AFRICA NOW is one of numerous micro-credit banks to be set up in recent years in the imitation of Grameen, the Bangladeshi "Bank of the Poor". Grameen, a bank that targeted the poor and not the rich, was the brainchild of Mohamed Yunus, professor of economics at Chittagong University, Bangladesh. Yunus believed that only a few dollars could make or break the lives of poor people, and, with this in mind, the first branch of the Grameen Bank was launched in 1983 with the aim of granting small loans, or 'micro-credit', to the poorest of the rural poor (the word 'gram' means village). "If we look for one single action that will enable the poor to overcome their poverty, I would go for credit. I have been arguing that credit should be accepted as a human right," explains Yunus.
However, behind the idea of "credit as human right for the poor" there lies a credit relationship that benefits the bank more than it does its borrowers, and this means that Grameen is more like conventional banks than meets the eye. For Grameen borrows at 12 per cent and charges Bangladeshi women 20 per cent for their loans, thus giving the bank a profit margin of eight per cent. And "these are the kind of figures that a banker in the city of London would be happy to settle for," commented social scientist Para Teare in the magazine Genderwatch.
Besides targeting the poor, another novel feature of the Grameen bank is the gender composition of its clientele. Ninety-seven per cent of loans in Bangladesh are granted to women, whom Yunus considers more "creditworthy" than men. "Women are honest", he says. "The money they get is more likely to stay with the family and be put to permanent use. They will not use it for gambling, or on alcohol as their men might." Yunus believes that the Grameen Bank's record-breaking default rate of only three per cent -- the lowest in banking history -- is attributable to women's greater "reliability".
Again, the bank's gender-targeting of funds might seem progressive at first glance, but how does Yunus define women's "reliability"? To a financier, this may, after all, be synonymous with compliance, with vulnerability and with a lack of mobility, Teare believes. "In impoverished rural communities, women cannot run away if they are unable to repay the money. They are easier to locate and to intimidate because they will be at home with their children," she says.
However the bank is an ambitious project and it has had impressive returns. By 1997, it had 1,084 branches in 37,000 villages in Bangladesh and had disbursed $35 million among its two million members. It had also accumulated a credit balance exceeding one billion dollars. The average loan amounts to $160, with reimbursement rates of 97 per cent. 'Banking for the poor' thus turns out to be big business, with, as an article in the respected French paper Le Monde Diplomatique explains, profits on invested capital reach up to three or four times their initial value. And, according to Gina Neff writing in The Left Business Observer, the international banking and finance community has been attracted by the lucrative new market and has been swift to grab a slice of the pie.
Indications of the commercial banks' venture into micro-credit were given during a February 1997 conference on the subject. This conference, though it paid lip-service to poverty alleviation and the empowerment of the poor, proclaiming a goal of providing "100 million of the world's poorest families, especially the women of those families, with credit for self-employment and other financial and business services," was not uninfected by more conventional banking concerns, such as the profit motive. This was evident from the high-level corporate participation at the conference; though sponsored by the Results Education Fund, a non-profit organisation, it was funded primarily by multinationals seeking to establish "partnerships" with micro-credit programmes.
Financial institutions of the calibre of Citibank, Master Card and Deloitte Touche Tohmatsu were thus in evidence, and these voiced a theme of "partnership with the poor", as did development specialists from across the political spectrum. Deloittte, one of the world's largest accountancy firms, was commissioned by the World Bank (WB) to investigate the profitability of micro-credit by auditing several successful microlenders. The WB's and the other financial giants' foray into micro-credit is an indication of the corporate sector's interest in this new and expanding business. As conference discourse had it, now "big business can have a heart and make a buck". "Rather than give money away, one high-level executive said, "[corporations] can now put it into loans, which will pay higher than the market interest rate, and they'll get their money back."
And the corporate sector, backed by the political establishment, has quickly jumped on the bandwagon. At a ceremony preceding the conference, US President Bill Clinton boasted of a $10 million welfare-to-work "partnership" between the poor and the Chase Manhattan Bank, the Rockefeller Foundation, and the US Department of Housing and Urban Development. This alleged "partnership" would raise employment levels between 20 and 30 per cent, bank executives who attended the conference predicted.
Pushing the rhetoric of micro-credit to the absurd, eager conference participants even made it sound as if millions of welfare recipients could readily be transformed into successful microentrepreneurs, if they could only be given access to the magic wand of credit, which coincided with high profits for lending institutions. Unfortunately for the poor in this equation, upon close inspection the magic dissipates, as Ben Rogaly, an Oxfam development worker, noted. "There is no straightforward link between micro-financing initiatives and poverty reduction," he said, warning at the same time that the growing trend to substitute microfinance for social security and health and education programmes was increasing, and not decreasing, global poverty.
The proponents of micro-credit initiatives have been careful not to link them with the kind of massive global social-service cuts that have been contingent on the WB's decade-old strategy of making cuts in social security the condition for new loans. However analysts have been equally quick to observe that micro-credit is on the way to becoming a highly profitable substitute for state welfare spending.
"The micro-credit model has sparked a movement to dismantle development initiatives and to decentralise antipoverty programmes with the ultimate privatisation of welfare -- shoeless women lifting themselves up by their bootstraps," according to Panos, an NGO involved in international women's development.
For, according to Neff, the gurus of micro-credit, deeply mired in market ideology and the tenets of neoliberalism, "promote the transformation of the world into a borderless supermarket, and circulate the message that the market is the measure of all things."
By depoliticising issues and glossing over what is really at stake in the market economy, Yunus and his corporate backers have simplistically reduced the issue of poverty to a lack of credit. This is to dismiss and ignoring the market's inherent disparities, which include the exploitation of labour markets by the multinationals, the plunging prices for raw materials and the massive debt burdens of the countries of the South. These, which on average exceed 120 per cent of GNP, the micro-credit movement attempts to ignore, conveniently displacing macro-economic problems onto the individual level.
In truth, Yunus and his followers, who have dispensed with the need for costly health, education and social-welfare infrastructures and gloss over structural political problems, ultimately serve the tenets of neo-liberalism under the guise of 'poverty alleviation' and 'empowerment'. For, as Neff comments, "without the cumbersome delivery of the other services that the poor need, Grameen gets to champion the free market system and all its goodness." ____________________________________________