learnt this morning that david halberstam, pulitzer-winning journalist, author of books like ‘the best and the brightest’, ‘war in a time of peace’, ‘the reckoning’, ‘the powers that be’, and ‘the fifties’, a man whose reporting on the war in vietnam vexed john f kennedy so much that he tried to get halberstam’s publisher, arthur sulzberger, to recall him from nam, has died in a car crash.
it is strange, the sense of loss that accompanies news like this. i didn’t know him. all i did was read some of the books he wrote. and yet, i get this strange strong urge to sit in the dark later this night, to bow my head in a silent salute, and raise a toast to him.
i remember the time when i first read ‘war in a time of peace’. back in those days, i was in the process of pupating into an enthusiastic biker. and yet, fifty pages into ‘war in a time…’, a rich account of american foreign policy after the cold war (a period when, even as the world saw ethnic cleansing in bosnia, somalia and rwanda, america was increasingly unwilling to intervene), i began leaving my bullet home, preferring to take the hot noisy bus with its rotten speakers playing rotten songs to work for the next two weeks. two extra hours to read. that is how good the book was.
it, and all the other books he wrote, underscored a great truth: few things are as powerful as what i call, a tad grandiosely, full-blown investigative journalism. done the right way, it can reveal any truth, nail any lie.
i leave you with some links. the ny times has put together an excellent page on him — his dispatches, reviews of his books, and articles on him. then, there is the transcript of an commencement address he delivered at the university of michigan. a very good chat about halberstam at radio open source. a letter he wrote to his daughter about vietnam. and, finally, a couple of obits — the first from the guardian, the second from the washington post.
another thing: i am deactivating the comments. my time at sussex is drawing to a close. there is too much work to be done. and the comments are a bit of a distraction. if you need to reach me, mail me at mrajshekhar (at) gmail (dot) com.
update: businessweek has just put up the transcript of mr halberstam’s last speech, at the graduate school of journalism, berkeley. an extract to whet your appetite is reproduced below.
“…Reporters are charged traditionally with “who, what, why, when, where.” I think the most important question, as you go towards being a historian, is why. Why do things happen? Why do they not happen? What are the forces at play? And that’s really, I think, what put me out of the routine of daily journalism. This is not just a book you do. This is part of your own education. This is a great, great gift you get from this life. And that is the chance to be paid to learn. I mean, what defines your life at the end of it when you hit 70 or even a few years more is love and friendship and family and things you’ve done. But I think it’s the education and the ability to spend, what is now 52 years, learning every day. Going out every day and asking questions and coming away with just a little bit more knowledge. What a blessing. And each book was really like a graduate school. I’d enter graduate school for four years and learn this and go on to the next one and learn something more. And so I got to study the rise of modern media, a book about the industrial challenge of the Japanese, a book about the Civil Rights movement, a book on the impact of technology on the society of the ’50s, the conflict of the Cold War, the rise of the China lobby in the Korean War—that’s a great education. That’s more than any person really has a right to expect.
I was in this without knowing it, a part of a larger movement of restless reporters of a generation. Restless, with the narrow boundaries of journalism as they existed in the ’50s and into the ’60s. We probably were responding without knowing it, to the changes forced by technology. One thing print had always been was the fastest carrier, but there was a new faster carrier, television and it was self-evidently more powerful and seemingly more dramatic. So we had to do things they couldn’t do. We had to go places where they couldn’t go. We had to use skills that they didn’t use. And we were very lucky, because they were so incredibly lazy. (Laughter)
In television newsrooms across the county: there’s a football game, let’s get the camera angle of the local fans at a bar cheering on their team. Because the instrument itself was so powerful, and it was an end in itself, really, this storytelling, they did not do reporting that was really complete. What they did was a greater gift: they raised the question in people’s homes every night that we had the chance to answer if we used our skills properly.
If we did this, we had to be thoughtful of where we went and where we didn’t go, we had to write reasonably well, because we were now in competition with something. A new media carrier, which had drama and excitement, was competing with the time of our audience. There they were out there, and they were offering something exciting and easy to follow. And if we were to compete, we’d better be very good storytellers.
There is, I think, craft.”
Aberration or Synecdoche: Reflections on suicides amongst microfinance borrowers in Andhra Pradesh. Circa 2006.
right. continuing with my highly successful strategy of driving readers away by never posting anything less than 5,000 words long, here is the term paper i just submitted on the microfinance suicides that india saw in march last year.
as ever, comments welcome.
“One Rennu Chandramma of Chenchu colony on the Chandraiah drain bund in Gudivada town, died of asphyxiation as she hid in a rice drum to evade a microfin firm’s representative who came for collection of loan instalment . This death, however, was not reported anywhere. She reportedly borrowed Rs 7,000 from a microfin company and could pay the instalments only for eight weeks. As pressure for repayment mounted, she virtually lost her mental balance and ultimately took her life.”1
In March 2006, a major crisis for microfinance institutions (MFIs) broke out in the south Indian state of Andhra Pradesh. After reports that they were charging “usurious interest rates” and following “forced loan recovery” practices that were so coercive that an unknown number of women in the state – estimates ranged between 7 and 200, (see Celestine2, S Nagesh3 and Maddipatla4) — had killed themselves, the state shut down about 50 branches of two MFIs — Share Microfin and Spandana5. In the days that followed, the branches of two more MFIs, Asmita and Umduma Poddu Pedatha, were shuttered as well.6
In the days that followed, three explanations emerged. The first, put forth by the MFIs, alleged that the Andhra government was creating a controversy, trying to push them out of the state in a bid to minimise competition for Velugu, the state-run microfinance initiative.7 Another explanation, pushed by the state government, blamed private sector banks and MFIs for succumbing to greed, and lending irresponsibly to the poor8. A third explanation, put together by Indian journalists, including this writer, pointed at state populism, poor regulation, banks trying to maximise lending and MFIs greedy for growth9.
The story went like this. Part of the problem could be traced back to the previous elections when, during his campaign, Rajshekhar Reddy, the congress party’s chief ministerial candidate, announced that, if he came to power, he would ensure that SHGs hitherto paying an interest of 9 percent on loans would pay just 3 percent10. This imposed externalities on the MFIs in the state. Unable to compete with a rival that was able to offer loans at 3 percent, they found their operations restricted to the relatively more prosperous coastal districts where Andhra’s SHG network is not as strongly ensconced as in the rest of the state11. Another part of this explanation was rooted in banks’ exploding interest in lending through MFIs. Total bank lending to MFIs in India is estimated to have doubled every year in the three years leading up to March 2006.12
It was a fatal combination. On one hand, the MFIs had much more capital to lend than before. And yet, unable to compete with the state’s subsidised scheme, they could not expand their operations. The results were predictable. The MFIs flooded the area with loans. Going, in some cases, door to door carrying wads of cash. For reasons we discuss later, no livelihoods training accompanied these loans. And so, most of the women used the money for consumption, not productive purposes. When the time to pay up came, several of them had no option but to take fresh loans to retire the old ones. Debt traps were inevitable. And then, things got uglier. Replete with threats and innuendo about repaying the loans even if that meant they had to turn prostitutes. Which is when some women chose to do away with themselves.13
So far, the suicides have not attracted the sort of attention they should have. For the most part, they have either been explained away as the product of weak regulation exploited by greedy MFIs and banks, or dismissed as a few deaths which a sensationalising media blamed on innocent MFIs14. In the process, a fundamental truth that the suicides highlight about India’s microfinance story has escaped scrutiny.
It concerns the relationship between the women and the MFIs. Think about it. The women were preferred to kill themselves instead of run afoul of the MFIs. This is extremely odd. They were not dealing with the state, nor with the police — two institutions with access to state-approved violence. They were dealing with private sector companies. When the MFIs abused them or forced them to stand in the sun as punishment for missing a payment what made the women so willing to comply (there were also cases where the women were told to turn prostitutes if that is what it would take to get them to repay old loans)? For that matter, what enabled the MFIs to make this blithe assumption that they could indeed punish the women instead of reporting them to the police? How did the relationship between the MFI and the locals, doubtlessly a tabula rasa when the MFIs first entered, acquire this form?
It is this power dynamic, I argue, that, once combined with the rising dependence of the MFIs on commercial borrowings which necessitated their running their businesses along increasingly neoliberal lines, resulted in the suicides. Further, seeing that both these forces (the commercial linkages between MFIs and banks, and the dynamic between the MFIs and the women) are present across the country, I argue that it is important to study the microfinance suicides of Andhra Pradesh in detail, instead of dismissing them as an unfortunate local incident.
In this paper, I begin by outlining the reasons driving the integration of microfinance into India’s credit markets. I discuss the implications of integration for the MFIs and, consequently, their borrowers. Then, I turn to the relationship between the women and the MFIs. I present evidence that suggests that microfinance might be creating new dependencies between the women and the people purportedly working for their development. I discuss ways in which these relationships might form. And then, I close by wondering if economic empowerment can deliver social and political empowerment on its own.
The commercialisation of microfinance
A major reason for the crisis was the sudden boom in MFI funding. This is very evident when one looks at the balance sheets of Spandana and Share Microfin, two of the four NGOs targeted by the administration. The gross loan portfolios (GLR) of both show an abrupt jump in between 2004 and 2005. Spandana’s GLR, having taken six years to reach the $10 million dollars mark at the end of FY 03-04, rose to $55.5 million dollars the next year15. Similarly, Share Microfin’s GLR, $18 million at the end of FY 03-04, climbed to $82 million over the next two years16 (Also Celestine17, see Maddipatla18 and Shylendra19).
Banks were starting to love microfinance. Rural India was becoming very attractive for them. Partly because under the Indian Reserve Bank regulations, all banks need to lend at least 18% of their aggregate loans in the rural sector as a part of their priority sector lending obligations20. And partly because of a growing realisation among Indian banks that they needed to look beyond competitive urban markets where competition is intense and the margins are thin. And yet, expansions into the rural credit markets can be problematic. Most banks have few rural branches, and lack local relationships that might bring rural customers to them21.
Given that backdrop, they have come to see microfinance as an attractive conduit for rural credit disbursal. This is partly due to microfinance’s emphasis on financial sustainability. Which shows itself as the “relative absence of interest subsidies in microcredit/finance programmes, the high repayment performance deriving from the adoption of appropriate lending technologies and peer monitoring mechanisms, as well as the reduced transaction costs to lenders (vis:a:vis the costs of individual targeted lending)”.22 Further, the discovery that not only are the poor bankable, but that banking with the poor could be profitable as well, suggests the prospect of the financially-viable microfinance institution, which address poverty-related concerns even as it covers its lending costs.23
As Indian banks look to lend to the large number of attractive, if small and dispersed, borrowers in rural India, it is this mix of reach and sustainability that makes MFIs so attractive for banks. As KV Kamath, the CEO of ICICI Bank, said, working with agencies such as MFIs is a strategy for ICICI Bank towards leveraging the rural economy in order to break into the top league of global banks.24
It’s a motivation that he shares with several other banks. Take Share Microfin. It had raised loans from both public and private sector banks– ICICI Bank, Oriental Bank of Commerce, Small Industries Development Bank of India, UTI Bank, HDFC Bank, IDBI Bank, ING Vysya, Indian Overseas Bank, Development Credit Bank and Canara Bank. In addition, it had also borrowed from foreign banks like the Bank of Bahrain & Kuwait, Deutsche Bank and Standard Chartered Bank, to say nothing about a number of other foundations and international institutions. Some of these banks, as Celestine sardonically notes, were “extremely eager” lenders. Deutsche bank’s Mumbai branch had lent around Rs 9.97 crore to MFIs. Interestingly, the security for the loan came from Deutsche Bank branches in Luxembourg and New York. So, the bank had provided the loan as well as the security to the borrower. Spandana, too, had borrowed from many of these lenders and also raised funds from ABN Amro, Dhanalakshmi Bank and Indian Bank25.
This interest from the banks has been transformational for the MFIs. A brief backgrounder now before I discuss how the business changed for them: MFIs do not operate like traditional banks. That is, they are not classified as depository institutions that take client deposits and use them as lending capital. They focus on lending. The problem with this approach is that it isn’t easy to generate capital for lending purposes. Most of the capital they lend, especially in the early stages, comes in the form of contributions by governments, from philanthropic organizations and individuals, and as loans from governments and institutions that incur interest at below market rates. As an MFI matures, it can start borrowing from banks, and then on-lend it further at its own risk. This is clearly preferable from an operational basis as it demonstrates an ability to exist outside of the unreliable world of voluntary contributions.26 Now, with the financial constraint lifted, the MFIs were free to expand as rapidly as they like.
It is pertinent to mention here that the rapid growth in MFI lending took place after 2003, with the introduction of ICICI Bank’s ‘partnership’ model. In this model, the MFI becomes an agent of the commercial bank. While it continues to evaluate, recommend, disburse, track and ultimately collect the loans, the loans sit on the books of the bank and not of the MFI.27 For the services that the MFIs provide a service charge is collected from the borrowers by the MFI. and gets some commission for its efforts in lending and recovering the money.28 This model helped overcome the growth constraints that the MFI had faced till then29 and greatly stepped up lending to MFIs, especially by ICICI Bank, which accounts for over two-thirds of total bank lending to MFIs in the country. It is also pertinent to mention here that two of the MFIs against whom action was taken had a significant proportion of their portfolio under the partnership model.30
That said, the corollary to an expansion in commercial capital availability is a steady decline in the proportion of zero or low cost funds. And, as the share of commercial capital in their borrowings rises, the MFIs reach an inflection point. Repayment performance and institutional viability emerge as the critical criteria of programme success. MFIs find they have to adopt the economics of commercial interest rates, which would enable them to recover fully all their costs – even at the cost of their members.31
This pressure to achieve institutional sustainability reflects in policy decisions to expand the scale of the programme, to increase the volume of loans disbursed per borrower, increase interest rates, tighten repayment discipline by enforcing punitive strategies and offer minimalist credit programmes. Minimalist, incidentally, refers to an approach which focuses only on providing financial services, as opposed to the more holistic “microfinance plus” approach which seeks to also provide livelihood support, or so-called “business development” services. Minimalist MFIs (the vast majority, says Ghate) recognise the importance of livelihood support services but take the view they are best provided by specialist NGOs and the public sector.32
In their paper, Hunt and Kasyanathan give an instance of such a minimalist credit programme. They cite the case of the Bangladesh Rural Advancement Committee, where the imperative to meet self-imposed targets for supply of credit to women had resulted in a reduction in the time during which the community groups are expected to qualify for credit or undergo training, before credit is supplied.33
That is the point. These features aimed at ensuring programme goals of repayment performance and institutional viability can come to clash with the organisational mandate to serve the core poor membership. They might begin excluding the very poor, or lending to them only after imposing the most stringent conditionalities.34
In their paper, Goetz and Gupta argue that all these programmes do is give women access to resources without eroding the basis of their gender subordination35. Mahmud, on the other hand, argues that while these have a limited impact as far as widening women’s access to choice-enhancing resources are concerned, they have a much stronger effect in helping women exercise agency in intra-household decisions.36 But, as we see later, this delivers subpar empowerment.
All of that is what happened in Andhra. The MFIs began focusing on their rate of growth of outreach, efficiency, field worker productivity et al without remembering that these can lead to short-cuts in client selection and training, in field worker training and sensitisation, and in loan size determination. Worse, they began using these as the only criteria for incentive payments to field workers: and third, put a degree of pressure on the staff that left them with no time to deal with issues affecting client satisfaction, other than loan turn-around time, and progression in loan size, etc.37
Thus, while Spandana was being lauded by the MFI community at home and abroad for its margins, and for its unusually high efficiency with extremely low operational costs, the possibility that all these were enabled by a disregard for the clients went unacknowledged.38
What complicated matters further is that the MFIs follow the Grameen Bank model. The operations of Grameen groups are very much under the control of the institution. The rationale? Regular supervision can protect weaker members from exploitation by those who are stronger, and ensure that all members have equitable access to loans. In contrast, the SHGs are much more free to manage their affairs as they wish. NGO or bank staff may attend their meetings, but as observers rather than managers, and the usual intention is to phase out regular attendance of this sort.39
Close supervision can be a double-edged sword. Given that the interest rates are high, and that all borrowers have to adhere to the weekly repayment schedule, members come under massive pressure to maintain regular repayment. It is also possible that pressure (on them) for high recoveries can lead the MFI employees to act even more oppressively than fellow-members in the groups. For, unlike the SHG model where the onus for recovery lies with the members; under the MFI model, it is the staff who take the responsibility.40
That is what unfolded in the late-nineties in Bangladesh. That was the period when, writes Karunakaran, Grameen Bank began moving away from working with its core poor sections due to donor imperatives related to generation of revenues that would enable it to cover all costs. It increased the number of loans per borrower, introduced larger loans and brought in more punitive punishment of repayment discipline. There were incidents, she writes, where the deployment of coercive repayment tactics by programme staff led to suicides by Grameen Bank borrowers and involved the seizure of property of defaulters. These reports were buttressed by researchers’ accounts of the exacerbation of exclusionary pressures against poorer members in a context of structural disempowerment of microcredit clientele vis:a:vis Grameen staff.41
To sum up. If they are to scale up, MFIs need funds from the commercial sector. But, this being commercial capital, the MFIs need to invest these funds in a sustainable, risk-averse. Which means that the MFIs will have to either abjure from lending to the very poor or accompany every loan with very strict conditionalities. In Andhra, so far, they have opted for the latter approach. And that, as we have seen, can hurt the women. An empowered woman would be in a position to resist changes that go against her interests. And yet, if the suicides, in India and Bangladesh, are anything to go by, the borrowers are not always in a position to resist the MFIs.
That brings us to this notion of power.
A question on empowerment
Much of the euphoria over microfinance as a silver bullet to solve the two problems of poverty and gender inequity rests upon two assumptions. One, pushing up the earnings of poor women by making available enough credit to engage in gainful occupations will help them gain greater bargaining power within their households; and, two, bringing together women in groups will not only strengthen their earning capacities, but also create an institutional space from where they can articulate their interests.42 Mayoux calls this a virtuous spiral — women’s access to micro-credit leads to more well-being for families leading to greater bargaining power for women within the household, which then is seen to lead to greater empowerment in the public as a group.43
Whether this claim stands up to scrutiny has been the subject of much debate. According to Mayoux, for many women, (microfinance’s) impact on social and economic empowerment does appear to be marginal, and some women might be disempowered.44 That is echoed by the findings of Goetz and Sen Gupta in Bangladesh. They found that on average women retained full or significant control over loan use in just 37% of the cases; nearly 22% of respondents were either unable to give details of loan use, or were aware of how their husbands or other male household members had used loans, but were not themselves involved in the productive process; about 43% of the cases, they found, fell into three categories of partial, very limited, or no control: indicating a fairly significant pattern of loss of direct control over credit.45
And, that is at the level of households and communities. There is very little in the public discourse on microfinance so far on whether the relationships between the women and the MFIs are empowering. Now, it is impossible to try and answer that question in the absence of fieldwork. And so, in this part of the paper, I focus on two issues. One, I suggest approaches that might aid in developing an understanding of how these relationships form. But first, I will present some more evidence, over and above what has already said about the women being punished by the MFIs (and worse), that suggests that these relationships might not be empowering.
One. In December 2005, this writer attended a World Bank workshop on using the private sector to create market linkages for SHGs. It was an educative event. (Note: the part that follows is reproduced from a blog post I wrote about this World Bank initiative)
“A group of village women sat through the first session, impassively hearing the inaugeral addresses. They sat through the second session, hearing the project leaders from the World Bank’s poverty reduction programmes in other states talk about their poverty reduction efforts, the scale they had reached, and the commodities they could supply to companies. And then, after lunch, one of the speakers, while talking about the women who run the village procurement centres, asked these women to stand up. They stood up. Were gaped at. And then sat down again. End of participation in workshop on how to empower the poor.”46
Two. From Microfinance As Business, a report brought out by The Centre for Global Development and ABN Amro on microfinance, a short but insightful excerpt.
“However deserving and appropriate women may be for microcredit, this is not the only reason they have gotten more of it…. in Grameen’s early years, men actually dominated. As Yunus and his team refined the methodology they shifted toward women. The focus became official in 1985…. After 13 months of field work in Bangladesh, anthropologist Aminur Rahman of the University of Manitoba came to the conclusion that the immediate reason for the move toward women was practical. For cultural reasons, women were more sensitive to protecting the reputations of their families, perhaps precisely because of their relative lack of power. As a result, in rural Bangladesh, at least, they repay more reliably. One loan officer explained to him that, “In the field it is hard to work with male members. They do not come to meetings, they are arrogant, they argue with the bank workers and sometimes even threaten and scare the bank workers.” Women, he was told, are more vulnerable and submissive, and less mobile, thus easier to track down if they do not pay (my emphasis).”47
We come back to the original question. How does the relationship between the MFIs and the women, blank when they first met, acquire what Robert Chambers would call an upper-lower orientation?
One option can be safely junked. The MFIs in Andhra were not deriving their power from external sources. They had an adversarial relationship with the state –no question of deriving power from there. They weren’t hiring the local elite. Instead, they were recruiting local youth48, graduates and school passouts49, who, in turn, derived their authority from the MFI. This pattern of recruitment, incidentally, is typical of the Grameen model which relies on rigid systems to compensate for a poorer quality of staff (compared to the SHG networks).50
Does the answer lie in the contrast between the MFI and the SHG model? As has been mentioned earlier, the operations of Grameen groups are bound and protected by a rigid and highly disciplined system. They have regular weekly contact with bank staff, and they have little discretion as to the amounts or terms of loans, or even as to who receives them. In effect, they have merely to do what they are told.
In contrast, members of SHGs have to demonstrate a much higher level of management skill and initiative. They have to manage their own bank — financed by their own savings, accumulated interest earnings and institutional finance, and juggle a range of loans of different maturities and often at different interest rates.51 Incidentally, Harper uses that to argue that, for this reason, poorer people might be better served by models like Grameen Bank. The SHG model, he says, demands more of its members, and exposes them to greater risks.
But the women attending that World Bank workshop were not members of MFIs. They belonged to the state’s SHG network. And even they, as is evident, did not enjoy a particularly empowered relationship with the other actors in their development. Even assuming that Hunt and Mayoux are wrong and that the women’s status had indeed immeasurably improved inside their households and their communities, it was as though a new level of dependency had been created.
One part of the answer might lie in Bourdieu’s notion of Habitus. According to him, people’s behaviour is neither determined solely by individual decision-making, nor by larger structures in society. Instead, there is a mediating link between these two principles of determination – which he calls Habitus. This is a system of internalized social norms, understandings and patterns of behavior, or, in more general terms, embodied dispositions that incline actors to act in certain ways. It is structuring but not fully determinant of conduct, and located within individuals but not strictly individual.
These dispositions are acquired, particularly through childhood socialization, and constituted through processes of habit-formation. They are structured by the social conditions in which they were acquired. This means that an individual from a middle-class background will hold dispositions that differ from those produced in a working-class environment. This also means that Habitus may be relatively homogenous among individuals from similar backgrounds. They are durable in the sense that they are embodied in individuals and operate at the subconscious level. This means that they are not readily available to conscious reflection and modification. And fourth, they are generative and transposable in the sense that they can generate practices and perceptions, also in other fields than those where they were acquired.52
It is what Goffman calls a sense of one’s place.
Imagining how that would work in the context of the women and the MFIs is not too hard.
Once that equation is in place, the staff excesses are swiftly explained. Think here of Stanley Milgram’s famous experiment. Also, modern industrial societies, writes Drekmeier, suppress ethics. “Because organisations exist to accomplish some goal, responsibility loses its old meaning of accountability downward and has its reference instead to the… accomplishment of a task.” the technical imperative replaces concepts of legitimacy.53
To sum up, there is nothing to suggest that the suicides were an aberration. As this paper has argued, across India, MFIs are indeed deriving a larger proportion of their funds from banks. Similarly, the power imbalances, as personified by the MFI suicides in Andhra, in the report by Roodman and Qureishi, in the World Bank workshop, in the Grameen Bank suicides, are too widely spread to be dismissed as mere aberrations. Further, should Habitus prove to be the right explanation, it is at least partly determined by class. Which means that, in a third world country like India, it cannot possibly be endemic to just two districts in the whole nation.
After the suicides, the MFIs launched a quick damage control exercise — an interest rate ceiling of 15%, desisting from providing multiple credit to an existing borrower, loan recovery at a pace compatible with the borrower’s income level.54 Is that enough? Will that ensure that no more women, hounded by bottomline-obsessed beancounters masquerading as development practitioners, kill themselves?
Unlikely. Partly because a similar strategem by Grameen, after the suicides in the late nineties, had failed as well. Back then, after facing failed repayments, suicides, consumer boycotts and a global outcry, it came up with what is now called Grameen two. This sought, among other things, to offer savings products that could be easily accessed, allow branch level staff to design flexible repayment schedules of varying duration (thereby replacing the one year duration on all loans), and allow borrowers facing difficulty in repaying the option to renegotiate their current loan to a flexi-loan with easier repayment options.
It received a mixed response. On one hand, it helped Grameen grow again. Its client base doubled. And its deposit base trebled within three years of the introduction of Grameen Two. On the other hand, Grameen Two couldn’t ease repayment-related tensions. Nor could it enable borrowers to easily switch to the flexi-loan option. As the more diversified product portfolio swelled interest in Grameen products among the non-poor, and with pressure to maintain steady rates of membership, the staff stayed unwilling to implement policies that might undermine repayment or disturb the rhythm of the bank.55 The idea did not take off – the poor continued to labour under stringent conditionalities, or got excluded altogether.
And partly because the issue of power goes unacknowledged in the MFIs new code of conduct. While it asks MFIs to “ensure that staff do not use abusive language or intimidation tactics while collecting repayments”, that is easier said that done.56 Ultimately, organisations respond to their internal institutional logic. In this case, the need of the MFIs needing to borrow commercial capital is too strong.
It’s perhaps time to close by throwing up a couple of questions about this notion of empowerment. What is it? Is it good enough if women, as the World Bank and Velugu appeared to have done, have been empowered at a household and community level, but dependant at successively higher levels? Is it, for that matter, inevitable and acceptable that new dependencies will be created?
At this point, it is worth referring to a critique of Kudumbashree, the Kerala government’s microfinance-based poverty reduction programme, by Devika and Thampi, to understand what we should mean by empowerment. Schemes like Kudumbashree, they aver, define ‘women’s empowerment’ as increasing their capacity to improve the well-being of their families. Empowerment here, they say, does not mean revolutionary change in power structures, but merely the creation of greater space and flexibility for the poor within the existing limits, postponing the more far-reaching changes to a distant future hopefully reached through the ‘virtuous spiral’.
This, they say, is not good enough. It cannot be. That puts the women in a very defenceless position vis:a:vis the development apparatus – be it the MFIs or the state government.
To challenge patriarchy, one needs to transform economic structures. And so, they write, a feminist interventionist micro-finance programme would define empowerment very differently. In such a context, it would be defined as the women acquiring the capability to transform the newly created opportunities and spaces so that the very limits of existing institutions, public and domestic, are challenged.57
The question is whether minimalist microfinance is good enough to deliver that.
1. Surya, D., “Did small loans lead to seven suicides?”, The Economic Times, 17 March, 2006, http://economictimes.indiatimes.com/articleshow/msid-1452471,curpg-1.cms
2. Celestine, Avinash, “Blood Money”, Businessworld, 10 April, 2006
3. S, Nagesh Kumar, “The makings of a debt trap in Andhra Pradesh”, The Hindu, 20 April, 2006, http://www.hinduonnet.com/2006/04/20/stories/2006042005220900.htm
4. Maddipatla, Rajshekhar, “The mess in Andhra”
5. HS, Shylendra, “Microfinance institutions in Andhra Pradesh”, Economic & Political Weekly, 20 May, 2006.
6. “Microfinance institutions reach crucial agreement with government in Andhra Pradesh, India”, Microcapital, http://www.microcapital.org/cblog/index.php?/archives/401-Microfinance-Institutions-Reach-Crucial-Agreement-with-Government-in-Andhra-Pradesh,-India.html
7. Ghate, Prabhu, “Consumer protection in Indian microfinance”, Economic & Political Weekly, 6 March, 2007 (http://www.epw.org.in/articles/2007/03/11245.pdf). He attributes the state’s actions to “the increasing frustration being experienced by Velugu managers over the effect MFI lending to SHG borrowers was having on Velugu performance as shown in indicators such as the recovery rate within groups, and of on-time repayments by the groups to the banks.”
This perspective, that the state was out on a witch-hunt, is also evident in the business press. See “Micro-sharks”, The Economist, 17 August, 2006. http://www.economist.com/finance/displaystory.cfm?story_id=7803631
8. See quotes by the Andhra government in (2) and (3).
9. Maddipatla, Rajshekhar, “The mess in Andhra”
10. Maddipatla, Rajshekhar, “SHGs, Andhra and the mad populism of Pavala Vaddi”,
11. Maddipatla, Rajshekhar, “The mess in Andhra”
12. Ghate, Prabhu, “Consumer protection in Indian microfinance”, Economic & Political Weekly, 6 March, 2007 (http://www.epw.org.in/articles/2007/03/11245.pdf).
13. Maddipatla, Rajshekhar, “The mess in Andhra”
14. Ghate (see 7) argues that “the base suicide rate in AP is 14 per 100,000. There would be cause for concern only if the rate among the borrowers of an MFI were significantly above this.” There were other rumours doing the rounds at that time. One canard floated at that time suggested that the collector had cracked down after the MFI refused to bribe him.
While cause and effect are indeed hard to hard to prove in these cases — what is the cause of death if a woman kills herself after being thrown out of her house by her husband, who doesn’t want to help her repay her microfinance loans – this writer had spoken to people working in the affected parts of andhra at the time when the suicides broke. A friend of his travelled through the state meeting survivors of the women who had killed themselves and other women who had enrolled with the MFIs. Another source of his information were informal chats with the World Bank’s Andhra Pradesh Rural Poverty Reduction Programme (APRPRP) team. The number of 65 suicides came from them.
15. Spandana’s balancesheet, http://www.mixmarket.org/en/demand/demand.show.profile.asp?ett=763&
Gross loan portfolios of Spandana and Share Microfin (in US$)
FY Spandana Share Microfin
31/03/06 63,646,299 82,083,949
31/03/05 54,596,602 40,199,815
31/03/04 10,170,654 18,902,622
31/03/03 3,219,369 10,398,279
31/03/02 958,056 5,799,022
31/03/01 288,818 3,522,218
31/03/00 104,648 2,401,976
31/03/99 28,556 1,036,040
16. Share Microfin’s balancesheet, http://www.mixmarket.org/en/demand/demand.show.profile.asp?token=&ett=51 (also see 15).
17. Celestine, Avinash, “Blood Money”, Businessworld, 10 April, 2006
18. Maddipatla, Rajshekhar, “The mess in Andhra”
19. HS, Shylendra, “Microfinance institutions in Andhra Pradesh”, Economic & Political Weekly, 20 May, 2006
20. Reserve Bank Of India. Priority sector lending – FAQs. http://www.rbi.org.in/scripts/FAQView.aspx?Id=8
21. Celestine, Avinash, “Blood Money”, Businessworld, 10 April, 2006
22. K, Karunakaran, “Microcredit wins Nobel: a stocktaking”, Economic & Political Weekly, 16 December, 2006
23. K, Karunakaran, “Shifting trajectories in microfinance discourse”, Economic & Political Weekly, 17 December, 2005
24. K, Karunakaran, “Microcredit wins Nobel: a stocktaking”, Economic & Political Weekly, 16 December, 2006
25. Celestine, Avinash, “Blood Money”, Businessworld, 10 April, 2006
26. HS, Shylendra, “Microfinance institutions in Andhra Pradesh”, Economic & Political Weekly, 20 May, 2006.
27. Ghate, Prabhu, “Consumer protection in Indian microfinance”, Economic & Political Weekly, 6 March, 2007 (http://www.epw.org.in/articles/2007/03/11245.pdf).
28. HS, Shylendra, “Microfinance institutions in Andhra Pradesh”, Economic & Political Weekly, 20 May, 2006.
29. “Final draft report of the internal group to examine issues relating to rural credit and micro finance”, Reserve Bank of India. www. rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/63448.pdf
30. HS, Shylendra, “Microfinance institutions in Andhra Pradesh”, Economic & Political Weekly, 20 May, 2006.
31. HS, Shylendra, “Microfinance institutions in Andhra Pradesh”, Economic & Political Weekly, 20 May, 2006.
32. Ghate, Prabhu, “Consumer protection in Indian microfinance”, Economic & Political Weekly, 6 March, 2007 (http://www.epw.org.in/articles/2007/03/11245.pdf).
33. Hunt, Juliet and Kasyanathan, Nalini, “Pathways to empowerment?”, Gender and Development, Volume 9, Number 1, March, 2001
34. K, Karunakaran, “Shifting trajectories in microfinance discourse”, Economic & Political Weekly, 17 December, 2005
35. Goetz, Anne Marie, and Sen Gupta, Rina, “Who takes the credit? Gender, power and control over loan use in rural credit programs in Bangladesh”, World Development, Volume 24, Number 1, 1996
36. Mahmud, Simeen, “Actually how empowering is microcredit?”, Development and Change, 34 (4), 2003
37. Ghate, Prabhu, “Consumer protection in Indian microfinance”, Economic & Political Weekly, 6 March, 2007 (http://www.epw.org.in/articles/2007/03/11245.pdf).
38. Ghate, Prabhu, “Consumer protection in Indian microfinance”, Economic & Political Weekly, 6 March, 2007 (http://www.epw.org.in/articles/2007/03/11245.pdf).
39. Harper, Malcolm, “Grameen bank groups and self-help groups: what are the differences?”
40. Harper, Malcolm, “Grameen bank groups and self-help groups: what are the differences?”
41. K, Karunakaran, “Microcredit wins Nobel: a stocktaking”, Economic & Political Weekly, 16 December, 2006
42. J, Devika and Thampi, Binitha V, “Between ‘empowerment’ and ‘liberation’: the Kudumbashree initiative in Kerala”, Indian Journal of Gender Studies, 14:1, 2007
43. Mayoux, Linda, “Questioning virtuous spirals: micro-finance and women’s empowerment in Africa”, Journal of International Development, 11, 1999
44. Mayoux, Linda, “Questioning virtuous spirals: micro-finance and women’s empowerment in Africa”, Journal of International Development, 11, 1999
45. Goetz, Anne Marie, and Sen Gupta, Rina, “Who takes the credit? Gender, power and control over loan use in rural credit programs in Bangladesh”, World Development, Volume 24, Number 1, 1996
46. Maddipatla, Rajshekhar, “A disagreement in Andhra” http://www.mrajshekhar.com/post/2175480836/a-disagreement-in-andhra
47. Roodman, David, and Qureishi, Uzma, “Microfinance as Business”. http://www.cgdev.org/content/publications/detail/10742
48. S, Nagesh Kumar, “The makings of a debt trap in Andhra Pradesh”, The Hindu, 20 April, 2006, http://www.hinduonnet.com/2006/04/20/stories/2006042005220900.htm
49. Personal communication from uma anakarla, employee at the Andhra Pradesh government’s Society of Elimination of Rural Poverty.
50. Harper, Malcolm, “Grameen bank groups and self-help groups: what are the differences?”
51. Harper, Malcolm, “Grameen bank groups and self-help groups: what are the differences?”
52. Stokke, Kristian, “Habitus, capital and fields”, http://www.folk.uio.no/stokke/Publications/Bourdieu.pdf
53. Drekmeier, Charles, “Knowledge as Virtue, knowledge as power”. In “Sanctions for Evil”, by Nevitt Sanford, Craig Comstock and associates, Jossey-Bass, 1971
54. Ghate, Prabhu, “Consumer protection in Indian microfinance”, Economic & Political Weekly, 6 March, 2007 (http://www.epw.org.in/articles/2007/03/11245.pdf).
55. K, Karunakaran, “Microcredit wins Nobel: a stocktaking”, Economic & Political Weekly, 16 December, 2006
56. The interim code emphasised among other things the need to…
(i) to avoid over-financing of the same household by different MFIs,
(ii) make interest rates more transparent,
(iii) ensure that staff do not use abusive language or intimidation tactics while collecting repayments,
(iv) ensure high standards of corporate governance by including on MFI boards eminent independent board members, and
(v) stay in touch with government authorities, banks and the media on a regular basis.
57. J, Devika and Thampi, Binitha V, “Between ‘empowerment’ and ‘liberation’: the Kudumbashree initiative in Kerala”, Indian Journal of Gender Studies, 14:1, 2007