The Lorwin Microfinance Symposium to be held on October 19, 2010 at the University of Oregon offers us an opportunity to engage with a topic of global significance. The symposium brings together scholars, practitioners, and students to discuss the pros and cons of microfinance in a public forum [See also the afternoon Microfinance Workshops]. Since the Grameen Bank of Bangladesh won the 2006 Nobel Peace Prize for improving the social and economic conditions of poor women, microfinance has become a household word. The Bank claimed a 98 percent rate of loan recovery, and huge improvements in the lives of its female borrowers. Since then microfinance has created an enormous buzz for ending world poverty.
Microfinance is the extension of small loans, usually between $100–$300, given to poor women to start income-generating programs. These loans help women to start small enterprises in cow rearing, chicken breeding, paddy husking, tailoring, packaged foods, and so on. Today, microfinance policies cover a wider range of financial services from savings to healthcare to retirement plans that are offered to poor women. While microfinance programs have been initiated in the United States as well, their primary beneficiaries live in the Global South.
Microfinance came to the forefront of development policies when the 1997 Microcredit Summit was held in Washington D.C. The summit’s organizers proposed to end world poverty by the year 2015, and bring a hundred million of the world’s poor into its microfinance policies. Since the 1990s, millions of dollars have been poured into microfinance programs globally. These programs have been widely received as the new panacea for ending global poverty by development organizations, world leaders, philanthropists, corporations, feminists, and non-governmental organization (NGO) activists.
In more recent years, joint ventures between multinational corporations and microfinance institutions have resulted in the sale of various goods and services through loans. In Bangladesh, Grameen Danone markets a nutritionally fortified yogurt to poor children. Grameen Phone and Telenor Corporation of Sweden sell phone technology to Grameen Phone Ladies who rent their cell phones at a small charge to rural users. Breeder chickens and terminator seeds are sold to women and farmers through microfinance loans. These link-ups with multinational corporations are now seen as the path forward for uplifting people from poverty.
This euphoria puts me in a sober mood. As someone who grew up in Bangladesh, I am acutely aware of the unanticipated consequences of developmental policies in the lives of poor women. My research among borrowers of the Grameen Bank and three of the leading NGOs in Bangladesh has shown that microfinance policies benefit those women who have marketable skills, are savvy, and operate as heads of households. But the majority of women do not fall into these categories. In fact, their husbands often control the money, while the women remain responsible for loan repayments. This puts the women in dire situations when investments do not work as planned.
Let me then pose some questions that I think need to be included in any discussion of microfinance:
- What does it take to empower women? Is money enough? More importantly, what are the social relations within which these women and loans operate?
- Who speaks for these women in public? The majority of the studies on microfinance are quantitative. They measure success in terms of number of loans distributed, number of beneficiaries, and number of loans recovered instead of questions about the qualitative changes in the women’s lives.
- What forms of regulatory oversights are in place to monitor these microfinance programs? In the United States, we have already witnessed what can happen when financial institutions are deregulated. In fact, I have heard very little about transparency and regulation with regard to microfinance programs in developing countries.
The Lorwin Microfinance Symposium is an exciting event that gives us an opportunity to ask tough questions about microfinance practices that have almost become sacred cows in development circles.