Why IPL and J-PAL studies make sense

748/8 just came to read this article on washington post. The first thing I did, I smiled. The thing I have been telling people for the last 8 years has at last been published as a research.

Micro-finance sucks, unless you go to a model village of it (Yes, when you visit Bangladesh with Grameen bank, you will be taken there. You will see a documentary claiming 95% success rate). The eye-witnesses are usually delighted, excited, hyped and go back to their country to their job or get a job that often does not related in any means to micro-finance.

Does Micro-finance alleviate poverty? Not necessarily, not as much they claim
Does Micro-finance alleviate poverty? Not necessarily, not as much they claim

My uncle used to work for Grameen Bank—the banker of the poor. Once I had the chance to visit his place of work, which was Natore. I remember some of his words about not liking the job. It breaks heart to be rude to loan takers and he felt that quite often. He left the job after 10 years of service.

Two most acclaimed things about micro-finance: 1) It works. 2) Success rate is high. I beg to differ.

It does not work for some countries, that is already proven, countries like Mexico, Philippines. Two years ago, during TEDGlobal conference I met some of south american social workers who were furious about micro-finance. Why? Mainly because of the reasons the Washington Post article describes. High interest rate with people’s tendency not to give the loan. And it is impossible to impose such things by law on people in South America.

What about Bangladesh, the birth place of Modern-Micro-finance. 1970 to 2015, how much poverty has been alleviated? I tried to find out what the Grameen Bank meant by poverty line. Nothing came out on that. What is meant by poverty line by Grameen Bank?

The next in point, like any other Bank Grameen is financed by Government of Bangladesh ( At present the Bank’s authorized capital is Tk. 10,000 million (increased in current year from Tk. 3,500 million) and paid-up capital is Tk. 734.05 million. Members who are also borrowers hold 79.57 percent of Grameen Bank shares. The remaining 20.43 percent is held by the Government of Bangladesh, Sonali Bank Ltd. and Bangladesh Krishi Bank). And it does need to comply with Bangladesh Bank (central bank of Bangladesh) rules and regulation. Muhammad Yunus did hold his position even being the laws pretty well by himself.

The Grameen bank 16 decisions contain some points which I take as hilarious. For example decision 3 says, ” We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest.” Firsthand witnesses have seen loan collectors take the roof, cows or any other valuable things from borrower when they fail to pay interest.  Some other account of such incident can be found here.

Grameen Bank also claims that 50 million people has risen out of poverty because of their effort. Cool, lets take it granted. Grameen bank is operational for almost 40 years. right now, poverty rate is around 30-35% in Bangladesh. 50 million is 1/3 of the total population. Now, of that one third, yes of that one third the voices coming out should be much louder than it seems. What happens afterwards? You are out of poverty, and then you live in constant condition?

I had a simple logic before. I still have it. If suppose, Grameen Bank is successful in its cause, there should be no poverty at all in Bangladesh and as a result we will not be in-need of the bank, because it does business with poverty. If no poverty, no business.

Lastly, I know it may sound personal— when you see a person who works with the poor and talks of getting rid of their poverty, but rides one of the luxurious cars in Dhaka, you do tend to question. When you hear employees are not paid well enough and the employee turn-over rate is high, you do need to ask questions. World media may try to put it in a political agenda, but what is right will remain right, no matter who the person is. Getting a Nobel does not mean you are above all laws and regulation. It makes you more responsible as people do look up on you for examples.

[Two recommended articles to read are in link 1 and 2, but there are in Bengali]


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