Micro credit and the poor

Everybody is aware about the way micro credit has empowered the hard-core poverty stricken poor people of Bangladesh. No doubt it gave the poor people opportunity to come out of their shell of grief and do something on their own. All the credit definitely goes to Prof. Dr. Muhammad Yunus for pioneering this system. But the other side of micro credit is not as bright. On one hand the beneficiaries have improved their life style but on the other they are in a vicious circle of paying the interest.
In this regard a news published in the Daily Ittefaq recently caught my eyes. This news published on 20th June, on page 20, column 5 goes on like this "Sanoara, wife of Moslemuddin of Meherpur Sadar, died of fear of being arrested as she was not able to pay the last installment of loan amount. She took loan of taka 8350/- from Islami Bank. She repaid taka 5000/. But was not able to pay the remaining amount. Police came to arrest her. Fearing to be arrested she became sick and died on her way to Meherpur hospital . Family sources said she took micro credit from nine NGOs. She was always in a mental pressure to repay the interests." And this is certainly not the lone case of its kind, rather a tale of many Sanoaras living in the rural areas.
As a development practitioner, I had the opportunity to visit the rural people mainly in remote, hard to reach areas like chars. It was very interesting to find that many beneficiaries of micro credit commented "kisti'r nai kono nisti" -- "there is no relief from the installments (interest)." Once they have taken loan they are in a circle of paying it. But often they find it difficult to come out of this. It is because few people use micro credit for income generating activities. People have a tendency to fulfil their immediate needs/ demands. As dowry is still the major demand in the rural society even after so many NGOs working against it, people fulfil this demand by taking loan/credit. This credit, especially for dowry, does not give any return to the beneficiaries. But once they take loan they have to repay it.
It is reported that if they are unable to repay the loan in due time their interest doubles or the providers take away whatever they can to recover their interest. May be it is not true in all cases or for all NGOs. But many of them recover their loan this way. Apprehending to loose their belonging and finding no other option the so-called beneficiaries take credit from another NGO to pay the interest of the former. Sometimes, these NGOs are ignorant about their (beneficiaries') involvement as the latter hide the information apprehending disqualification for the credit. But sometimes it is also alleged that NGOs are quite aware about their (beneficiaries') involvement but ignore, apprehending to lose customers. This way the poor people go on taking credit from one NGO to pay another's interest. It is learnt that one beneficiary often gets involved with many NGOs.
The case of Sanoara stated above and the case of the octogenarian Manoranjan (jailed for non-payment of Tk 9000/- loan) whose loan was paid off by our Chief Adviser are the facts and the other side of micro credit . In most cases it happens that if they have taken loan/ micro credit from one source for paying dowry or other reason they go to another source for another loan and pay the former's interest and again to pay the latter's interest they go to yet another source and thus fall in a 'vicious circle'. Ultimately when all of the sources (NGOs or institutions) come to recover the interest at a time the beneficiaries will have no option but to sell whatever they have or commit suicide. Mr Manoranjan was the lucky one to come out of the clutches of such credit. But what about others? Some NGOs are allegedly taking opportunity of doing business in the name of providing services to the poor. That is why we can see mushrooming of nameless NGOs. Most of them only have micro credit as their major programme. If they have the intention of providing service why not they give the support in kind rather than in cash? And where it is difficult in kind, why not reduce the rate of interest? They can even develop the receivers' skill when they provide loan so that they can generate income in a professional and certain way.
I strongly believe that Prof. Yunus is very much aware of these issues and knows the situation better than we do. Moreover, he may now give more emphasis on the quality of Micro-Credit service and its success through strong monitoring or whatever way he thinks better.
I'll appreciate if Prof. Yunus kindly suggests some steps to regulate micro credit business by NGOs and help the poor people to come out from this vicious circle, sometimes of their own creation, and derive actual benefit of micro-credit. They need a safeguard against the habit of approaching one NGO after another for paying the interest!

Romina Dewan Kabir is Executive Director, TRK Consultancy Services.