In 1998 University anthropology professor Lamia Karim returned to her native country of Bangladesh to expose the reality behind the nation’s microfinance programs. What she found — which she documents in her new book, “Microfinance and its Discontents: Women in Debt in Bangladesh” — defied a widely accepted practice and pitted her against some of the most powerful and distinguished organizations in the world.
“Professor Karim’s research shows that extending loans to women can have bad consequences,” anthropology professor Lynn Stephen said. “It disturbed an important myth of microcredit being universally beneficial.”
Bangladesh has been a hub for non-governmental organization projects for decades, Karim said. Some of the most prominent and recognized projects developed in the country were microfinance programs that distributed small loans to Bangladeshi women. They have been praised internationally as a means of addressing poverty and empowering women.
“You’re telling the world that they are becoming entrepreneurs,” Karim said of the programs. “It was a good story — people want to help poor people.”
Suspicious of the rhetoric, Karim conducted an 18-month field research study in 1998 and a follow-up study in 2007. She intended to document what these microfinance programs, particularly those of Bangladesh’s Grameen Bank and Building Resources Across Communities — two of the world’s most powerful microfinance institutions — really meant for these women.
“I was critical; these were not the women I had met,” Karim said. What they were saying about the programs “did not correspond with the reality I had seen.”
According to Karim, the Grameen Bank and BRAC loans have a 98 percent rate of recovery, which seemed high considering Bangladesh is one of the most economically depressed countries in the world.
“Either rural women were all becoming successful mini-entrepreneurs through these microfinance NGOs, or there was a hidden story behind these high recovery rates,” Karim writes in her book’s preface.
What Karim found, she said, was that although women were issued the loans, 95 percent of the time it was their husbands and sons who actually put them to use. When the loans weren’t be paid back, however, the women were still held responsible and lenders exploited the nation’s social codes of honor and shame, often publicly humiliating women to pressure them into paying.
“They are using poor women’s social roles instrumentally,” Karim said. “I find it totally unconscionable to use women in this way.”
Karim said she found that NGOs were also selling product “tie-ins” — adding to loans separate products like chickens or cell phones and marketing them as means of creating income-generating projects. What they really did, Karim said, was create internal markets with the NGO as the primary beneficiary. Along with the initial chicken, for example, there were hidden costs like feed that women became dependent on an NGO to sell to her.
“They’re using women as surrogate capitalists,” Karim said. “The poor should not be treated as markets.”
Karim’s findings have been held to a high level of scrutiny, she said, particularly because the Grameen Bank was awarded a Nobel Prize for its work in 2006.
“I didn’t realize what it meant to write against the master narrative,” Karim said, adding that 20 million women are members of microfinance programs. “You cannot decimate this institution, but I would like to see more oversight.”
Karim hopes her book, which has been highly acclaimed by the Huffington Post and National Public Radio, will bring more attention to development projects in Bangladesh. Her findings have already gotten more attention in light of a recent controversy over Bangladesh’s central bank’s efforts to remove Muhammad Yunus as the current director of the Grameen Bank.
“You have to be brave to do it,” Stephen said of Karim’s work, which initially she had to struggle with to get recognized. “Most of the great ideas in the world (however) have come from people pushing the status quo.”