Professor Muhammad Yunus’s Grammen Bank has come a long way since its origin in 1976. Admittedly, it wasn’t an easy journey; not least his recent brawl with the Government of Bangladesh when he was ordered to step down as head of the micro-finance bank. However, in 2006, the World has recognised his contribution in poverty reduction and subsequently he was awarded Nobel peace prize. It made him world famous - all gratitude on behalf of people of Bangladesh go to him as he made all Bangladeshis very proud indeed.
His concept on micro-finance is very simple. Rural poor people (with a particularly emphasis on women) can take small loans to start any business, which they are usually good at doing. Once revenue start to come in, they can start returning the money that was borrowed and with the help of revolving loan funds their businesses can further grow, thus leaving behind poverty and destitution. A fantastic idea that was revolutionised entire banking system in mid 1970s.
On the other hand, economic impact assessment of micro financing has been debated in the literature for many years. Particularly in Bangladesh many researchers do not agree with the conclusion that micro-credit definitely increase poor people’s income and consumption hence reducing the poverty level. Critiques have been arguing that micro financing is slow, high interest rates, over-indebtedness, commercialisation, lack of women’s authority in a male dominated society, religious tradition (e.g. sharia tradition), cultural stigma (e.g. women dependency is repulsive) and natural calamity (that wipes of loan holder’s assets) have put added obstacles in economic empowering of women.
The debate goes on - if micro-financing is helping poor people to reduce their poverty level then why after so many years millions of people are still poor in the rural Bangladesh. If the same concept is working appropriately in other countries around the world then where has it gone wrong in Bangladesh? It isn’t a logical fallacy but a valid question. Counter argument is that there are too many people to lift them out of poverty and many variables and factors associated within the context of Bangladesh; moreover, in a slow process like micro-financing, it would take decades to see the real impact. Indeed, it has been very debateable, yet over the last three decades millions of poor people were benefited with the help of micro-financing in Bangladesh.
Critics, more specifically the proponents of communist ideas have gone further - saying that the entire flagship Grammen Bank micro-credit movement is another way to counter the spread of communism. Providing small and hand-to-mouth loans to the poorest would thaw the undercurrent in building any future revolution, which could potentially jeopardise the capitalist system. And counter the spread of communism would be highly desirable by the capitalist masters. That, in my opinion, may or may not be verifiable as there is no hard evidence to prove that the expansion of global empire had reached to the poorest in rural Bangladesh by introducing micro-financing system in mid 1970s.
Say, if the communist revolution were to happen, then perhaps there would be an arms struggle and the conflict might drag for many years. We don’t have to go too far – our neighbouring country India is a perfect example, the Maoist revolutionaries have been fighting for decades against poverty and extreme inequality in parts of Central and Eastern India, including Chhattisgarh, Orissa and Jharkhand. The Indian government repeatedly launched full-scale war against these rebels and the consequences have been more deaths and destruction.
After the recent economic turmoil around the World, the communism-capitalism cat-and-mouse arguments have metaphorically become ailing lame-duck. Banking crisis around the World is costing taxpayers’ vast amount of money; whilst banks are still reluctant to provide loans to the small businesses, which in turn would reactivate the economy. Irresponsible free market capitalism that led us into this situation and the world need to get out of this recession unless bank will provide more micro finances to the small and medium sized businesses. Therefore, there is a need for this mechanism to be applied to the wider scale around the world.
On the other hand communist system driven by a centralised economic planning has not worked either and that is why economic reforms (e.g. de-collectivisation of agriculture sector, promote private entrepreneurs and foreign direct investments etc.) were taking place since 1980s in most of the major communist countries. But that does not mean that the revolution should not be happening, also its capability should not be underestimated. Given that it can happen in different ways. Revolution needs to happen to build a new green economy that would result in poverty reduction, increased equality and human wellbeing while reducing environmental negative impacts and at the same time increasing natural capital.
We ought to build a low carbon and resource efficiency society. Keep that in mind, Grameen Bank can make a real difference largely to rural Bangladeshis by introducing more and more micro-credits for renewable energy, pollution prevention, and water purification and desalination technologies.
