Feature Img

yunus_bankerpoorThe heading is not mine. The first portion is a quotation from Mr. Muhammad Yunus and challenged by Thomas Dichter — one of the development experts who participates in my film, “Caught in Micro Debt” which was aired in the Norwegian Television on November 30.

The film was the Norwegian version of an upcoming international film on microcredit which we have been working on over the last couple of years. The new version, which will be named, “The Micro Debt” will be released at the end of January in both Sweden and Denmark. From there we can only hope that other countries will air our film. Thomas Dichter’s retort, “Is debt?,” pinpoints what our film actually is about: does microcredit really eradicate poverty? Is poverty just a matter of handing out a small amount of money and then letting “the market” do the rest?

After talking to scores and scores of poor people in Mexico, India and Bangladesh I do not believe so.

One billion poor people in the world need access to money — just like you and I — but when the poor have to pay interest rates ranging from around 30-200 percent — one could with good reason question how this is being done. And that is what we have done. Asked questions. We have studied loan books, and we have seen some of the consequences of an unfettered market, where poor loan takers tell us about harassment, intimidation and threats. What they told us is a million miles from the smiling faces we see depicted in the many websites and adverts which hail microcredit as the number one solution to poverty problem. As far as I know it is the first time ever that a TV-documentary has turned the lens the other way, and tried to look at the other side of the coin — the flipside where people drink poison or burn themselves to death in India or where poor Mexican women who have lost everything because they are so indebted with loans with 200 percent interest rates or where the small villages in the area of Dinajpur have not moved themselves one bit out of poverty.

On the contrary in order to service the debt, houses have been sold and people have fled to big cities. Embroidery, jewellery, pots and pans — even the tin-sheets from the roofs are being sold to pay the weekly instalments. Not only to the NGO’s and banks but also to the local loan sharks who still exist and have better days than ever.

One little feather and the five chickens

A part of our story is about Grameen Bank and Mr. Yunus and without being personal, I can conclude — after almost a month in the centre of the enormous media attention in the Bangladeshi and international medias — that the famous Danish poet, Hans Christian Andersen’s fairy tale of the feather that became five chickens is not only right — it’s also very scary.

However, and because not many journalists in Bangladesh, France, Italy and the UK are fluent in the Norwegian language, I can understand that some misunderstanding can occur. But that cannot and should not be an excuse for not doing the job properly!

I have seen and read so many wrong things, that most of my times have been spent correcting various journalists and commentators spreading rumours about Grameen Bank and Mr. Yunus. I’m therefore glad that bdenews24.com has given me the opportunity to clarify a few of the many misunderstanding/misinterpretations of what my film is actually saying:

• We have never said — nor claimed — that the transfer of money from Grameen Bank to Grameen Kalyan was done to enrich Mr. Yunus and/or Grameen Bank

• We have never said – nor claimed – that corruption or any misuse of the money has occurred

• We have never said – nor claimed – that Grameen Bank broke any law.

However, we have said – and we still do:

• The transfer was violating the agreement between Norway and Bangladesh.

• The official report from Norway does NOT give any substantial answer as to what happened with the remaining Norwegian donation to Grameen Bank.

• We are still puzzled as to what the so-called “compromise” actually contained.

• We have published a number of documents that were stamped “Confidential” at the offices of Norad and at the Norwegian embassy in Dhaka. We have asked:  If there was no problem with the transfer, why were the documents kept away from the public? So far — no one has come up with an answer to that question.

• We are still puzzled as to why the First Secretary at the Ministry of Finance’s ERD-division turned 180 degrees after initially deciding that all the money should be transferred back from Grameen Kalyan to Grameen Bank. We still don’t know why. (However, I have read that Mr. Yunus said that all the money finally (when?) was later transferred back. If so, why was that done, when it has been said that nothing wrong was done in the first place?)

• The transfer was done for tax reasons. A point that was one of the major concerns in the documents from Norad and the Norwegian embassy in Dhaka.

• We are still puzzled about the “taxation-questions”. To my knowledge, Mr. Yunus has shifted from saying the transfer was not done for tax-reasons to that it was. We only quote from his personal letter and we would still like to know why or what motive was behind the transfer.

• When the Norwegian aid to Grameen Bank finished in the mid 90’s, it was agreed, that there should be made a joint evaluation (NOT an independent evaluation) where both Grameen Bank and the Norwegian embassy participated. Why did the evaluation not mention one single word about the transfer of money?

According to the head of the evaluation, it was not part of the agreement. We have never received an answer as to why. Who decided the terms of reference for the evaluation?

I have with interest read Grameen Bank’s official response on their website as I have for almost six months asked Mr. Yunus and Grameen Bank for an official interview on camera. He and the Bank decided not to participate. It is their decision. I can only regret that one of the most dedicated promoters of microcredit rejected the opportunity to answer the many critical points I presented to them in email after email.

Let’s “Grameenise” the society

In an earlier response on bdnews24.com, Mr. Afsan Chowdhury correctly concludes that microcredit is merely a simple loan system — and not the miracle solution to alleviation of poverty that it has been sold as by aid agencies and Grameen Bank — and the plethora of evangelistic microcredit organisations.

The way microcredit works in almost all developing countries is unfortunately not as simple as it looks. The IPO’s in India (SKS) and Mexico (Compartamos) have highlighted that there is big money to be made out of poor people. And in Bangladesh the facts and figures from e.g. UNDP contradicts the glorious path envisioned by Yunus which purports to “see poverty in a museum”. In the Human Development Report from UNDP 1990, more than 84 percent of the population in Bangladesh lived below the official poverty line. 29 years later, the annual report from UNDP said that almost 81 percent of the population of Bangladesh lived (survived!) on less than 2 USD a day.

After three decades of microcredit and being the world’s motherland of microcredit, one should expect that the figures would have dropped dramatically in Bangladesh. Sadly they did not. The reason is that poverty is not simple at all. People are poor for a lot of reasons, and to “Grameenise the private sector” is not the answer: “Not all of us can become Bill Gates. Why do we believe that poor people are better entrepreneurs than you and I”, asks Thomas Dichter in our film.

The Scandinavian welfare model has shown that creating a well functioning society means that the state needs taxes to provide free education, free healthcare, good infrastructure and provide jobs and basic rights for the inhabitants of the country.  That development has been achieved over generations and is or should not be in the hands of liberal marketers and greedy loan sharks — whether they are private or NGO’s/banks.

It can seem almost masochistic to pay from 50-60 percent in income tax, but that’s the reality in Scandinavia. On the other hand, my children can become doctors and professors without paying one single taka. They even get money from the state to study. I can get a heart surgery for free and if I lose my job, the state will give me money for my food and basic expenses.

When confronted, most say that offering microcredit is a costly affair. The banks/NGOs have to employ numerous people to administrate the system and that is why they “have to” charge the exorbitant interest rates. I’m asking: is that the poor people’s fault that the system is built in that way? Do the loan officers have to be paid in terms of how many weekly payments they can collect or how many loans they can hand out? Is their “success rate” based on the fact that most of the borrowers we met had from 3-7 loans at various banks/NGOs – and the main reason was the fact that defaulters were offered a new loan – just to cover the old one in order to make the proclaimed “success rate” higher than even Danish banks can flash.

And what about basic consumer rights? Do they exist when it comes to microcredit? Almost all we met in the villages in Bangladesh and India can’t read or write. We asked: So if you do not know how to read and write, how do you know what’s said in the loan documents you signed?

“The loan officer told us”, they said.

It’s like asking a blind man to cross a highway – ensuring him that everything will be fine.

Mr. Asfan Chowdhury asks for better and more thorough investigations into these issues. I totally agree. However, there are lots of evidence-based and imperative reports that have addressed the “not-so-success-full” side of microcredit.

The problem is, hardly anyone likes to listen.

It is about time they did.


Tom Heinemann is an independent journalist and filmmaker based in Copenhagen, Denmark.

20 Responses to “Credit is a human right. Is debt?”

  1. Rebecka Hornyak

    Wonderful write-up, a lot of the information ended up being specially useful.

  2. Ana

    Dear Mr Heinemann. Thanks for your article. Bangladesh govt carrying out an investigation into Grameen Bank. But please see what Denmark’s company Grameenphone is doing to its staff in Bangladesh. Why writers from Europe do not write about it?

  3. Ehan

    All these people who are not very sure about the con side of micro-debt either never visited any village in Bangladesh, or even if they did, they were busy taking pictures and preferred not to talk to the locals.
    Because if they ever had any sort of discussion regarding micro-loans with at least 2-3 village elderly, they would know how destructive and flawed this credit mechanism is.

    One does not need to provide evidence to prove that Dhaka is filled with rickshaw-pullers. One just needs to be in Dhaka for once to know that. same way, all these foreign living sympathisers of micro-credit, if not anything, please visit your own village for once and talk to the people to know the real picture.

    It wont take you long to explore the real meaning of the so-called ‘success rate” and understand why this peace prize winning model is being attacked so harshly.

    All these people who are asking for an alternative:
    Just leave the poor as it is.
    Does exploitation need an alternative?

  4. S.M.Khaled

    I will not comment on the topic of fund transfer which is more a legal issue and Mr. Heinemann himself claimed no wrongdoing or any personal benefit enjoyed by Prof. Yunus.

    But let’s talk about ‘microcredit’ as a concept to alleviate poverty. Poverty alleviation is quiet a complex subject and of course easier said then done! Prof. Yunus has tried to do something in his own way and people have seen some benefit of it. Like every other things in life, there is nothing called absolute ‘good’ or ‘bad’. So, Prof. Yunus’ efforts did not deliver 100 percent, but how can one say that it didn’t bear any good at all?
    It’s easy to criticise something, but can Mr. Heinemann propose some better options?

  5. shaheda

    Nobody is above the law, not even Dr. Yunus. But the problem in Bangladesh is when we seat someone in the highest seat, we can never take off our silver-lined lenses and look with naked eyes.

    Programs have gone wrong. It does every year. Can any institution be naive enough to say that it has achieved 100 percent without stepping into our target population’s throat? The microcredit is one such program.

    True there are instances of a boy doing his Phd. thanks to his mom being a recipient in microcredit loans. But unfortunately, the ravages of the loan have left poor people poorer. Grameen Bank IS the “MAHAJAN” of the modern world, maybe not so unscrupulous as the old-day lenders. but a LENDER, nonetheless…and when we argue..we always remind ourselves..’maybe not so unscrupulous’..as if we are doing ourselves a huge favour thinking ‘we are doing the poor a HUGE FAVOUR’ by eradicating their poverty..or as Yunus likes to make a tall, childish claim ‘poverty will be in the museum’…when? When you are buried 3 fts under the ground, Mr. Yunus? Would you not like to see instant results? I would..because I am a modern woman…and micro-credit in Bangladesh…after almost over 30 years have only made a slight ‘almost invisible’dent in the society…so really..what are we patting our backs about?? I think enough is enough..the poor in Bangladesh have been raped twice times over by being made a guniea pigs in the hands of so-called reformist..this ‘invisible genocide’ needs to stop..unless (and here is an option!) GB can come up with over 100,000 creditors and make a tangible report…with photos and authentic story-lines (as of 2010) saying how micro-credit has made a difference in their lives…sorry..figures and numbers are just ‘bullshit’…we all know consultants are being paid ‘hefty fees’ to come up with these numbers in the comfort of their over-priced hotel bills and remunerations!! tsk! tsk!

  6. Ashfaque Chowdhry

    In no way I wish to sound personal, but I would like to ask Mr.Tom Heinemann: What actually is your personal agenda as regards to poverty in Bangladesh visavis Grameen Bank – especially Prof. Yunus?

  7. C. T. Karim

    I have a couple of simple queries/observations:

    1) Firstly, microcredit is a concept — why are the cons of microcredit being focused on “Grameen Bank” and “Dr. Yunus” only? There are other micro-finance institutions in Bangladesh, BRAC being one of them — is it the author’s view that BRAC’s (or for that matter other NGOs) (i) microcredit program has gained greater success in alleviating poverty than Grameen Bank; and/or (ii) rate of interest for microcredit lending is much lower than Grameen Bank?

    2) Secondly, did the author at any point try to come up with the solutions to the problems he has so ‘wisely’ identified? Or at least did he try to identify the root cause(s) of the said problems? Let’s accept on face value the author’s notion that “microcredit”, “Grameen Bank” and/or “Dr. Yunus” are the root of all evil — now what is his solution? Does he propose: (i) to stop microfinance activity altogether? or (ii) to continue microfinance activity but at a lower interest rate? or (iii) to continue microfinance activities, but not to focus on recovery? or (iv) some other ‘magical’ solution?

    3) Thirdly, is the author solely against harassment/intimidation of poor people only in connection to recovery of debt or is the author equally opposed to the notion of rich people incurring debt, losing property through foreclosure, filing bankruptcy etc.?

  8. M. S. Ahsan

    Did Mr. Heinemann forget to talk to people like Mr. Shahid, Mr. Billal Hussain, Ms Maria Roy or Mr. Ashfaque Chowdhury? It is puzzling but one has to grant him his human rights of choosing his interlocutors carefully so as not to debase his own premise. Some such reposte should come with more statistics to refute Mr. Heinemann’s claims from the horse’s mouth.

  9. imon

    Dear Tom Heinemann, thanks for your write-up. While I am not in a position to comment on the controversy of fund transfer by the Grameen Bank (as things are still not quite clear and I am not a legal expert), however, I would like to offer my views on some social and economic issues of Bangladesh that you raised here.

    In terms of poverty (as well as social and economic development), it is well-recognised that Bangladesh has done fairly well in the last 29 years (you said in the last 29 years but also mentioned since 1990). Anyway, it is true that in terms of income growth, the country has not progressed much during the corresponding periods, but as you know, economists prefer to see the progress of a country not merely based on income growth (or income poverty) rather development has been seen from a holistic perspective (income, education, gender, health etc); that’s what UNDP’s human development index is all about.

    The HDI value of Bangladesh has increased from 0.295 (out of 1) in 1980 to 0.342 in 1990 and 0.497 in 2010, thanks to the country’s better performance as far as access to healthcare and education and stride in gender balance, inter alia. The comparison based on poverty line is highly misleading as the World Bank and other organisations keep changing the definition of poverty. From this year there is a new benchmark to measure poverty called ‘multidimensional poverty index’ (by UNDP). Based on this index, the poverty rate in Bangladesh at present is 58 percent. According to the national poverty line, there are 40 percent poor people, the rate is 81 percent based on 2 dollar-a-day and 50 percent based on 1.25 dollar-a-day. There is a qualitative change in poverty– poor people nowadays wear decent clothes and some even use mobile phone which was unthinkable even a decade ago!

    But as I said development can’t be measured in merely dollar and cents terms. The UNDP itself praised Bangladesh for its marked progress in the past three decades. Launching the UNDP’s latest global report, the UN Secretary General and also Nobel laureate Amartya Sen remarked that “Bangladesh is one of the countries that has made the greatest progress in recent decades as measured by a new version of the HDI”. (For details see http://www.thefinancialexpress-bd.com/more.php?news_id=116828, http://www.ophi.org.uk/policy/multidimensional-poverty-index/ and http://hdr.undp.org/en/data/trends/).

    In terms of total schooling, Bangladesh outshone all of its regional peers, except Sri Lanka. (see Harvard’s Barro and ADB’s Lee’s work on this). The World Economic Forum’s global gender index shows that Bangladesh fares better than all South Asian countries except Sri Lanka. It outshone all Muslim countries bar Indonesia in this regard. Greater involvement of NGOs and women’s wider role in society are believed to be marginalised by the extremists’ thoughts in Bangladesh. The success of Grameen and BRAC is reflected in their increasing global presence. I can go on.

    The next issue is the debate on interest rates: It is true that the Grameen (and some other microcredit institutions) charge higher interest rates (compared to the traditional banks) but remember the borrowers who get credit without collateral from Grameen used to reply on village Mahajans (money lenders) paying over 500 percent interest. Moreover, the effective interest rates at the traditional banks in Bangladesh are not that low– not to mention high default rates, poor’s inability to access to their services etc.

    It is often quoted the economic conditions of the people who are worse off after becoming the Grameen borrower, but why don’t we highlight the success stories at the same time? I personally know someone whose mother was once a borrower of Grameen, he graduated from BUET, thanks largely to her mother’s financial support and received a PhD from the National University of Singapore. Otherwise, he would have been a school dropout! Such successful examples are scores.

    Your comparison on the development gap between Bangladesh (South Asia) and the Scandinavian doesn’t make much sense, as development is a process and it takes time to bridge the gap. You know the bloody history of Europe, hundreds years of war, not to mention the history of Vikings (an earlier version of today’s Somali Pirates) of the Scandinavia.

    That said, the Grameen model is not the panacea when it comes to poverty alleviation. This is one of the ways to address extreme poverty. Bangladesh should have seen more progress in poverty reduction but this is a subject of a separate debate as there are issues concerning poor governance, supply side constraints like inadequate infrastructure, among others, that are beyond the control of Grameen or similar organisations. Appreciate your comments.

    Best regards,
    Shahid, National University of Singapore

    • Mohammad Billal Hossain

      Hats off to you…..I have no words to describe how strong your arguments are.

    • Mohammad Abdul Latif

      Grameen Bank once followed a definite target group who were poor. Later they changed their target group. Yes, I know many cases, where people have improved their economic conditions with the loans borrowed from Grameen Bank. Last month, I met one such lady in Basail Upazila in Tangail. She is a female UP member and her husband runs a business of microphone and sound system in Basail bazaar. She is also a member of the Grameen Bank from which she took a loan of TK60,000 of which she invested Tk40,000 for construction of a house and TK 20,000 in her husband’s microphone business (bought a sound box). Is she a poor group member? She told me that she did not borrow in her name and used her other female relatives because she had a plan to compete in the next UP election and she did not want to be a loan defaulter as it would bar her in participating in the UP election.

      I know someone who invested borrowed loan from a micro-credit organisation in renovation of his/her house in Dhaka city, of course not in downtown.

      So, it appears that microcredit operators in Bangladesh are not concerned with the poverty alleviation of the poor rather they are concerned with the sustainability of their own organisations by lending and recovering loans.

      A small segment of the poor have improved their economic conditions by taking loan from microcredit organisations. These poor people are young with smaller size, with alternative income sources to repay the weekly installment. Those who invest the borrowed money, mainly invest it in land mortgaging, money lending and purchasing asset, not in self-employment generation activities, which Dr. Yunus once propagated.

      In the above mentioned Basail Bazaar example, people told me that many Grameen Bank group members lend Grameen money to local traders at 10 percent interest rate per month (annually 120 percent). Many of their borrowers were once group members of the Grameen Bank but became defaulters and somehow have gotten rid of the GB while some of such borrowers borrow from them to pay back their weekly installments to the Grameen Bank.

    • kalvy

      This is rich reply with the correct and useful information. Before criticising a model, we should look into the fact that to what extent it benefits us. And there is a certain difference between criticising and completely abusing a model. micro-credit of Grameen Bank and micro-credit plus plus or micro finance of BRAC obviously have some impact on poverty reduction. The model, itself needs some time to bridge the gap to reach ultimate success.

      Thanks Mr. Shahid for such an informative reply.

  10. Mohammad Abdul Latif

    Tom Heinemann has written, “As far as I know it is the first time ever that a TV-documentary has turned the lens the other way, and tried to look at the other side of the coin/.” I agree with him on the impact of his documentary. But he is not the first to look at the other side of the coin. In March 1995, I looked at the other side of the coin writing on Grameen Bank which was published in a little vernacular magazine. bdnews24.com might want to reprint it.

  11. f islam

    I met one rickshaw-puller who told me why he became a rickshaw-puller. He could not pay the installments for the microcredit loan as the interest rate is very high. He came to the town to earn extra to pay back the loan. It would have been much better if the Grameen Bank organised people to run some micro-industries in the villages for generating work rather than giving loans and sit back to collect the money from the poor people by any means. More important is to collectively work for some programme in villages than the individual effort by illiterate people in the villages who as told in this report by T Heinemann is ignorant about the terms of the credit. All the allegations about the Grameen Bank deserve in-depth investigation.

    • Mohammad Abdul Latif

      F Islam is right. I met many rickshaw-pullers both in Dhaka and in district towns who left their villages failing to pay back the installment. Many reported that they migrated to town keeping their families in their villages and were sending back home to pay back installment. I started talking to many such rickshaw-pullers being influenced by poet Zahid Haider who drew my attention to this aspect of urban migration, as Haider was aware of one of my write-ups on the impact of Grameen Bank.

  12. Mohammad Billal Hossain

    Many thanks for the article. I would like to humbly request the author not to make meaningless arguments. The author here is dealing with a core topic of economics. But in most cases, he used vague words such as ‘after talking to scores and scores of people…’, ‘women in Mexico are losing everything…’ etc to support his arguments. How many exactly were meant by ‘scores and scores’? What was meant by ‘everything’? How many of the women in Mexico lost so-called ‘everything’? All these information had to be given precisely before writing the phrases like ‘Caught in Micro debt’, ‘I do not believe so’, ‘not-so-success-full’ and so on.

    The author has mentioned ‘In the Human Development Report from UNDP 1990, more than 84 percent of the population in Bangladesh lived below the official poverty line. 29 years later, the annual report from UNDP said that almost 81 percent of the population of Bangladesh lived (survived!) on less than 2 USD a day.’ The author probably meant UNDP report 1980. If so, in 2009, 81% population of Bangladesh survived on less 2 USD a day compared to 84 percent living below the poverty line in 1980. Technically, this is a wrong comparison. The author should have compared the years on identical units, for example ‘USD’. If we compare on daily earning in USD basis, in 1980, 84% population earned less than 1 USD a day compared to the earning of 2 USD in 2009. So there was clearly an increase of 1 USD in daily earning. Even if we consider 1 USD in 1980 is equivalent to 2 USD in 2009 for inflation, 3 percent (84 percent-81 percent) of total population came out of this barrier. 3 percent of 150 million is 4.5 million which is close to the entire population of Denmark. Therefore, please do not underestimate the socioeconomic development of Bangladesh. Another useless comparison was comparing the poor with Bill Gates. No poor wants to be Bill Gates. They just want an earning which will meet their basic needs.

    The author has mentioned about Scandinavian welfare system. This system as you mentioned rely on high taxation. If people do not have income where will the taxes come from? It was industrial revolution which changed the whole Europe. To meet the need for raw materials for their industries, the whole Europe started competing with each other to colonise the Asian and African countries. That made us poor. We were never poor like we are now. India just took 50 years to become an economic giant of the world and it has a tremendous potential to progress further. Bangladesh is also moving forward. Give us some time, we will show what we can do.

    Finally, I am not saying that Grameen Bank is above scrutiny. There should be proper investigations. If it has had done any good to the poor, it should be given credit. If not, should be criticised harshly. But before any criticism, there should be solid statistical evidences. So please provide the evidences (in numerical figures) to reveal the “not-so-success-full” side of microcredit’.

  13. Maria Roy

    “In the Human Development Report from UNDP 1990, more than 84 percent of the population in Bangladesh lived below the official poverty line. 29 years later, the annual report from UNDP said that almost 81 percent of the population of Bangladesh lived (survived!) on less than 2 USD a day.”

    Are you comparing Apples to Oranges here? Here is the report from UNDP. The poverty level has come down to 40 percent in 2005. Here is what in the report –

    “Bangladesh is well on track to achieving Goal 1 with poverty coming down to 40 percent in 2005. Also, the average annual rate of poverty reduction till 2005 has been 1.34 percent against the required 1.23 percent to meet the 2015 target. The poverty gap ratio has also decreased dramatically to 9.0”

    See the link below for details-

    Please clarify yourself on this.

    • Ashfaque Chowdhry

      The problem, if I’m allowed to use this word, with persons like Tom Heinemann is that they tend to look at poverty in Bangladesh from their standard of living. In Bangladesh, earning roughly US$2 a day (according to Mr. Heinemann)=US$60 a month=Tk.4,200 @ Tk.70/US$. The government, for example, has fixed Tk.3,000 as the monthly wage for garments workers which is worth about $43 per month.

      I am all for higher income for all categories of workers including self employed. But what Mr. Tom Heinemann should realise is what USD2=Tk.140 can buy in Bangladesh, won’t even buy a bottle of water, where he comes from. But situation has much improved in Bangladesh since — according to UNDP report of 2005 which Maria Roy has very rightly pointed out. Now let Mr. Heinemann prove UNDP wrong before he takes on Prof. Yunus.

    • Mohammad Billal Hossain

      Dear Maria Roy, many thanks for your wonderful post. I have gone through the link you posted. The report has a lot of useful information. Thanks again.

Comments are closed.