Micro-borrowers not trapped in debt: study

Microcredit has helped borrowers earn and consume more, accumulate assets, invest in children’s schooling, and move out of poverty, according to a recent study.
The study showed significant welfare gains resulting from microcredit participants, especially women.
The accrued benefits of borrowing also outweighed accumulated debt, said the study that tracked the changes microcredit has brought in more than 2000 households in 20 years.
Both participants and non-participants of microcredit gained over the last 20 years but poverty reduction was higher for participants than for the non-participants, said Shahidur R Khandker, lead economist of the World Bank.
The WB and Institute of Microfinance, a research organisation in Bangladesh, jointly conducted the study.
The rate of extreme poverty declined by 2.95 percent a year among the microcredit recipients, while the rate was 2.77 percent for the non-participants, he said.
Khandker shared the findings of the study at a discussion on “are microcredit participants in Bangladesh trapped in poverty and debt?” organised by the microfinance institute at the auditorium of Palli Karma-Sahayak Foundation in the city yesterday.
“This is not to say that the non-participants have failed to progress over the period. Both the participants and non-participants have gained as the economy has grown,” he said.
The amount of household net worth rose by 320 percent to Tk 2.87 lakh among the microcredit participants during fiscal 1992-2011, while such net worth increased to Tk 2.69 lakh among the non-participants, according to the study.
“So borrowers are not trapped in poverty or debt due to microcredit,” said Khandker, who is also the team leader of the study — Long-term Dynamics of Microcredit Programmes in Bangladesh.
The study also said long-term membership with a microfinance institute is not bad as continuous participation is not necessarily a liability.
Extreme poverty reduction was 3.2 percent for average and 3.6 percent for continuous participants, it said.
Khandker said welfare gains still vary by programme. Grameen Bank has the highest impacts on income gains, while BRAC has the highest effect on social gains.
He said income gains are as high as the average cost of borrowing (average returns of 36 percent against 32 percent interest rates).
Khandker, however, said all participants do not benefit equally as “microfinance is not a cure for all.”
“It’s a very powerful study as the survey is based on ’20-year panel data’ on the same households,” said Mahabub Hossain, executive director of BRAC, a leading non-government organisation.
Incidence of borrowing was only 26 percent in 1991, whereas it is 69 percent in 2011, and the average size of borrowing registered a 4 percent growth annually over the last 20 years, he said.
He stressed targeting the extreme poor while designing beneficiary groups as it will bring more impact on poverty reduction.
“It’s clear that microfinance can protect households from shocks, contribute to changing societal norms about the role of women in society and lead to some households moving out of poverty,” said Atiur Rahman, governor of Bangladesh Bank.
Overall, it has played its part in the impressive progress Bangladesh has made in poverty reduction over the past two decades, he said.
But not everyone utilises loans productively and there is a risk of falling into over-indebtedness. So, the role of microfinance should be strengthened through further innovations which take into account these pitfalls, he said
Microcredit is obviously helpful to reduce poverty. But it is time to reexamine the traditional model, said Qazi Kholiquzzaman Ahmad, chairman of the institute.
The system of weekly loan recovery should change and half yearly or yearly recovery systems should be in place, he said.
He also stressed the need for including a number of issues such as education and healthcare in the microcredit programmes for sustainable development.
Quazi Mesbahuddin Ahmed, former managing director of PKSF, and MA Sattar Mandal, a member of the Planning Commission, also spoke.

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Blink of Social Business: A New Hope to the World

Enamul Hafiz Latifee

Social Business, the revolutionary mechanism was first formally developed on the year 2010 through the book Building Social Business, by our beloved one and only Bangladeshi Nobel Peace Prize Laureate Professor Muhammad Yunus, with a view to creating poverty free a world. According to Yunus (page no. xii- xiv, Building Social Business, June 2010), we can create a poverty free world if we redesign our system to take out its gross faults which create poverty. He compared poor people to bonsai tree and remarked that if we can help poor people out of poverty by creating an enabling environment available to them then it is a matter of time only to resolve worldwide poverty problem.

But the question arises that how can this redesign process be kicked on and mashed up with the traditional way of economic thinking & doing business to help out this bonsai people. Yunus answers the question by following simplest way at the beginning, in his opinion, fundamental change in the architecture of our capitalist economy by bringing it closer to a complete and satisfactory framework, freeing it from the basic faults social and environmental ills along with poverty (page no. xiv, Building Social Business, June 2010). Moreover, he rejected the as usual evaluation of global financial crisis of 2008- 2009. He thinks that, the biggest flaw in our existing theory of capitalism lies in its misrepresentation of human nature, where men are described to be single minded, that is human beings engaged in business are portrayed to maximize profit only but nothing else (page no. xv, Building Social Business, June 2010).

Well, he does not reject that humans are selfish beings, but also includes that they are selfless beings simultaneously. So that, the worldwide existing institutions are not only designed to generate maximum individual wealth, but churches, mosques, synagogues, art museums, public parks or health clinics or community centers does exist, which are the strong illustrator selflessness motive of human beings as these institution don’t make anyone into a tycoon. So, when recognize the flaw of economic theory based on one dimensional person and replace with multidimensional person (a person who has both selfish and selfless interests at the same time) economic theory, then the problem would be solved (page no. xvi, Building Social Business, June 2010). 

So, a new kind of business known as social business should be self sustaining- that is, it generates enough income to cover its own costs and part of the economic surplus is invested in expanding the business, while a part is kept in reserve to cover uncertainties. Moreover, in this kind of business, the company makes a profit, but no one takes the profit (page no. xvii, Building Social Business, June 2010). So, this is the way how social business actually get started in existence of traditional business.

Now being apart from the theory let us look at the worldwide field level situation of social businesses. Starting from the example of Bangladesh, we are already known to the name and fame of most probably world’s first Yunus- type social business, Grameen Danone Foods Ltd. (GDFL), which had started its journey in early 2007 and had promised to offer its 'Shoktidoi' (yogurt) at a cheap rate to help poor people, mainly children and women in Bogra district get nutrient-rich foods. Others objectives of GDFL are to promote local business activity and to indirectly create jobs in the agricultural industry, or in sales and distribution. To ensure the initiative’s long-term success, the idea was to offer appropriate micro-financing solutions and professional training tailored to the people from local communities who will be taking part in the project (Extract from press release published by Groupe Danone on 16^th March, 2006).

GDFL then had planned to set up and launch as many as 50 production plants during the ten years between 2006 and 2016. The first factory has been built in Bogra district GDFL was built in Bogra, 220 kilometers north of Dhaka, the capital city of Bangladesh with a daily production capacity of 3,000 kgs/day to 10,000 kgs/day. The plant was built only on 75,000 square feet areas which included milk reception, mixing and fermentation, a filling line, packaging station, a laboratory, a cold room, a storage room, and office space (Hussain, Chowdhury & Hussain, page no. 257- 258, Vol. 2, No. 4, World Journal of Social Sciences, July 2012).

As a primitive stage though GDFL had faced so many problems regarding its marketing and distributional procedures but later, after getting matured as a company it had learnt to cope up with present market structure which had already proved that a social business can indeed sustain and is better than any other form of charity. In words of Professor Yunus, “A charity dollar has only one life; a Social Business dollar can be invested over and over again”.

The organization, Yunus Social Business (YSB) is now currently working in Haiti and Albania. The Haiti Initiative was launched in 2010 by YSB’s predecessor The Grameen Creative Lab with corporate partner SAP AG to foster prospective Social Businesses through financing and incubation. It is already been realized within short time experience from Haiti that the country needs a dynamic, efficient private sector which can contribute to the productive development, assumes the risk of generating economic activity and creates jobs (YSB, http://www.yunussb.com/incubator-funds/haiti/).

Recently, in March 2013, Nobel Peace Prize Laureate Professor Muhammad Yunus, founder of Yunus Social Business, Sir Richard Branson, founder of Virgin Unite, and U.S. President Bill Clinton, founder of the Clinton Foundation, announced last Sunday the launch of a new social initiative called Haiti Forest. The partnership aims to solve social and environmental problems in Haiti by bringing sustainable, productive and socially responsible forests to the country.

Ten thousand hectares of land are being promised by the Ministries of Agriculture and Environment to develop the new, bold Haiti Forest Initiative in the Artibonite and northern part of the country. Haiti Forest has full support of the Government of Haiti and is in line with the priorities of the Government to support long-term reconstruction efforts, especially those that create jobs and promoting economic opportunities. The multi-year project will provide affordable food, timber, and employment in Haiti, and will be organized as a Social Business – a company set-up for maximizing social benefit rather than private profit (PR Newswire, http://www.prnewswire.com/news-releases/yunus-social-business-virgin-unite-and-clinton-foundation-launch-haiti-forest-initiative-198460341.html).

In Albania, the Social Business Movement of Albania is a programme started by YSB in April 2012 to initiate and scale up social businesses throughout the country. Started at the request of Albania’s Prime Minister, and working hand in hand with the agency created by the Albanian government for the promotion of social business in Albania, Nxitja e Biznesit Social Sh.A., the programme includes the incubation and investment as main focal points (YSB, http://www.yunussb.com/incubator-funds/albania/).

Later on January, 2013, Nobel Laureate Professor Muhammad Yunus has signed a Memorandum of Understanding (MoU0 for setting up of Vocational Training Social Business Joint Venture with Tirana Business Park, an Albanian investment of the German company Lindner Group. The MoU was signed at the Tirana Business Park construction site in Albania Monday in the presence of Prime Minister Sali Berisha, said a press release (Yunus signs deal to run Social Business in Albania, 23^rd January, 2013, The Financial Express).

On other side, YSB is working together with the African Development Bank (AfDB) Department of Human Development (OSHD), and financed by the Policy and Human Resource Development Grant of Japan (PHRDG), launched a Holistic Social Business Movement in Africa in December 2012. As part of this movement, YSB and the AfDB will first raise awareness through National Conferences on Social Business in Tunisia, Togo, and Uganda and subsequently will establish Social Business incubators and funds in Tunisia and Togo in the second half of 2013. The National Conference on Social Business in Tunisia took place in March 2013, at IHEC in Carthage, Tunisia (AfDB, http://www.afdb.org/en/news-and-events/article/the-afdb-and-nobel-laureate-muhammad-yunus-launch-social-business-in-africa-11614/).

More surprisingly it is observed that Social Business is not only working in the relatively lower GDP (PPP) per capita holder countries (i.e., Tunisia, Togo, Uganda, Haiti, Bangladesh) but it is also proactively working in the higher GDP (PPP) per capita holder countries (i.e., Albania, Brzail) too.

Roughly, just a month back, Muhammad Yunus launched a number of social business initiatives in Brazil during his visit there from May 27- 29, 2013. The Bank of America announced the creation of a Yunus Social Business Fund for Brazil during his stay. ESPM, a leading business school in Brazil, also launched Yunus Social Business Centre which will develop academic curricula around social business. Brazil Foods (BRF), one of the largest poultry companies in the world, has announced a joint-venture social business in Haiti for developing poultry business in the earthquake affected island (Dhaka Tribune, May 30, 2013, http://www.dhakatribune.com/bangladesh/2013/may/30/prof-yunus-launches-social-business-movement-brazil)

We have marked already Italian city, Pistoia to be announced as first social business city in the time 11^th July, 2012. We have also observed that first Social Business applying the seven Social Business principles in Japan named as Human Harbor, a scrap up cycling company has been established in December, 2012, which targets people recently released from jail, and helps them getting proper education, a job, an accommodation, as well as social welfare pieces of advice. It contributes to solve the social issue of Japanese prisoners, facing major reinsertion difficulties, half of them actually return to jail within 5 year (Ekovivo, http://www.ekovivo.org/social-business-in-japan-when-universities-pave-the-way-towards-social-business/).

In reality, it is now highly evident that Yunus’s Social Business concept has already been kicked off on the surface of world with a great problem solving self sustaining inherited power. Thus the new kind of capitalism that serves humanity’s most pressing needs, as a set of tools, Social Business should be coped up by the countries like Bangladesh at a high scale, will undoubtedly make human being, better off. So why are we stopped for? Let us do it with joy for creating world without poverty!

The writer is a student of Department of Economics, Shahjalal University of Science & Technology, Sylhet

Email: enamul.hafiz.sust@gmail.com

Muhammad Yunus: Savar tragedy, garments industry and Bangladesh

Photo: AFP

THE Savar tragedy is a symbol of our failure as a nation. The crack in Rana Plaza that caused the collapse of the building has only shown us that if we don’t face up to the cracks in our state systems, we as a nation will get lost in the debris of the collapse.

Today, the souls of those who lost their lives in Rana Plaza are watching our actions and listening to what we say. The last breath of those souls surrounds us.

Did we learn anything at all from this terrible massacre? Or will we have completed our duty by merely expressing our deep sympathy?

What should we do?
* Do everything to prevent such an incident from repeating in the future.

* What to do for those who have lost lives, their limbs or their livelihoods?

* What do we need to do to not only save our garments industry but make it stronger?

The collapse of the nine-storey building in Savar was not merely a collapse. It is just a precursor to the imminent collapse of all our state institutions. If we look closely at the collapse of the Savar building, we can read the symptoms of collapse of our state institutions. We will have to find ways to fix the institutions to protect them from complete collapse.

Citizens’ action group
I will discuss how we might be able to not just save, but also strengthen our garments industry.

Questions have been raised about the future of the garments industry. A very large foreign buyer has decided to pull out of Bangladesh because of the dangers in the garments industry here. Others may follow. If this happens, it will severely damage our social and economic future. This industry has not only increased our national income, but has also brought immense change in our society by transforming the lives of women in the country.

We cannot allow this industry to be destroyed. Rather, we have to be united as a nation to strengthen it.

The government, the leaders of the garments industry, the NGOs, and the civil society have to come forward in unity to do so.

We have to give complete reassurance to the foreign buyers that they will never again face this kind of situation, and that we are all united to take steps in order to achieve that, and will firmly carry out this commitment in the future.

Each of these actors (government, owners, civil society etc.) will work jointly and also work independently within their own spheres. Civil society will have to undertake programmes in its own way. Civil society can try to bring hope and trust in the minds of the foreign buyers on behalf of the country. They can immediately send jointly signed letters to the chairmen of the foreign companies as well as to the CEOs of those companies. The message will be to highlight the social and economic importance of the garments industry in Bangladesh, and to thank them for the role they have played in the empowerment of women and in bringing widespread transformation in Bangladesh.

It will inform them that the civil society is ready to work together with the government, as well as separately, to solve the problems being faced by the industry. It will let them know about the types of programmes that are being considered, express interest in meeting with the companies to discuss about these programmes, and let them know about the formation, structure and work of a citizens’ action group for “protecting garment workers and garment industry” (or something similar) that could take quick decisions etc. in support of these.

Another letter will go to the foreign organisations, international NGOs, and consulting firms that are already working to improve the quality of the garment industries in the third world, including on the issue of workers’ rights, monitoring and screening, and so on. This letter will let them know that the citizens’ action group would like to work and cooperate with them to improve the conditions of the workers. The letter will express the group’s interest in meeting and remaining connected with them.

We must also write letters to various government agencies in the countries of the foreign buyers to inform them that the citizens’ action group is determined to bring widespread change in the garments industry in Bangladesh.

Within the country, letters to the government, garments owners, BGMEA, BKMEA, labour organisations, NGOs, buying houses, and other affiliated organisations should be written and meeting arrangements should be made with them to elaborate the working procedures with them.

AFP

My two proposals regarding workers
I have from time to time given recommendations to foreign buyers about how to tackle the problems faced by the garments industry in Bangladesh. Under the present circumstances I find it all the more important that I raise this issue again, particularly because of the castigation by Pope Francis that buyers are treating the garment workers like slave labourers with $40 wage per month.

My first proposal is as follows:
(a) A minimum wage law for the labour already exists in our country. If any company pays a salary below that minimum wage, that will be illegal.

My proposal is that the foreign buyers will jointly fix a minimum international wage level. For example, if the minimum wage is now 25 cents per hour in Bangladesh, then they will standardise minimum wage for garment industry as 50 cents per hour. No buyer will give any salary below this rate, and no industry/owner will fix salary below this limit. It would be an integral part of compliance.

Of course, we have to be prepared for a negative market reaction to this. As a result of this, some will argue that Bangladesh may overnight lose the competitiveness it had gained for being a country offering “the cheapest labour.” In order to retain its competitiveness, Bangladesh will have to increase its attractiveness in other ways. For example, increasing labour productivity, increasing specialised labour skills, regaining the trust of buying companies, giving assurance that no unfavourable situations will be created in future, ensuring the complete welfare of the workers, and so on. Until we are able to ensure this international minimum wage, we will not be able to pull out the workers from the grievous category of “slave labour” as mentioned by the Pope.

We have to gain support for the international minimum wage through discussions with politicians, business leaders, citizens, church groups, and media leaders in the countries of the foreign buyers. In the past, I had tried to convince the buyers, but have not yet succeeded. Now after the Savar tragedy, and in light of the castigation from the Pope, the issue has gained a new dimension. I want to mobilise my international and Bangladeshi friends to make my efforts stronger and more persistent this time.

We have to get the international business houses to understand that while the garment workers are physically working in Bangladesh, they are actually contributing their labour for their (international business houses) businesses. They are stakeholders of their businesses. Their business depends on the labour here. Mere physical separation should not be a ground for them to look away from the well-beings of this labour. That is the main message from the Pope. I hope the buying companies get the point.

It is not necessary for all the companies to agree on the minimum international wage at the same point in time. If some of the leading companies come forward on this issue, I think the process will start. Others will soon accept it.

(b) I have made my second proposal many times before, but it did not get any attention. There is now an opportunity for me to propose it again. This time I see a good chance for its adoption because of its relevance to the current situation.

Bangladesh garment factory produces and sells a piece of garment for five dollars, which is attractively packed and shipped to the New York port. This five dollars not only includes the production, packaging, shipment, profit and management but also indirectly covers the share that goes to the cotton-producing farmers, yarn mills for producing the yarn, cost of dyeing, and weaving as input cost.

When an American customer buys this item from a shop for $35, he feels happy he got a good bargain. The point to note is that everyone who was involved in the production collectively received $5. Another $30 was added within the US for reaching the product to the final consumer. I keep drawing attention to the fact that with just a little effort only we can achieve a huge impact in the lives of those so-called “slave labours.” My proposal relates to the little effort. I ask whether a consumer in a shopping mall would feel upset if he is asked to pay $35.50 instead of $35 for the item of clothing. My answer is: No, he will not even notice the little change. If we could create a “Grameen (or Brac) Garment Workers Welfare Trust” in Bangladesh with that additional $0.50, then we could resolve most of the problems faced by the workers — their physical safety, social safety, individual safety, work environment, pensions, healthcare, housing, their children’s health, education, childcare, retirement, old age, travel could all be taken care of through this Trust.

What do we need to do for this?
The international buying company will pay 10% of the amount that it has agreed to pay the garments factory owner (based on their negotiated price for the garments produced) against a particular order to the Trust. This money will be managed solely for the welfare of the workers in that particular factory.

There will be separate sub-funds in the Trust for each and every factory so that the workers in each factory benefit on the basis of their own production, if the buyers place this 10%.

Bangladesh now annually exports garments worth $18 billion. If all the garment buyers accept this proposal, then $1.8 billion would be received by the Trust each year. This would mean that an amount of $500 would be deposited in the Trust for each of the 3.6 million workers. If this amount of fund can be collected, the situation of the workers can be vastly improved. All we have to do is to sell the item of clothing for $35.50 instead of $35. A small, unnoticeable addition to the price can do wonders.

Of course, international buyers may argue that that extra 50 cents charged in the final price will reduce the demand for the product and that their profit would shrink. My answer to that will be that we will offer them an arrangement whereby their sales will go up, instead of down. We would give them a good marketing tool to make this product more attractive to the buyers by making the consumers feel they are getting more for this extra 50 cents. We would put a special tag on each piece of clothing to make them “special.” The tag would say: “From the happy workers of Bangladesh, with pleasure.” Workers’ well-being is managed by Grameen or Brac or any other internationally reputed organisation. There would be a beautiful logo that would go with it. This would immediately convey the message that the dress has been made with a lot of warmth and happiness by the factory workers in Bangladesh.

When consumers will see that a well known and trusted institution has taken responsibility to ensure both the present and the future of the workers who produce their garments, they won’t mind paying 50 cents extra. The retailers may say in their advertising that these products are made by well protected, well supported workers. Consumers would be proud to support the product and the company, rather than feel guilty about wearing a product made by “slave labour” under harsh working conditions. A consumer will be able to know from the company’s website and annual report what benefits the dress she wears are currently bringing to the workers, and what benefits their children are receiving.

Both the national and the international businesses should feel as though the workers are a part of their family. The days of slave labour have to come to an end. It is better to start the process now, before more ugly incidents occur.

I do not expect that all companies will immediately implement my proposal. I hope that a few would come forward to experiment with the proposal. Their country’s governments, the agencies, organisations who work to protect labour rights, citizens’ groups, church groups, media, will step forward to support it. This issue will attract attention more urgently now in light of the mass death in Savar, as well as for the Pope’s comments on the treatment of the poor labour in garment industry in Bangladesh.

I believe that for buying companies leaving Bangladesh is definitely not a solution. It would be as unfortunate for Bangladesh as it would be for the foreign buyers. There can be no sense of relief for them in leaving a country which has been highly benefited through their business, a country which could have gained continuing rapid and visible economic and social progress because of them, a country that would always remain grateful to them for their business.

Rather, if the Bangladesh government and citizens come forward to work together to remove all the difficulties being faced by the foreign buyers, and work shoulder to shoulder with them, it would bring joy for creating a new kind of business that takes pride in achieving something which is far beyond only business success — something which leads to a bright new future for a country.

I believe that they would rather like to remain in Bangladesh, face the challenges and take pride in creating a new society and a new economy. Not only will Disney, which left the country because of the recent problems, come back when they see big changes taking place because of the collective efforts of the government and the citizens, but more companies will also be interested to invest here.

Changes are taking place in the world of business. Even if they are tiny changes, they are coming nonetheless. We can accelerate that change. A citizen action group can prepare the ground for that.

Savar related programmes
The citizens’ action group can create a data-base of all those who lost their lives in Savar, lost their limbs or have had their livelihoods affected, and work to regularly update it. The primary work of this has already been initiated by Grameen with the help of other organisations. The citizens’ action group can take the responsibility to coordinate this work.

Many programmes have been announced and a lot of funds have been pledged for those who have been affected, and this is still ongoing. The citizens’ action group can provide advice on these programmes on how to best implement them. It can monitor the programmes and inform the relevant authorities accordingly. They can keep contact with the victims on an individual basis, and help them solve their problems by establishing links between them and the appropriate agencies.

The problems that are being faced by the victims of Savar range from the immediate to the long-term. The citizens’ action group should be ready to keep the people of the country engaged with the rehabilitation of the victims, and come up with effective measures to tackle the problems of different kinds (health, income, education etc.) and of different durations, faced by these victims.

When will we come to our senses?
Savar has created a huge wound and deep pain in the minds of the people of country. I pray that this deep pain compels us towards resolving the core of the problems in our national life. Savar is the creation of our dysfunctional politics. When we watched more than 600 helpless deaths, the loss of limbs of hundreds on our TV screen throughout the country, it made us aware of where our dysfunctional politics has led us to.

After all this, will we just keep on watching as it keeps happening again and again?

When will we come to our senses?

The writer is founder of Grameen Bank and Nobel Laureate.

News Link: Savar tragedy, garments industry and Bangladesh