Tandi asked a great question so I thought I would make a posting of my response rather than burying it in comments. A word of warning, I am no expert on microfinance, or Bangladesh. The following is based on a number of conversations I have had in the past month. The interesting thing is I am spending a day with a microfinance team from BRAC on Thursday, out in the field where the practical work is done. Should be a great experience, and also interesting to keep in mind the comments I have heard from mostly academics and researchers from the devloping world, who do not necessarily get their hands dirty in the trenches.
Microfinance 40 years on – the primary aim all those years ago was to give people access to credit to lift them out of poverty and make them self-sufficient. The talk here is it has not really done that. Why?
The women keep coming back for additional small loans once the previous loan is paid off. They get into a cycle of debt akin to credit card debt that we see in the developed world. The husbands continue to take the cash the women get as loans, leaving the woman with the debt and no way to earn money to pay it back. She then may be forced to go to another institution to get a loan, to repay the initial loan. Or worse still, go back to the moneylender who charges higher interest rates but whose loan is ‘off the record’ and therefore blind to the microfinance institutions.
So in effect she is credit surfing which puts her in a worse rather than better position. Women being women, they pay back the loan hell or high water but it can be to the detriment of the wellbeing of the family.
The thinking here is, better to set up co-operatives, buy communal equipment (crafts, farming, fishing etc) for the extended community to use so that the whole community can benefit …. including the men who are “good” yet who are not supported because most of the aid programs are directed towards women. The tables have turned on gender discrimination it seems. Food for thought. But much more to come.