Telenor of Norway and Grameen Bank jointly created the Grameen Polli Phone (Village Phone) program that sold cell phones to rural women. Called Grameen Phone Ladies, these women made an income by selling time on their cell phones to rural people to make calls. The phones with their paraphernalia (phone, antenna, security deposit, pension scheme, connection fee) cost approximately $700 in the early 2000s,9 although prices later fell as the price of phones went down. While initially many of the Grameen Phone Ladies had made money, very soon other cell phones moved into rural areas, and undersold the Grameen Phone Ladies. Cell phones have become universal in rural areas as a reliable means of communication. It costs very little to purchase a phone or to make phone calls. Many of the women who had taken out loans to operate their phone businesses, saw themselves stuck with huge debts that they had to repay although their phone businesses had declined severely. The point here is that Grameen Polli Phone was able to use these poor women, who remain dependent on it for access to much-needed cash, to usher in new market forces. These women had little or no knowledge of how competition worked in an open market. Thus, I would argue that they were used instrumentally to create an environment hospitable for corporations to come in and corner new markets.10
- David Harvey, A Brief History of Neoliberalism, (Oxford: Oxford U P, 2005) 2. [↩]
- Jude Fernando, “Nongovernmental Organizations, Micro-Credit, and Empowerment of Women,” ANNALS, AAPSS 554 (1997): 150-177; Jude Fernando, Microfinance: Perils and Prospects, (New York: Routledge, 2006); Lamia Karim, Microfinance and Its Discontents: Women in Debt in Bangladesh, (Minneapolis: U of Minnesota P, 2011); Aminur Rahman, Women and Microcredit in Rural Bangladesh: The Rhetoric and Realities of Grameen Bank Lending, (Boulder: Westview Press, 1999). [↩]
- M. Mannan, “BRAC: Anatomy of a “Poverty Enterprise,” Non-profit Management and Leadership 2.2 (2009): 219-235. [↩]
- S. Hashemi, S. Schuler, and A. Riley, “Rural Credit Programs and Women’s Empowerment in Bangladesh,” World Development 24.4 (1996): 635-653. [↩]
- L. Mayoux, “Questioning Virtuous Spirals: Microfinance and Women’s Empowerment in Africa,” Journal of International Development 11.7 (1999): 957–984. [↩]
- David Roodman, Due Diligence: An Impertinent Inquiry into Microfinance, (Washington, DC: Center for Global Development, 2012); Milford Bateman, Why Doesn’t Microfinance Work: The Destructive Rise of Local Neoliberalism, (London and New York: Zed Books, 2010); Karim 2011; Thomas Dichter and Malcom Harper, What is Wrong with Microfinance?, (Rugby, Warwickshire: Practical Action, 2007); Fernando 2007; Rahman 1999. [↩]
- Milford Bateman and Ha-Joon Chang, “Microfinance and the Illusion of Development: From Hubris to Nemesis in Thirty Years,” World Economics Journal 1 (2012): 13-36. [↩]
- Karim 2011. [↩]
- Karim 2011: 97. [↩]
- Karim 2011: 95-101. [↩]
