Feature Img
Grameen Bank. Photo credit: Reuters.
Grameen Bank. Photo credit: Reuters.

Increasing state control over Grameen Bank will not serve Bangladesh’s best interests and will be detrimental to the nation’s progress on gender equality instead.

Bangladesh has improved its rank in this year’s Global Gender Gap report, moving from 75 in 2013 to 68 in 2014. Much of its progress in improving gender equality over the years is owed to the inclusive model of social development that has seen NGOs working side by side with the state for four decades. This has facilitated social innovations in the field of women’s empowerment and gender development. NGOs like Grameen are invaluable in environments where conventional solutions to gender issues (such as poverty reduction and economic growth) alone have failed to deliver. Further progress is possible if the government-NGO partnership is nurtured and left outside politics.

Bangladesh is a global poster child within the Muslim world for women’s development. When it comes to gender equality, Bangladesh ranks above all other South Asian countries and Muslim-majority nations in Asia. In the past 20 years, women’s health conditions and economic participation have improved despite limited public investment in social sectors.

When the boom in women’s participation in export-oriented factories started in the mid-1990s, most girls in Bangladesh were barely completing primary school. Now, a large number of Bangladeshi women are going to work every day as factory workers, primary school teachers, and healthcare providers. This has not happened because of any large-scale public investment project.

Instead, the foundation for women’s development was laid by non-state actors. Bangladesh’s microfinance pioneer Professor Muhammad Yunus saw women as the key agent of social change nearly four decades ago, before gender development was recognised in the national agenda. More recently, NGOs like Grameen Bank and BRAC have not only championed development schemes that target women, they also employ hundreds of thousands of women at the community level to deliver health, family planning, and education services.

Bangladeshi NGOs have further promoted the status of women by increasing their participation within the organisation. Seven out of twenty directors at BRAC are women. Grameen Bank has gone further by employing female borrowers as members of its governing board. More recently, the government built on these transformative measures by adopting a gender-sensitive budget and further promoting women in leadership positions in the public sector.

But this unique collaboration between the state and NGOs for women’s development is now under threat. In 2011, Yunus was forced to step down as managing director of the bank because he was older than the mandatory retirement age of 60. That was followed by a number of attempts to bring Grameen Bank under state control. But the Bangladesh government recently amended the rules to give itself the authority to appoint board members for Grameen Bank. Many see this as a blatant attempt to strengthen government control over and eventually nationalise the bank.

Previously, the Bank’s more than 8 million rural female borrowers would directly select board members from among their ranks. Officials from another bank will now oversee elections, following the new government directive. The government will form a three-member committee to elect nine members of the twelve-member board. According to Bangladesh’s largest English newspaper the Daily Star, the three-member body will comprise two deputy managing directors: one from a state-owned commercial bank and another from the Palli Karma-Sahayak Foundation.

What does this mean for the future of microfinance and women’s empowerment in Bangladesh?

The evidence on whether microfinance reduces poverty has been contentious. A number of recent studies find no sign that access to microfinance improves household consumption in India, Morocco, Mongolia, Thailand, or the Philippines. But the same studies demonstrate that microcredit if reasonably priced, can lead to business creation and expansion. In the case of Bangladesh, a large-scale, long-term study by World Bank researchers published last year shows a positive impact on personal expenditures, household assets, and children’s education. Recent research on Bangladesh’s social achievements also suggests that without the platform created by NGOs, women’s development in Bangladesh would have been unlikely, given the restrictive social setting and limited public spending on social outcomes.

Women’s participation in NGO programs in Bangladesh, including initiatives in health, education, savings and microcredit, remains strikingly high. In a nationwide survey of 8,000 households conducted last year, almost 12 percent of rural women between the ages of 20-39 reported having joined a new NGO program, predominantly in microcredit, in the preceding 12 months.

NGOs in Bangladesh ensure that poverty and patriarchy do not stand in the way of expanding women’s agency in the country. Beyond teaching women how to save and get access to credit, the NGO-driven microcredit program created a sense of solidarity and improved outside mobility as borrowers formed credit groups and met each other on a regular basis. This helped deliver other important social services such as family planning and maternal and child health care. Most importantly these actions have facilitated significant changes in norms, attitudes, and practices related to gender equality.

Bangladesh gains nothing if state control over Grameen Bank is strengthened. It would at best marginalise millions of female borrowers who have fought for gender equality for years.


Niaz Asadullah is Professor of Development Economics and Deputy Director of the Centre for Poverty and Development Studies (CPDS) at the University of Malaya. Zaki Wahhaj is Senior Lecturer in Economics at the University of Kent.

A version of this article was first published by The East Asia Forum.

One Response to “Bangladeshi politicians should keep hands off Grameen Bank”

  1. Golam Azom Died

    Mr Niaz Are You a Friend of Yunus and BNP’s ?
    I guess You seem to be an Agent of BNP and Jamaat Propaganda !
    I guess You haven’t seen a BBC Report by the BBC That Your Friend Yunus is an American Loan Shark, Where the Poor are selling their Organs to Pay for his Micro Credits !
    And I also guess You haven’t done a Comparative to BNP/Jamaat Alliance V Awami League Data Of Women’s Gender Equality as well ?
    If you had done Your Research, You will Find That Women Fair Much Better Under the AL Government compared to Your BNP/Jamaat Alliance.
    You have More Women Drivers, Police, Air Force, and Army under this Government.
    Is microcredit a flawed idea that does more harm than good, with high interest rates and lack of proper regulation?

    A few years ago, microcredit and microfinance were seen as world-changing endeavors that could drastically alleviate poverty by enabling those without the ability to get a traditional bank loan to receiving funding for their business or household. Muhammad Yunus won a Nobel Prize in 2006 for his work founding Grameen Bank, and services such as Kiva have brought the concept to the masses. Oprah even featured Kiva on her show, and the service couldn’t find enough loans for interested lenders.

    It makes sense: enable millions to make small loans, which can reach remote communities all while creating a sense of helping people without asking individuals to give their money away to charity – simply lend it. And once the money is paid back, those lenders will be more likely to continue to lend. Major countries such have Norway have even become big supporters of organizations like Grameen, because microcredit is seen as far more effective at reaching those in need than traditional foreign aid.

    But perceptions are starting to change. Muhammad Yunus was asked to step down from Grameen by the Prime Minister of Bangladesh who claims the poor are being taken advantage of. There are also allegations of Grameen Bank funds being diverted illegally, but that’s another issue. The biggest criticism seems to stem from the extremely high interest rates microcredit loans have. While it may seem like you give $25 via Kiva and $25 is repaid, the actual repayment number could be 40% higher, or more. That money is pocketed by the microfinance institution (MFI) that is handling the transaction and repayments. Clearly there are costs involved, and higher risks when dealing with loans to low-income individuals (which is why they couldn’t get bank loans in the first place). But poor families are now being burdened by high-interest debt many can’t pay off.

    Is microcredit simply going through “teething problems” as Yunus says, or is the very idea flawed despite its noble intentions?

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