Nearly three decades after the pioneering Grameen Bank began giving small loans to poor people, microcredit is being hailed for helping some 5 million Bangla-deshis, although critics say it fails to tackle the root causes of poverty.
"We took our first loan to buy 20 hens and ducks and if it wasn't for that we we would be beggars now," Roushanara, 30, said this week.
PHOTO: AFP
Roushanara, who uses one name, used to be a manual laborer. She and her mother were left penniless after her father died, the family having earlier lost their home to river erosion.
"My mother and I used to earn 30 taka (US$0.50) a day digging earth. Our life was very difficult. We were vagabonds but now we have land, a home and we earn around at least 6,000 taka (US$100 dollars) a month."
Roushanara is among the many success stories of the Grameen Bank, which began life in 1976 as a pilot project run by Muhammad Yunus, a professor of rural economics at Chittagong University in southeastern Bangladesh.
The project set out to prove that lending to the poor was not an "impossible proposition."
By giving small loans to landless rural people, it aimed to break the exploitation of the poor by money lenders.
Borrowers used the loans to buy their own tools and equipment, cutting out the middlemen and transforming their lives through self-employment.
However, though the Grameen model has been replicated in more than 40 countries, some experts have criticized it for failing to help those who most need it by giving credit to the poor but excluding the poorest.
Critics have also said microcredit fails to tackle the root causes of poverty and traps people into petty trading in an overcrowded market.
Roushanara, however, has no doubts. After making a success selling hens and ducks, she took another loan to rent a piece of land to harvest rice crops.
She took a third loan to buy an engine which she used to power a tractor during the dry season and a boat during the rainy season.
"Later we bought another engine and rented it out to people," she said.
"We started to earn more money. Now we have bought two pieces of land for cultivating rice and another one for our house. I am happy now. Before I commanded no respect, now I have social identity," she said.
Women in particular were targeted for microcredit after Grameen found them to be astute entrepreneurs.
Grameen's loans are repaid over a year with an interest of 16 percent. Loans are typically given to help borrowers pursue activities such as raising goats or chickens, weaving, pottery or mat-making. Others use the loan to buy a rickshaw or piece of machinery. The purchase of mobile phones through microcredit has given rise to the now ubiquitous Bangladeshi "village phone lady" who makes a living renting it out call by call.
"Without loans I would still be a tea boy because I had no way to change my life on my own," said Dilip Kumar Devnat, 32.
"I was so poor. I could only afford to eat once a day and even the money lenders would not lend to me," he said.
But after taking a loan to set up his own tea stall, he took out another to buy a refrigerator and stock cold drinks.
Gradually, the stall became a success. He took a third loan for a mobile phone and is now planning to take a fourth to set up a stationery shop.
Twenty-eight years after the project started, more than 800 non-governmental organizations and four banks and financial institutions operate microcredit schemes in Bangladesh. Some 5 million people are estimated to have taken loans. Grameen alone has given such loans to more than 2.3 million people in 39,000 villages. Repayment rates have varied from 88 percent to 99 percent.
Last year, Grameen took on some of its critics by offering interest-free loans to roadside beggars, allowing them to buy items such as sweets, pickles or toys to sell at a profit.
Shops give them credit with Grameen as guarantor. More than 25,000 people are expected to take part in the scheme by the end of this year.
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