The main philosophy of NGO-promoted microcredit programs is to alleviate poverty of poor women in order to achieve sustainable and equitable social development. Women’s involvement in the income-generation projects of microcredit offers promises to cultivate social and gender equality by way of bridging the widening gap between rich and poor, and reducing male and female disparity in terms of their access to important social and life- sustaining amenities. Against this backdrop, the objective of this section is to offer an analysis as to whether microcredit programs have the potential to reduce the social and gender
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disparities through the rational operation and management of credit. I question whether microcredit programs can achieve this goal by overemphasizing the recovery of loans and identifying clients on the basis of their higher socioeconomic status (meaning they are typically able to pay back the loan in regular installments within one year). The respondent women as well as NGO workers have informed me that they visit the loan-seeker’s house before the loans are approved for disbursement. They estimate the price of the available property in the poor woman’s possession, because they consider the existing asset base as a guarantee and safeguard for the recovery of loans in the event that the clients end up defaulting. Even the type of house the poor women belong to is taken into consideration before loans are offered. Loans are only offered after thorough scrutiny. Every program participant has to undergo a double screening test before borrowing loans – one is by the field workers of NGOs and the other by the center- chief of the respective center. Assessments of this kind are intended for identifying the most reliable clients for microcredit so that the recovery of loans is hassle free, and so that NGOs do not suffer any losses in order to make the programs successful.
It is found in the study areas that Grameen Bank and BRAC’s microcredit programs tend to be biased in their selection of clients, which ultimately excludes the poorest women from the programs. The primary selection process of the clients indicates that NGOs have a specific preference for those who have regular income and capable wage-earning person in the family when offering loans. At the same time, the center-chief also typically recommends women who have a more favorable financial standing compared to others, which further contributes to inclusion and exclusion errors. One of the clients of BRAC named Khatun (50) who was one of my respondents told me:
“They [NGOs] verify the existing family conditions, such as houses, number of children, and the number of income-earning persons before offering loans. They give loans if the family condition is good. They do not offer loans to those who have no saleable assets in house, such as a television. They say that there is nothing in your house to sell. So you will not be provided a loan.”
It has also been found in the program villages that the main motivation of NGOs is to expand the programs in the broader areas with the maximum repayment rate so that the programs become successful and sustainable. In this case NGO workers keep in mind the eligibility criteria for the selection of clients so that the regular return of repayments is ensured on time. According to the description of many female clients, all women are not given equal opportunity in accessing credit, and equal amounts of loans is not offered to them. I asked respondent
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women whether NGOs give equal importance and opportunity to every client when they request for a loan. In a reply one of the respondents named Khatibunnesa (age 45) of Grameen Bank has said:
“When offering loans NGOs take measures on the basis of the current condition of the clients. Those who have good financial conditions are given more money. And those whose economic condition is not as good are given less amounts of money. Sometimes NGO-bosses take a long time to provide loans. They do it intentionally so as to vet the eligibility of the clients. Even if they offer loans, it is a very small amount. We cannot meet our needs with this small amount. It is used up for meeting immediate needs. Those who have good income, assets and earning members in the family are given relatively large amount of loan. They can use the money for business and other income- generating activities. They [NGOs] are just adding oil to the oily head [NGOs prefer offering credit to those who are already better off].”
The experiences and ground reality of the credit-borrowing women indicate that the process of providing loans to them operates in contradiction to the moral philosophy of the microcredit programs, which explicitly aims to promote sustainable development for poor women. As a result, the pro-poor policy of social development by NGO interventions through microcredit programs is called in question. Moreover, the center-chiefs also play a rather dubious role, as they tend to recommend the more financial stable amongst the poor women for loan- disbursement rather than the poorest women, which exacerbates social cleavages instead of minimizing and bridging them. I also found an exceptional case in Chatal village where Grameen operates its program: Grameen offered loans to some women38 who were not clients
of microcredit programs for the reason—those women already possess a good asset base and substantial monthly income. They were employed in a government-run primary school in that village, but despite not being inhabitants of that village, they were still offered loans. It is not relevant to mention here why those women borrowed loans from NGOs in spite of them having better economic conditions. I asked: why do NGOs still offer loans even though you are not the target group of the programs? One of them preferring anonymity explained:
“We are doing a job here in the school of this village. We have the financial ability to pay back loans. NGOs know it well. They do not have any problems recovering loans
38 Those women live in the city and come to school in the village daily. As they work as teachers in the government primary school, they cannot leave without paying up the loan. They also have to pay the installments in order to maintain their honor and prestige.
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from us. Our installments are kept ready well before the repayment deadline. They do not have to come to us for money. We do not have to go to the center either. The center- chief comes and takes our book with the installments on the repayment date.”
This is the practical scenario of the program village. Making and breaking rules by the organization lies in the structure of the programs in order that the fiscal interest is properly served. This might be an exceptional case, but it reflects the hidden motive of the programs. Not only do NGOs consider their own interests, the center-chiefs also prioritize their convenience for loan-recovery. Therefore, they are more willing to forward the recommendations of clients who possess the financial ability to make timely repayments. The recommendations of the center-chief in this connection is very important for receiving loans from NGOs, as these are expedited for approval and disbursement. It has been reported by significant numbers of women both from the middle- and lower- economic statuses that the center-chief supports and forwards recommendations in favor of the clients who have regular repayment capacity, advocating to the NGOs on behalf of them to receive substantial amounts of loans, while only small amounts of loan are recommended for relatively poor clients. One of the group leaders named Achia (age 30) of BRAC told me of the following:
“If we have faith that one is able to pay back the loans, we make our recommendations on behalf of her. If we can feel that she does not have the capability to repay the loan, we ask NGO bosses to make a decision as to what they consider good. We do not reject them directly.”
NGOs offer small amounts of loans to poorer women instead of comparatively big amounts at the beginning, which functions as a sort of test by NGO-workers to justify whether they can repay the loan on time and continue the installments regularly. While a certain amount of money is provided to relatively wealthier women with much interest, it may fail to reduce the level of social inequality amongst the poorer classes, and rather has reinforced class- differences instead. Therefore, the promise of building social capital through the operation and management of microcredit programs for the development of the poor women in rural Bangladesh – particularly in my study areas – have fallen short of expectations on account of the program structure and design, which fails to incorporate the neediest women into such programs. At the same time, it is true that microcredit has been a proper channel for the entry of the poor women into the domain of the market, and has made them consumers of the market economy by easing their access to credit. However, in the design and structure of microcredit programs there remains the kernels of social and gender inequality. Although the overt
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intention of microcredit programs is not to reinforce existing inequality, the structure, design and commercial nature of the programs results in microcredit programs cultivating social inequality in itself. Most importantly, the criterion for suitability is based on the capability of the poor women to repay their loan-installments rather than on the basis of the level of vulnerability (or necessity), which is also considered to be another factor that reinforces the prevailing social disparity. While social capital as a neoliberal development intervention tool constructed through microcredit programs has been a good strategy for the recovery of loans from poor clients, it ignores the most important aspects of equitable social development by integrating all poor women. The process of providing and recovering loans from poor clients has, however, facilitated the process of producing social class differences. Instead of targeting the most vulnerable, NGOs seem to prefer selecting relatively well-off clients among the poor in order to ensure the financial viability of microcredit programs. Moreover, the microcredit programs of Grameen Bank and BRAC do not challenge the existing social disparity for they focus their attention on the economic pay-off of the programs, which inexorably amplifies the divide between the gendered social classes. If the existing pattern of disbursement and repayment system continues without any necessary modifications, positive developmental outcomes for poor women would be difficult to achieve.
The findings of the study suggest that microcredit programs reinforce and utilize the existing forms of social capital for the purposes of the management and operation of the programs, whereby the potential risk of the clients’ moral hazards, as well as the transactions costs involved are mitigated through the self-selection process engaged by the poor women themselves. There remain inclusion and exclusion errors in the organizational structure of the programs due to NGO preferences, which choose relatively “safe” clients defined in terms of the number of regular income-earning persons in the family and their existing asset base. Moreover, the group liability method escalates conflicts among the clients; and while cooperation in the form of helping defaulters repay their debts has to some extent been engendered, it is not a spontaneous outcome. This means that NGOs instruct group members to foot the installment on behalf of the defaulting members, as the whole group is liable for the repayment. Furthermore, the existing forms of inequality have not been challenged and instead appears to have been reinforced along class and gender line. Besides, among group members there prevails a form of envy, hostility, and misunderstanding that centers upon the repayment of loans. Therefore, microcredit often serves as a mechanism to produce and reproduce conflicts and inequality (Geleta, 2014).
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CHAPTER
6
Disciplinary Technologies and Maximization of Recovery in
Microcredit Programs
Microcredit programs have gained huge prominence and attention for the high recovery rate and sustainability of the programs for banking on the poor; particularly poor women. Microcredit NGOs consider women as convenient subjects for the viability and sustainability of the programs given their greater propensity to pay back loans (Rankin, 2001; Havers, 1996). While the poor are not bankable and hence are denied to have access to credit services, microcredit programs have proved to be successful initiative. Since conventional banking systems do not offer credit to the poor given their lack of financial and physical collateral, microcredit programs have successfully incorporated those clients into the market while boasting an impressive recovery rate. Against this backdrop, the principal focus of this chapter is to offer an analysis as to how microcredit programs have been able to ensure maximum recovery from the poor clients in my study areas. Moreover, I seek to investigate how microcredit programs regulate clients in order to check their moral hazard, how poor credit clients are kept under continuous surveillance in a subtle and self-regulated way, and whether sanctions have been imposed on defaulting clients.