- Paperback: 296 pages
- Publisher: Univ Of Minnesota Press; 1 edition (March 7, 2011)
- Language: English
- ISBN-10: 0816670951
- ISBN-13: 978-0816670956
- Product Dimensions: 5.5 x 0.8 x 8.5 inches
- Shipping Weight: 12.8 ounces (View shipping rates and policies)
- Average Customer Review: 8 customer reviews
- Amazon Best Sellers Rank: #358,895 in Books (See Top 100 in Books)
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Microfinance and Its Discontents: Women in Debt in Bangladesh 1st Edition
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"It is precisely because the microcredit mantra has been so endlessly repeated, often in place of actual empirical documentation to back its claims, that Microfinance and Its Discontents is so compelling. This is an outstanding, courageous, and path-breaking piece of scholarship; one that will doubtless unsettle the microcredit establishment, and by extension, key presumptions of neoliberal research agendas." —Kamala Visweswaran, University of Texas, Austin
"Lamia Karim has done an excellent job by juxtaposing facts against myths, lies against truths and objective research against subjective hagiographies. . . . I believe this book is an important addendum to the growing literature that demonstrates and deconstructs the lies and myths about microcredit and NGO business in Bangladesh and elsewhere in the Third World." —countercurrents.org
"Karim's book is a timely contribution to the debate on microfinance, and is a challenging and engaging read for the specialist as well as the lay reader. I believe that her ideas will serve as a guideline for future researchers’ and policy-makers inquiries into the gender aspect of microfinance." —Soumya Mishra, Governance across Borders
"Karim’s book serves as a stark and timely reminder of the value of ethnographic research in offering a deeper understanding of how developmental interventions in specific institutional and local contexts may reproduce or even exacerbate structural inequalities, and also in informing the strategies that seek to counter these inequalities." —Economic & Political Weekly
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By 2006 there were only three large microfinance institutions in Bangladesh - Grameen Bank, BRAC, and ASA, covering 90% of the country. Ninety-five percent of their microfinance borrowers are women, though most of the money is then used by their husbands - sometimes even appropriated by a widow's male relatives. (Grameen tried loaning money to men - most would not accept the terms; another problem - most are working during the day.) Rural centers of 40 women, sub-divided into 8 groups of five each, became the structure of microfinance. Small loans of $100 - 200 were expected to be repaid within a year at a fixed effective interest rate of 32% plus sundry hidden costs - less than the prevailing moneylenders' rate of 120%. It did not, however, stamp out those moneylenders and their rates.
When a default occurs, the bank withheld money from the other members, forcing them to either pay up or lose access to future loans. Surveillance of women already exists in rural Bangladesh, especially in the regulation of rural women's sexuality and fraternizing with non-kin men. Failure on the part of loan managers to collect the money results in money withheld from their paychecks - too many defaults result in their being fired or never promoted.
Professor Yunus (economist PhD from Vanderbilt) began working with the poor after the 1974 famine - it was poorly handled by the government and thousands died. He established the Grameen Bank in Bangladesh in 1983. It was one of the earliest and most successful pioneers of the 'solidarity circles' methodology. The Grameen Bank appeared to be able to sustainably provide hundreds of thousands of microloans to the very poorest in Bangladesh. Microfinance became interchangeable with poverty reduction.
By the early 1990s, microcredit was transmuting into the wider concept of microfinance - including micro-insurance, micro-savings, etc. It was also becoming clear that most microcredit is used not for income-generating projects, but to facilitate consumption spending. There are a growing number of reasons to believe microfinance may be undermining attempts to establish sustainable economic and social development, and sustainable poverty reduction. It may even constitute a new and powerful form of 'poverty trap.'
Exhaustive analysis of microfinance in prior times and other areas show it has played no role in reducing poverty. For all enterprise sectors there is an accepted minimum efficient scale of production below which it is virtually impossible to survive. Thus, it is important to invest in small enterprise units that can rapidly achieve minimum efficient scale of operations and materially contribute to local sustainable development and poverty reduction. However, this factor is generally ignored - especially in agriculture, and each microenterprise has very little chance of surviving within its own locality. High microenterprise turnover is the norm, often imparting a serious cost upon those failing, as well as encouraging drastic cost-cutting which can take market share away from more sustainable enterprises. (In India, the average firm size is less than one-tenth the size of comparable firms in other emerging economies.) In Bosnia, many poor individuals signed up to receive microfinance to purchase a cow and generate additional income from the sale of raw milk - the resulting local over-supply led to a general price decline that undermined all producers. Similarly in Croatia. In India, several hundreds of thousands of the very smallest farms were trapped in a vicious downward cycle of dependency and growing debt, with around 160,000 farmer suicides since 1997.
Further, informal microenterprises increasingly do not raise the total volume of business as much as redistribute or subdivide the existing volume of business - at very low and 'ungrowable' productivity levels. There are also hidden opportunity costs of such investments, and the problem of microloans being repaid by selling family assets, further indebtedness, and the diversion of other income into repayment. (This 'fallback' strategy helps explain the generally high repayment rates, alongside growing evidence of rapidly rising microenterprise failure rates.) Actually, while Bangladesh has encouraged use of domestic savings and international aid into mainly unsustainable informal sector microenterprises (eg. rickshaws, subsistence farms, petty traders, street sellers), neighboring countries have more aggressively tried to uses savings to fund larger, more sophisticated, technology-intensive projects that are likely to be growth-oriented.
Microfinance also inappropriately underpins the concept of financially self-sustaining economic units and discredits the notion of public support (eg. subsidies) for organizations.
Author Karim demonstrates that beneficiaries of microfinance are rarely the poorest of the poor, but include the rural 'middle class' - women with access to husbands working in town or abroad. She is somewhat surprised to discover the widespread practice of borrowing from multiple microfinance institutions in order to repay existing loans
Why has microfinance become so popular? Because it is in agreement with the Washington Consensus.