Kabir Ahmed
I am (pseudonym) Kabir Ahmed In the late 1990s, I worked for several years in a loan program in three upazilas of a large micro-credit institution in Bangladesh and admitted about 5,000 women from one upazila as a member for loan, out of which I gave microcredit to about 4,200 women in a year. Almost all of these members have taken loans for the 2nd, 3rd or 4th time. This large number of borrowers have taken loans from my hands and I have been to almost all the village associations and almost all of them know me. If he went to the association, he would sit on a chair or stool. I have had the opportunity to talk closely to these poor women, their husbands and family members. These poor members have been members of the organization for three to four years and have taken loans every year. Almost all the members have taken loan money to improve their family income, but even after taking loans for so long, they did not see any economic progress. They could not pay loan installments. The loan taken for the first and second time could be repaid somehow, but if the loan was taken for the third or fourth time, it could not be repaid and almost everyone was considered a defaulting member. He also borrowed money from other NGOs. I used to roam in remote areas of all the villages of 9/10 unions of the whole upazila and thought that these poor members are taking loans but I do not see any improvement in their family and living standard. I went to an association surrounded by water around the upazila and beel bank. When I returned after seeing it, the field worker said that there is a woman in a house at the very end of the brother, who had taken a loan of 12,000 / = (twelve thousand) rupees, but for about ten months she has not paid a single installment and she and her husband do not listen to me. Then I walked a long distance on the unpaved road and went to his house. As soon as the woman saw me, she took a chair from the room and let us sit. My employee showed me his loan installment side book and said that he did not pay any installment after taking the loan for the third time. I asked the member what to do about the loan. He said, “Sir, I bought 75 ducks with this loan.” He had 40/50 more ducks with it, now about 100 eggs are available every day and in this rainy season, I have bought 200 more small sized chicks with the money from selling eggs and now they have about 300 ducks. Her husband used to work as a daily wage labourer in someone else’s house, now he takes care of his own ducks. Today her husband took the ducks to graze and will Come back with the ducks before evening. The woman said this was the first time a manager had come to my house. Sir, leave today. I will soon go to the office and pay all the money. The field worker said, “Brother, he says this every day but does not pay any installment.” Today I will take an installment of money. I asked the employee if he would pay in the future. On my way back, the woman called me to my room and tied 30 eggs in an old lungi with paddy husks and asked my staff to take them. And he said I benefited from this loan. My husband used to be a daily wage labourer and now he is no longer a daily wager. I earn Rs. 200-250 per day ( 4 eggs were Rs. 7-8 then). I know you don’t eat at your members’ homes. You have a lot of people in your office. Everyone will eat an egg and pray for me and my six-month-old son. I was reassured by the woman’s words and returned to the office and in the afternoon boiled the eggs and we all ate one. After about 2/3 months, one day the woman came to the office with her husband and young child and paid all the arrears.
This incident made me think greatly. Of the nearly 42,000 borrower members who paid fairly regular installments, there was no improvement in their lives. Despite paying 50% to 80% installments, the members are living in that miserable state of poverty. But the member who did not pay any regular installment of the loan for the third time has developed his family by raising ducks. So I could see that the defaulter and the loan installment did not pay the development of the loan! And those who have paid loan installments regularly have become poorer.
Then I was transferred from that upazila to another upazila. There also we see that most of the members pay the installments of the 1st and 2nd loan fairly for the first and second time. But after taking the loan for the third time, they became defaulters. You can’t get out of the vicious cycle of poverty by borrowing. Then I started making extensive calculations about the interest rate, distribution system, savings and installment payment time of this small loan, etc. Why can’t women prosper with debt or become poorer.
Member Admission and Lending Procedure:
At that time (late 1990s) a women’s association group was usually formed with an average of 30 women members (more or less). Again, there were small groups of 5 people who were in or near the same house. He had to become a member of the association by buying a pass book with a membership fee of Tk 20 and he was given a loan if he deposited savings of Tk 10/20 for 4-6 weeks and attended the meetings of the association regularly. Apart from the admission fee, if the savings of 200 rupees to 300 rupees were deposited, the member was given a loan of 2000 or 3000 rupees. The loan with interest had to be repaid in 46 weekly installments i.e. 46 weeks and the installment amount was the same.
Totalitarian Aggression of Usury:
If a member of micro-credit wants to take a loan of Tk 2,000 at 15% interest, he has to deposit at least Tk 200 in savings and in 46 weeks (which is called flat rate) he has to pay a total of Tk 2300 in interest. That is, the amount of each installment is 50 rupees and at the time of loan disbursement, the mandatory 5% savings (50 rupees) are deducted from the loan money and shown as the member’s savings, that is, a member gets 1950 rupees of the loan (2000-50 rupees). To get this loan of Rs. 1950, he had to deposit Rs. 200 in savings, and if you look at this savings as a down payment of the loan, he actually got Rs. 1750 (1950-200); As a result, the interest on 1750 rupees is actually 2300 rupees (interest is 150 rupees for one thousand rupees).
Again, every week a loan installment of Rs 50 and savings of Rs 10 has to be deposited from that Rs 1750 and a member cannot use the entire loan amount for a year. Every week, he has to pay 60 rupees for installments and savings from his original capital and the real money is reduced and they are very busy paying these installments. That is, a member can actually use 1750/2 = 875 rupees as capital for 46 weeks to pay the installment of 1750 rupees. Since the interest of 875 rupees is actually paid 2300 rupees, the interest rate is 262.8%, which is calculated for one year. But most members repay the loan within 40 weeks before 46 weeks to take the next loan, so the interest rate will change as time of using the loan and the interest rate stands at about 324% (the interest amount in the uniform rule). This interest rate will be much higher if the savings deposit is taken into account with installments. Because the 10 taka that the member pays as savings with each installment is given from his capital.
As a result, he pays 400 rupees in at least 40 weeks and as its mid value, his capital is decreasing (875-200 = 675 rupees) in this 675 rupees, he pays 2300 rupees !! Interest above 364%!! (However, interest is paid at the annual bank rate (6%) assuming Mid Value on the weekly savings deposited by the members, which is tantamount to the delivery of the mountain moose.) I’m not happy with this interest rate either.I don’t know where this interest rate will go if you take into account the use of capital, charges and other factors. If you are not a big researcher, it is very difficult to find out the real interest rate.
Again, the loan and savings installments that these members are paying every week are being used every day to provide loans to other members and the company’s money is not left in the bank for a single day. It is constantly used. Microfinance institutions are building mountains of money using the capital of ordinary poor members. That is why I see that after using only 10-20 lakh rupees (Seed Money) to start a branch, within two years the capital position (loan and savings money) of a branch exceeds crores of rupees and from there even after paying office rent and salaries of 10-15 employees every month. One branch has been demolished and two branches have been completed in two to two-and-a-half years and the total capital position is close to Rs 3 crore. Where the company did not have to provide any additional capital. All the money is from poor women’s savings and instalments. Much like a vegetable or fish seller – the money that buys fish or vegetables every day, at the end of the day, the profit is made at the end of the day, the next day he buys fish or vegetables again for all the money. Revolving capital every day is profitable.
Grameen Bank, which received the Nobel Prize as a microcredit disburser, and all other organizations provide loans under almost the same policy and the interest rate is almost the same. However, since Mrcro became the Credit Regulatory Authority (MRA) in 2008, the government has set interest rates at 24%-25% and stopped deducting members’ compulsory savings by 5% while disbursing loans. However, the installment amount has been kept for 46 weeks. All microfinance organizations are funded by the Palli Karma Sahayak Foundation (PSF), a government institution. PKSF was formed with the World Bank’s fund of Tk 300 crore, which is controlled by the government through the foundation, whose managing director and other officials get facilities like Bangladesh Bank.
If a person takes a loan from a conventional bank, he returns the entire money at the end of the loan period and pays it in installments and if the installment is paid, then the interest rate of his money is also refixed according to the time. Every bank provides loans to customers against salaries, land, shops, etc. Banks also have policies such as: If you take a loan of one lakh rupees, a customer gets a loan of eighty thousand rupees if you give a down payment of twenty thousand rupees and at the end of the year or at the end of the term, he has to pay interest on that eighty thousand rupees. But in the micro-credit system, the savings deposited by the members are not considered as down payment and the interest on the loan has to be paid at the flat rate on the entire loan. So here too, real hoax in repaying the debt of the members.
In the microfinance system, loans are given without any mortgage on the savings of the members and the trust of the president of the association and the witnesses of some group members. This is socialist capital. This loan is given by capitalizing on the trust of this poor woman and her family, which we call social capital. If a member is unable to repay the loan, the guarantor or the witnesses or their husbands raid his house for installments. Because the field workers say that if the installment of the defaulting member is not paid, then those members who testified in the future will not get any more loans. The self-esteem of the people of our country is very high. During the 1974 famine, people went without food but did not steal or commit robbery. Grameen Bank, including these lending agencies, have been exploiting the poor people for decades by using or capitalizing on the self-esteem of the poor people. Using this self-esteem is the key to debt collection.
One incident still haunts me today. The incident is that when I visited various associations in the field and went to an association in a remote village about 8/10 kilometers away from the upazila headquarters at 11/12 am, my field worker said that brother, except for one member of the association, everyone has paid installments and there are two loan proposals, but if one of them does not pay installments, I will not propose them a loan. The president and other members have gone to his house, you sit for the installment. We’ll leave together shortly. I waited for a long time with the staff at the center of that house. After some time, the sound of a heated argument was heard from the next house and it continued till about 2 o’clock. Then several people, including the president of the association, came and said that this is the money of two installments. They have also kept the remaining two installments with them, which will be paid in the following weeks. Later, the members said that they had raised this money by selling the Tables in the member’s house! I was shocked to hear that! Is that even possible! Then I saw the woman’s side book. The members were poor, landless. The woman’s face still flashes before my eyes. I still have the wound in my mind. I am nostalgic. Guilt works. Microfinance workers have witnessed many more tragedies. I have seen people of Grameen Bank selling tins of rice at home for not repaying the loan given to them to build houses. To sell the nose rings of ASHA workers. (Newspaper News 1993) Raiding women’s houses in groups at night for instalments, staying at home till midnight, how much more, I cannot express in words. The company have turned educated employees into goons by riding on red motorcycles to collect loans. As the head of the NGO, the chief executives of the organization increase their salary allowances through the executive committee of the organization. They ride in expensive cars. Sit in an air-conditioned office. They are alleviating the poverty of the poor people by sitting in air-conditioned offices! But after independence, NGO activities in the country started with simple offices and furniture and the constitution states that if the needs of the people are met, they will merge with any charity organization of the government. But now they have become capitalists. Who stops them anymore! However, some educated unemployed people of the country have got jobs. That’s all there is to it. All the rest is questionable development.
Norway’s international organization NORAD, which gave the first fund/fund to Grameen Bank, researched the loan and found that the members have become poorer and destitute with this loan. Their poverty has not been eradicated. In addition, Dr. Yunus transferred about $10 million (Tk 700 crore) from Grameen Bank to his own organization in 1998/99.
At that time, a documentary titled “Small Debt Trap” was shown on a Norwegian television. Probably in 2009/10, A much renowned journalist named Munni Saha did a big documentary news on the TV channel ATN Bangla. The headline was “Micro Debit” Anyone can find the link to the news. The documentary shows Professor Dr. Muhammad Yunus’s Grameen Bank from Jobra village in Chittagong flooding the house of the women group to whom they gave home loans. There has been no development with microcredit for those members. There is an analysis of Grameen Bank member, journalist Nurul Kabir, NGO leader Khushi Kabir and an economist living in the United States.
The capitalist world awarded the Nobel Prize to Grameen Bank and Professor Dr. Mohammad Yunus for discovering the tool of exploitation of capitalism! The Western capitalist world wants Professor Dr. Muhammad Yunus!
Kabir Ahmed