SUMMERY: PART-1
Bangladesh country is located on the fertile Bangla delta in south Asia. This country has bordered of the republic of India to its north, west & east and Bay of Bengal to its south and east. Bangladesh borders took shape during the partition of Bengal & British India in 1947, the country get liberation in 1971 war. Jatiyo sang-shad is Bangladesh elected parliament. The Bengalis form the country’s predominant ethnic group, whereas the indigenous peoples in northern and southeastern districts form a significant and diverse ethnic minority. The Bengal delta region has a rich and diverse cultural heritage. The country has more than 160 million people in a territory of 56977 Square meters. The four largest religions in the country are Islam (89%), Hinduism (9%), Buddhism (1%) and Christianity (0.5%). GDP per capital is 747.34 US dollar in ‘2012 its growth rate is 6.3% annual change ‘ (2012) population is around 154.7 million.
To understand the country better we have done a STEEPLED analysis of the country. It analysis is a simple and effective tool used in situation analysis to identify the key external (macro environment level) forces that might affect an organization. These forces can create both opportunities and threats for an organization. In pestle analysis P stands for political, E stands for economical, S stands for social, T stands for technological, E stands for environmental and L stands for legal aspects of the country. We have studied political aspect from four points of view that is taxation policy, government of Bangladesh, parties in Bangladesh and economic growth of Bangladesh.
Bangladesh includes taxation policy of two types of taxation that is direct tax and indirect tax. In the direct tax includes personal income tax, corporate income taxes and 15% value added tax are levied on consumer good, while for corporate tax public company at rate of 27.5% & banks or financial companies are charged tax at 45% other companies are 37.5%.
In parliament 300-seat body is there in legislature, election in every five years, 45 seats are reserved for women. Parties of Bangladesh include Awami league, the Bangladesh national party (BNP) & The Bangladesh Jamaat-e-Islami (BJI). With a view to fill the reserved seats for women, many women’s group has demanded direct election.
The democracy of Bangladesh is young and fragile & state institution is weak and at the national level political bickering is driven by personal & power rivalry between the government and the opposition, the state structure is centralize, corrupt & inefficient which is hindrance to the development The Bengalis form the country’s predominant ethnic group, whereas the indigenous peoples in northern and southeastern districts form a significant and diverse ethnic minority. The Bengal delta region has a rich and diverse cultural heritage.
Financial System is the set of well-organized institutional set up which helps to transfer excess funds from surplus unit to deficit unit. The financial system in Bangladesh includes Bangladesh Bank (the Central Bank), scheduled banks, and non-bank financial institutions like leasing etc., Microfinance institutions (MFIs), insurance companies, co-operative banks, credit rating agencies and stock exchange. Banking sector occupies the lion portion share of financial system in Bangladesh. Bangladesh bank is authorized for regulating and supervising financial institutions in Bangladesh.
Bangladesh Bank, the central bank and main regulatory body for the country’s financial system and monetary system, was established in Dhaka as an independent organization according to the Bangladesh Bank Order, 1972 with was effective from 16th December, 1971. Now, it has nine offices located at different division of the country among which two in Capital city namely Motijhee and Sadarghat, two in Rajshahi division namely Bogra and Rajshahi and one is each of the rest five division namely Chittagong, Khulna, Sylhet, Barisal and Rangpur; total manpower stood at 5071 as of end FY 2010. Bangladesh Bank basically responsible for all the core functions that are done by all the monetary and financial sector regulators.
Besides the core functions, Bangladesh Bank is also responsible for some other supporting functions. After liberation, two specialized bank operating in Bangladesh were also nationalized and renamed as Bangladesh Krishi Bank and Bangladesh Shilpa Bank. But Bangladesh Krishi bank was divided in 1987 and renamed as Rajshahi Krishi Unnayan Bank (RAKUB) for Razshahi Division to promote agricultural development in that region and Bangladesh Krishi bank for the rest of part of the country.
The Social analysis include the Social Aspects influencing the Bangladesh banking sector. Banks in Bangladesh do much thing for their society it takes care of the society while doing his work.
All Banks and FIs supported the victims and volunteers of Savar Tragedy by collecting one day salary of the employees of the said institutions, by forming a fund of Taka 1.9 billion by the BAB, ABB & BLFCA, and donating the aggregate collection to ‘Prime Minister’s Relief Because of Savar Rana Plaza Tragedy, unlike in preceding years, CSR initiatives of banks in 2013 mainly focused on emergency relief in humanitarian distresses.
Besides, focus on i) financial inclusion of less privileged population segments and underserved economic sectors, ii) promotion of health, education and cultural/recreational activities for advancement and well being of underprivileged population segments, iii) promotion of environment friendly projects, iv) adoption of energy efficient, carbon footprint reducing internal processes and practices in own offices and establishments was going on. Besides continuation and expansion of previous activities in these areas.
BB has taken initiatives to form ‘Bangladesh Bank Disaster Management & Corporate Social Responsibility fund’ of Tk. 5 crore where 5.02 (including interest) crore has already been disbursed till date for different projects addressing health, education, environment and human resources development/ capacity building etc.
There has been confusion about ‘riba’ (interest) among Muslims all over the world, especially among the Bangladeshi Muslims. In spite of efforts of the ulama to find a solution, the confusion remains. No consensus could be reached about the definition of ‘interest’ during the early period of Islam and till today there are differences of opinion on the matter. On the one hand, interest is important from economic view point, on the other, there is strong warning against riba in the Qur’an. Many people and even ulama agree that without finding a solution of the problem the economic condition of Muslims is at stake.
Let us take an example for properly understanding the issue of interest. Consider, two colleagues, one Hindu and the other Muslim, retire from government service and get Rs 0.5 million each in the form of Provident Fund and Gratuity benefits. The Hindu colleague puts the entire amount in fixed deposit for 12 years. After twelve years he will get a total amount of Rs 1.8-2 million rupees as a result of compound interest. The Muslim colleague, considering ‘interest’ illegal, puts his entire amount in a simple bank account. After 12 years he will get his principal amount of Rs 0.5 million together with a meager amount as ‘interest’ which he prefers not to use because to him ‘interest’ is unlawful.
Electronic Banking is transforming the financial services industry through various impossible innovations. The quantity of cross-border trading and other financial activities is increasing geometrically make possible by technology. It has been made possible by technology, particularly information technology to generate, collect and process information about bank operation and bank customers efficiently and effectively. There are currently 53 Banks working together in Bangladesh. The competition is going up day by day, especially between the private commercial banks. They are trying to exposure themselves as the better one to their customers by proving new banking services, developing the existing services and so on.
E-Banking is known to Bangladesh since 1990. Electronic Banking has got tremendous importance in banking sector and banking customers too. Currently in Bangladesh, there are 4 state owned Banks have 34% branches, 5 specialized banks have 1311 branches, 30 local private commercial banks have branches all across the country.In real terms Bangladesh’s economy has grown 5.8% per year since 1996 despite political instability, poor infrastructure, corruption, insufficient power supplies, and slow implementation of economic reforms.
Bangladesh remains a poor, overpopulated, and inefficiently-governed nation. Although more than half of GDP is generated through the service sector, 45% of Bangladeshis are employed in the agriculture sector with rice as the single-most-important product. Bangladesh’s growth was resilient during the 2008-09 global financial crisis and recession. Garment exports, totaling $12.3 billion in FY09 and remittances from overseas Bangladeshis, totaling $11 billion in FY10, accounted for almost 12% of GDP.
From the countercyclical monetary policy time lag perspective, empirical research suggests that when formulating the current countercyclical monetary policy, Bangladesh Bank is influenced by its actions taken in the last three quarters and the change in the real GDP a year ago. The countercyclical monetary policy actions and the change in the real GDP a year ago affect the current change in the real GDP.
In FY13 the economy faced a different set of challenges. Robust foreign remittance and export growth along with sluggish import growth led to a sharp growth of Net Foreign Assets (NFA) which needed to be sterilized. Moreover declining inflation and concerns over a slowdown in growth created space for a 50 basis point rate cut by BB in January 2013 with the aim of influencing bank lending rates downwards.
There are a number of laws that contain provisions regarding conservation of environment, improvement of standards and control of environmental pollution from various sources. Of these, the Bangladesh Environmental Conservation Act (ECA) 1995 is the umbrella Act.
The bank had initiated a project in Southkhali, a village under Shoronkhola thana of Bagerhath district, under which poor individuals and farmers of that area will be provided with motivational session towards Palm Plantation and then the interested farmers will be provided with Palm Trees, free of cost for plantation. The interested farmers will also be trained for Palm Plantation under this project scope and their progress in Palm Plantation will be monitored over time till the trees start yielding.
Under this project, interested farmers had already been trained in Palm Plantation and 5000 Palm Trees had been distributed amongst them. Bank is also ensuring periodic monitoring and reviewing of the status of palm cultivation, so that the targeted farmers can end up producing palm products successfully towards the end of the project period and can benefit financially through commercial trading of the same over period.
Bangladesh is a third world country with an under developed banking system, particularly in terms of the services and customer care provided by the government run banks. Recently the private banks are trying to imitate the banking structure of the more developed countries, but this attempt is often foiled by inexpert or politically motivated government policies executed by the central bank of Bangladesh, Bangladesh Bank.
The beginnings of policy reform and liberalization in bangladesh can be traced to deregulation measures in banking sector starting in 1976 under a New Government. However, initial reform efforts had neither a clear direction, nor a broad time frame for implementation. Political commitment to policy reforms remained problematic due to the Government’s continued preoccupation with the need to gain political legitimacy, which greatly restricted its ability to implement actions deemed unpopular.
Since the independence of the Bangladesh on December 16th, 1971 until December 1989, the Bangladeshi financial sector has been controlled under the strict directives of government and Bangladesh Bank-the Central Bank of Bangladesh. Then the government nationalized the commercial banks (except a few foreign banks) and organized them into six distinct banks by the Bangladesh Bank (the central Bank of the country) nationalization order 1972.
Under the current Prime Minister, Sheikh Hasina, Global banks are involved in international lending and foreign currency trading, in addition to the more typical banking services. Regional banks have numerous branches and automated teller machine (ATM) locations throughout areas that provide banking services to individuals.
In exercise of the powers conferred by Article 82 of the Bangladesh Bank Order, 1972(P.O. No.127 of 1972) and in supersession of the State Bank of Pakistan (Expenditure)Regulations, 1961, the Board of Directors of the Bangladesh Bank, with the approval of the Government , is pleased to make the following regulations.
With a view to preventing banks from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing, it is clarified that whenever there is suspicion of money laundering or terrorist financing or when other factors give rise to a belief that the customer does not, in fact, pose a low risk, banks should carry out full scale customer due diligence (CDD) before opening an account. Similarly, they have to observe the norms regarding record keeping, reporting, account opening and monitoring transactions. The Act has made various provisions regarding money laundering transactions which include maintenance of record of all transactions relating to money laundering.
Measuring the impact of customer demographics on bank selection criteria gives birth to newer marketing strategies for banks. It helps to understand group-behavior of the customer and therefore it makes positioning and branding activity easier. Studies in customer preference and market segmentation in Malaysia, Jordan, the UAE were mostly done by categorizing the customers based on religion; whether they are Muslims or non- Muslims. Sudin et al. (1994) found no significant difference in bank selection criteria between Muslim and Non-Muslims living in Malaysia. However, some researches sought completely a different mechanism for wider acceptability of the research. Erol and El-Bdour (1989) and Erol et al. (1990) compared the bank selection criteria between Islamic and Conventional Banks.
Indian banking is the lifeline of the nation and its people. Banking has helped in developing the vital sectors of the economy and usher in a new dawn of progress on the Indian horizon. The sector has translated the hopes and aspirations of millions of people into reality.
But to do so, it has had to control miles and miles of difficult terrain, suffer the indignities of foreign rule and the pangs of partition. Today, Indian banks can confidently compete with modern banks of the world.
Before the 20th century, usury, or lending money at a high rate of interest, was widely prevalent in rural India. Entry of Joint stock banks and development of Cooperative movement have taken over a good deal of business from the hands of the Indian money lender, who although still exist, have lost his menacing teeth.
In the Indian Banking System, Cooperative banks exist side by side with commercial banks and play a supplementary role in providing need-based finance, especially for agricultural and agriculture-based operations including farming, cattle, milk, hatchery, personal finance etc. along with some small industries and self-employment driven activities.
India’s banking sector is constantly growing. Since the turn of the century, there has been a noticeable upsurge in transactions through ATMs, and also internet and mobile banking. Following the passing of the Banking Laws (Amendment) Bill by the Indian Parliament in 2012, the landscape of the banking industry began to change. The bill allows the Reserve Bank of India (RBI) to make final guidelines on issuing new licenses, which could lead to a bigger number of banks in the country. Some banks have already received licences from the government, and the RBI’s new norms will provide incentives to banks to spot bad loans and take requisite action to keep rogue borrowers in check.
The year 1991 marked a decisive changing point in India’s economic policy since Independence in 1947.Following the 1991 balance of payments crisis, structural reforms were initiated that fundamentally changed the prevailing economic policy in which the state was supposed to take the “commanding heights” of the economy. After decades of far reaching government involvement in the business world, known as the “mixed economy” approach, the private sector started to play a more prominent role.
Overview of west bengal banking industry, Sri Ajit Maity, Chairperson, AMFI-WB said, ‘Currently, the industry is facing insufficient funding problem and is seeking bankers as a way to minimize the gap between supply and demand.’
The Bankers and MFIs meeting organized by AMFI-WB witnessed participation from cross section of microfinance players operating from West Bengal and senior state level officials from financial institutions including, State Bank of India, UCO Bank, Vijaya Bank, Union Bank, IDBI Bank, SIDBI, Corporation Bank etc.
Mr Anurag Srivastava, IAS, Joint Secretary, Dept of Finance, Govt of India said, ‘Since Indepence, poverty alleviation and financial inclusion has been in the main agenda of our government, but after 60 years we are still far from our dream. Prime Minister Narendra Modi re-christned Financial Inclusion mission as ‘Pradhan Mantri Jan Dhan Yojana’ and set a target to reach out 75 million households who are still unbanked.’
A case study has also been introduced where, Bangladesh’s elite anti-crime force has arrested a businessman in the country’s biggest ever bank fraud case, a senior police official said Monday.
SUMMERY: PART-2
Microfinance is a general term to describe financial services to low-income individuals or to those who do not have access to typical banking services. Microfinance is defined as any activity that includes the provision of financial services such as credit, savings, and insurance to low income individuals which fall just above the nationally defined poverty line, and poor individuals which fall below that poverty line, with the goal of creating social value. The creation of social value includes poverty alleviation and the broader impact of improving livelihood opportunities through the provision of capital for micro enterprise, and insurance and savings for risk mitigation and consumption smoothing.
A large variety of actors provide microfinance in India, using a range of microfinance delivery methods. Since the ICICI Bank in India, various actors have endeavored to provide access to financial services to the poor in creative ways. Governments also have piloted national programs, NGOs have undertaken the activity of raising donor funds for on-lending, and some banks have partnered with public organizations or made small inroads themselves in providing such services. This has resulted in a rather broad definition of microfinance as any activity that targets poor and low-income individuals for the provision of financial services.
MICROFINANCE IN INDIA
At present lending to the economically active poor both rural and urban is pegged at around Rs 7000 crores in the Indian banks’ credit outstanding. As against this, according to even the most conservative estimates, the total demand for credit requirements for this part of Indian society is somewhere around Rs 2,00,000 crores. India falls under low income class according to World Bank. It is second populated country in the world and around 70 % of its population lives in rural area. 60% of people depend on agriculture, as a result there is chronic underemployment and per capita income is only $ 3262. This is not enough to provide food to more than one individual.
The obvious result is abject poverty , low rate of education, low sex ratio, exploitation. The major factor account for high incidence of rural poverty is the low asset base. According to Reserve Bank of India, about 51 % of people house possess only 10% of the total asset of India .This has resulted low production capacity both in agriculture (which contribute around 22-25% of GDP ) and Manufacturing sector. Rural people have very low access to institutionalized credit( from commercial bank).
MAJOR MFIS IN BANGLADESH:
BRAC
BRAC, originally known as the Bangladesh Rural Advancement Committee, is a .finance-plus. NGO established in 1972. It houses a very large range of non-financial .social. programmes. Zaman (nd: 51) notes that .the know-how and confidence to implement large programs arose, in some cases, from the experience of scaling up programs not related to microcredit. For instance, in the case of BRAC, its first major experience with a nationwide program came when it implemented an oral rehydration program to combat diarrheal disease. Thirteen million women were trained.
Over the past decade in particular, it has also developed its range of financial services to include a greater variety of savings products, and credit for small business. More recently, in 2001 and1997 respectively BRAC Bank and the Delta BRAC Housing Finance Corporation were established as commercial interests to meet the financial requirements of non-poor Bangladeshis. In 2001, BRAC established a university, and in 2002 and 2005 respectively, it started work in Afghanistan and Sri Lanka.
As of September 2005, BRAC was working in over 68,000 villages and over 4,000 urban slums in every district of Bangladesh. It claimed over 5 million members, almost entirely women, and accumulative disbursement of over US$2.95 billion. Nearly 1 million children were enrolled in a BRAC school, and over 3 million have graduated. The NGO employed over 34,000 staff, over62,000 community school teachers, and tens of thousands of poultry and community health and nutrition workers and volunteers. (BRAC At a Glance September 2005).
GRAMEEN BANK
The Grameen Bank is a .finance-minimalist. bank that offers a wide range of financial products, and limited organizational support. It was started as an action research project in 1976, and became a government-regulated bank through a special government ordinance in 1984. In2001-2, all Grameen Bank branches began to operate the new, simpler and much more flexible. Grameen Generalized System. (also called .Grameen II.), which offers four types of loan products: basic, housing, higher education and struggling members (beggars) loans. There is also a facility for larger small enterprise loans, and a range of companies (commercial and notfor-profit) in the .Grameen family.. This includes Grameen Shikka (GS), established in 1997 top remote the education of non-literate Grameen Bank members; provide financial support in the form of loans and grants for education; and use and promote new and innovative ideas and technologies for educational development.
In March 2005, the Grameen Bank was working in almost 51,000 villages. It claimed over 4.3million members, over 95% women, and a cumulative disbursement of over US$4.7 billion.(Grameen Bank At a Glance March 2005).
PROSHIKA
Proshika, also established in 1976, started microfinance programmes in the 1990s. It matches member savings with credit and provides technical and marketing assistance where needed. Initially it fulfilled its social intermediation objectives through group formation and con scientisation rather than service provision, but it has moved into the provision of a wider range of social programmes. The present status of Proshika is unclear as it clashed with the government in 2002 and its registration, as an NGO, has been cancelled. At the end of 2004, Proshika reported over 1.5 million active borrowers, 80% of whom wereamong the poorest. 65% of the poorest . or 0.8 million people . were women (MicrocreditSummit 2005).
ASA
The Association for Social Advancement, known as ASA, was established as an NGO in 1978, with a focus on consciousness raising, group development and training among the rural poor. In1991 it started its microfinance operations and recreated itself as a finance-only MFI. It is now the third largest MFI in Bangladesh, and offers a range of savings, credit and insurance facilities. Its non-financial activities are now limited to providing capacity development to small Bangladeshi NGOs and MFIs worldwide. At the end of 2004, ASA had over 2.7 million active borrowers, about 90% of whom were among the poorest. 96% of the poorest. or almost 2.4 million people. were women. (Microcredit Summit 2005)
SELF HELP GROUP IN INDIA:
What is Self-Help Group?
A Self-Help Group [SHG] is a small, economically homogeneous and affinity group of 10 to 20 poor persons which comes together to
‘ save small amounts regularly
‘ mutually agree to contribute to a common fund
‘ meet their emergency needs
‘ have collective decision making
‘ resolve conflicts through collective leadership and mutual discussion
‘ provide collateral free loans on terms decided by the group at market driven rates
What are the goals of SHGs?
Self-Help Groups are generally started by non-profit organizations (NGOs)that generally have broad anti-poverty agendas. Self-Help Groups are seen as instruments for a variety of goals including empowering women, developing leadership abilities among poor people, increasing school enrolments, improving nutrition and the use of birth control.
If we see the presence of SHGs in India, 64% of total SHGs are in Southern India that to particularly in A.P and Tamilnadu, where as SHG movement is very weak in Northern and western states (Pl. see table for details)
SHGs IN VARIOUS STATES IN INDIA (As on March. 2003)
States No. of SHGs
A.P. 281338
TN 98410
Karnataka 62178
Uttar Pradesh 53696
Orissa 42272
WB 32647
Maharashtra 28065
Rajasthan 22742
MP 15271
SHG ‘ BANK LINKAGE MODEL:
‘ The SHG – Bank Linkage Programme is a major plank of the strategy for delivering financial services to the poor in a sustainable manner. The search for such alternatives started with internal introspection regarding the innovations which the poor had been traditionally making, to meet their financial services needs. It was observed that the poor tended to come together in a variety of informal ways for pooling their savings and dispensing small and unsecured loans at varying costs to group members on the basis of need.
‘ The SHG ‘ Bank Linkage Programme was started as an Action Research Project in 1989 which was the offshoot of a NABARD initiative during 1987 through sanctioning Rs. 10 lakh to MYRADA as seed money assistance for experimenting Credit Management Groups. In the same year the Ministry of Rural Development provided PRADAN with support to establish self-help groups in Rajasthan.
‘ The experiences of these early efforts led to the approval of a pilot project by NABARD in 1992. The pilot project was designed as a partnership model between three agencies, viz., the SHGs, banks and NGOs. This was reviewed by a working group in 1995 that led to the evolution of a streamlined set of RBI approved guidelines to banks to enable SHGs to open bank accounts, based on a simple ‘inter se’ agreement. This was coupled with a commitment by NABARD to provide refinance and promotional support to banks for the SHG – Bank Linkage Programme.
‘ Initially there was a slow progress in the programme up to 1999 as only 32,995 groups were credit linked during the period 1992 to 1999. Since then the programme has been growing rapidly and the number of SHGs financed increased from 81,780 in 1999-2000 to more than 6.20 lakh in 2005-06 and 6.87 lakh in 2006-07 (table below).
Year No. of SHGs financed
during the year
(in lakh) Cumulative no. of
SHGs financed
(in lakh)
2001-02 1.98 4.61
2002-03 2.56 7.17
2003-04 3.62 10.79
2004-05 5.39 16.18
2005-06 6.20 22.38
2006-07 6.87 29.25
‘ NABARD, in association with GTZ, conducted a study, in 2005, on the comparative performance of SHG ‘ Bank Linkage Programme vis-??-vis other priority sector credit. The findings are based on the data received from 27 commercial banks, 192 RRBs and 114 cooperative banks participating in the programme. One of the important observations of the study was that 1.44 million SHGs had loans outstanding of Rs. 4,200 crore with the banking system. 2.63 million SHGs had saving accounts with the banks and the savings outstanding was Rs. 2,391 crore.
‘ To cover all the 50 million odd poor households in India, the existing number of SHGs will have to be more than doubled and the extent of credit to the members of each SHG will have to be increased substantially.
GRAMEEN MODEL IN BANGLADESH
In the mid-1970s, Professor Muhammad Yunus (Yunus), then Head of the Rural Economics Program at the University of Chittagong, observed that banks did not extend their credit schemes to the rural poor as they were not considered creditworthy. In this situation, the rural poor were forced to approach money lenders who charged exorbitant rates of interest. In 1976, Yunus launched The Grameen Bank Project, on an experimental basis to study the framework of banking services for the rural poor. The objectives of the Grameen Bank Project were:
‘ Providing banking services to the rural poor
‘ Eliminating exploitation of the rural poor by moneylenders
‘ Facilitating self-employment projects for unemployed rural people
‘ Making women self-reliant by providing them opportunities through Grameen Bank
‘ To reverse the vicious cycle of. Low income, low saving & low investment, into a new cycle of more credit, more investment, more income.
To start with, Yunus took loans from commercial banks and extended the money to 42 needy women in Jobra village in Chittagong district. The project spread to surrounding villages between 1976 and 1979. However, bankers were skeptical about the project and argued that it was initially successful because Yunus implemented it around the university campus where he had a good reputation. In order to convince bankers about the project’s long-term viability, Yunus took two years leave from the university and started working in the Tangail district. The Bangladesh Central Bank provided financial support for the Tangail project and Yunus was appointed as the Project Director.
The project was started in 1979. With the successful implementation of the Grameen Bank project in the Tangail district, it was extended to other districts in the country. By 1980, Grameen Bank had disbursed $1.10 million as loans to the rural poor. In 1983, Grameen Bank was given the status of an independent bank by a special ordinance of the Bangladesh Government. Initially, government contributed around 60% of the bank’s capital and bank members held the remaining 40%. However, by 2003, government held only 7% and members held a 93% stake in the bank.
When it was successful in leasing fishing ponds to the poor, Grameen Bank started expanding its nonbanking activities. The Grameen Fisheries Foundation and the Grameen Krishi Foundation were formed to oversee the leasing of fisheries and irrigation pumps. In 1989, the Grameen Trust was formed to provide training and support to people from other countries to start micro finance programs. By the mid-1990s, Grameen Bank had expanded its activities to areas such as venture capital, textile industry and Internet Service Provider (ISP). All the non-banking ventures of Grameen bank were grouped under the Grameen Family.
By 2002, Grameen Bank had 2.4 million borrowers (95% of them were women) and its activities were spread across 41,000 villages with over 1,100 branches. By August 2002, it had disbursed cumulative loans of $3708.22 million and the loan repayment rate was reported to be around 95%.
GRAMEEN MICROCREDIT PRINCIPLES
Yunus stated his principles when he started the Grameen Bank.
‘ Poverty is not created by poor people. It is created by the institutions and policies which surround them. Loans offer people the opportunity to take initiatives in business or agriculture to make earnings that enable them to pay off debt.
‘ Poor people have skills that remain unutilized or under-utilized. It is not the lack of skills that makes them poor.
‘ Charity is not an answer to poverty. It only helps poverty to continue. It creates dependency and takes away an individual’s initiative to break through the wall of poverty. Utilizing the energy and creativity in each human being is the answer to poverty.
SELF HELP GROUP MODEL v/s GRAMEEN BANK MODEL
WHERE, BY WHOM AND WHY ARE THE TWO SYSTEMS USED?
The Grameen System
The Grameen system dominates the market in Bangladesh, where it has been widely imitated by a number of large and small MFI. The system was pioneered by Professor Yunus in 1976, and has grown very rapidly since.
In addition to the originator, the Grameen Bank, with 2.2 million members, two other major users of the system, BRAC and Proshika, each have over a million clients, and there were in 1998 some thirty other MFIs with over 10,000 members, and many hundreds of other smaller organisations). It has been estimated that some ten million people in Bangladesh receive financial services through this system. It has also been widely replicated by MFIs elsewhere, including a small number in India and in more than twenty other countries in Asia, in Africa, Latin America and also in disadvantaged rural and urban areas in North America and Europe.
The Grameen Trust supports ‘replicators’ with funding and technical assistance; at the end of 1999, these replicators had 420,000 clients, including about 42,000 in India (Grameen Trust, passim) Low or no-cost foreign donations represent the largest source of on-lending funds for the large MFI which use the Grameen system in Bangladesh, but members’ savings and the accumulated surplus from operations each contribute some 20% of the necessary funds. The interest rates vary, and it is difficult to estimate the actual rates because there are a number of fees, forced savings requirements and other charges, and the methods of calculation also differ from one institution to another. Broadly speaking, the cost to the final borrowers amounts to at least 2% per month, and often substantially more.
The Grameen system requires a dedicated special purpose organization. The success of the weekly or occasionally fortnightly or monthly meeting routine depends on tight discipline and adherence to a regular schedule, and it is difficult for a commercial bank which also has other financial products to integrate the Grameen system into its own operations. One of the few institutions which have done this is the Islami Bank of Bangladesh. By 1998 45 of its more than 100 branches had financed over 12,000 people through groups and centres, more or less following the Grameen system.
One important difference, however, is that this is an Islamic Bank; most of its credit is disbursed in kind, and the Bank is far more intimately involved in its clients’ use of their finance than Western style banks. Although loans under the group system amounted to only about a quarter of one per cent of its total portfolio in 1998, the Islami Bank intended massively to expand this approach.
The SHG System
The SHG system is mainly found in India, where it is used by both MFIs and banks. There also some important users in Indonesia, parts of South East Asia, Africa and elsewhere. The SHG system in India was initiated by NGOs, and is used for financial intermediation both by commercial banks and by MFIs. By April 2001 some 285,000 SHGs had taken loans from 41 Indian commercial banks, 166 regional rural banks and 111 co-operative banks. The average loan per group was about Rs 18,000 and the average loan per member was Rs 1,100, or just under twenty five dollars.
During the year 2000/2001 171,000 SHGs took loans, of which 149,000 were first time borrowers. (NABARD, Micro-credit Innovations Department, personal communication).
The average membership is around seventeen people per SHG, so these figures mean that about four and a half million people in India have access to formal savings facilities and loans through their SHG membership. In just one year, the number of new members was in excess of two and a half million people, or well over the total membership of even the largest institutions in Bangladesh.
The formation of SHGs for savings and credit, and their linkage to commercial banks, was initiated in India by MYRADA in the mid-1980s. NABARD management had around the same time had some exposure to similar experiences in Thailand and Indonesia, and they responded favourably to MYRADA’s suggestion that this could be a useful way to bring formal financial services to the rural poor.
Since that time, SHG linkage has been vigorously promoted by NABARD and other institutions. It generally involves two institutions. Most NGOs do not play any financial role. They promote and train the groups, and assist them through the qualifying process of saving and internal lending.
The groups are introduced to a bank to open a savings account, and later to take a loan. The NGO may remain heavily involved, assisting the members to manage their affairs, and possibly promoting higher level clusters and federations of SHGs, or it may withdraw and work with other groups.
Why Grameen in Bangladesh and SHGs in India?
The rural poor in India are not so different from their counterparts in Bangladesh, and the differences between Northern and Southern India, for instance, are certainly more pronounced than those between poor rural communities in West Bengal, or UP, Bihar and Orissa, from their neighbours in Bangladesh. It seems prima facie to be odd, therefore, that two such different systems have evolved, and that there are, as yet at any rate, so few examples of the SHG system in Bangladesh or of the Grameen system in India.
There are a number of possible explanations. None of them is probably sufficient on its own, but they may together account for the present situation. Bangladesh has less experience of any form of democracy than India; its people are used to military governments, and may for that or other reasons be more disciplined and less individualist. The Grameen system is often criticised for being or even militarist, with its tradition of saluting, of meetings with imposed seating systems and the necessity for strict adherence to pre-set schedules, by staff and members alike. It may, for that reason, be more acceptable in Bangladesh. In India, on the other hand, many NGOs see credit as an entry point for wider goals. For instance, mentions credit only as the third aspect of MYRADA’s involvement in SHG promotion; the identification and strengthening of traditional, social and institutional capital are given greater emphasis.
Early experiments with formal micro-finance began in the late 1970s in both countries, without any initial donor assistance. Micro-finance has however been largely a donor- driven phenomenon, everywhere, and the Grameen system was and indeed still is lavishly supported by donors in Bangladesh. It was and indeed still is an ideal channel for donor assistance, since it is relatively standardized and transferable, it is dominated by a few large institutions, it depends mainly on subsidized funds and is more or less totally independent of existing local banks. India was $1.90 per head of the population in 1985, and was at the same level in 1997. The equivalent figures for Bangladesh were $11.40 and $9.00. This difference may in itself account in part for the predominance of the Grameen system in Bangladesh.
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1.1 BACKGROUND
The twentieth century has witnessed large scale conscious efforts of social change to improve the quality of life of the disadvantaged section of the population. The micro-finance concept was emerged as a result of such efforts. It was recognized that making financial services available to the poor was necessary, though not sufficient, condition for improving the quality of their lives. However, it was also found that in spite of establishment of a large network of financial outlets, majority of the disadvantaged population had no access to formal financial systems.
The unequal economic opportunities for women are manifested most clearly in their limited access to credit. The availability of micro-credit, especially for poor women, provides them an opportunity to avail of economic independence to a certain extent. Numerous initiatives have been taken by both governments and NGOs in order to provide credit to women in India and Bangladesh. Although some of these have been very successful, there is still a huge unmet need for micro-credit in the region, particularly in the rural areas.
Women hardly get any benefit from formal financial institutions and also any credit other than the institutional credit has been given to poor women. In particular, banks have failed to take into account the special needs and concerns of poor rural women. Most of the banks apply the same rules to these women as are applied to richer borrowers in urban centers. High transaction costs, rigidity of collateral requirements and difficult procedures often restrict poor women to avail the facilities of formal financial institutions.
In short, traditionally, these banking institutions believe that poor people are not ‘bankable. Therefore, in different parts of the world, development practitioners have called for substantial efforts to make financial services, including savings, credit, insurance and financial counseling, available to the poor people and especially to the women workers. Micro-finance is a result of such efforts. In all such efforts, women have been under watch, mainly because they are more vulnerable in the formal financial system.
The Task Force constituted by the Reserve Bank of India (RBI) came out with a working definition of micro-finance as ‘provision of thrift, credit and other financial services and products of very small amounts to the poor in rural and semi-urban areas for enabling them to raise their income levels and improve living standards’.
In the absence of an appropriate micro-finance programme, women workers suffer the most. First of all, if they are denied access to banks, they are not able to keep their small savings at a safer place, besides losing some interest on such deposits. In the absence of any such arrangement, they either keep their savings ‘under the ground’ (in most of the cases) or with their husband. In the latter arrangement, their money is not safe as their husbands waste their money mostly on consuming alcohol. In the former case, their savings do not generate profit. Women workers in the informal sector are more vulnerable and they are more prone to fall under the vicious cycle of poverty due to lack of capital inflow. The only way they can break out of this cycle is to infuse some capital for increasing investment in the form of credit or to expand their capital base.
Savings is created by accumulating small amounts of cash set aside from some everyday expenditure, over a period of time. Credit is needed when a large sum is required, before the small amounts have been set aside. When income is not adequate for capital formation, it needs to be enhanced by increasing the investment through introduction of capital in the form of credit. One of the biggest problems, which women workers face, is that of timely availability of credit. In most cases, husbands own properties.
Nowadays, the informal micro-finance institutions and NGOs provide these women, money on time, at either their doorstep or nearer to their home, which is a mutually beneficial situation. The micro-finance experiences of the last three decades in the NGO sector in India and Bangladesh have shown that given a proper supportive environment and institutional support in the form of SHGs (Self-help Groups) and other models (Grameen model etc.), poor people can save.
In the absence of any savings, their position within the household and outside becomes vulnerable. In case somebody wants to work, or is working with the family enterprise, and being part of the family enterprise she is generally not paid. In addition to this, she can also look after the household work and children, which amounts to 15-16 hours of back-breaking work. So, even if she wishes to start her own enterprise, she feels helpless. In many cases, women start up their enterprise by taking loans from the moneylenders, who generally charge high rate of interest. The average rate of interest they charge in both India and Bangladesh is about 5 per cent per month, which amounts to an exorbitant 6o per cent per annum. But these women prefer exploitation than ‘no money’.
During the course of the study, a total of 94 per cent vendors were found dependent on this informal source of credit. They operate through permanent henchmen, who even issue passbooks to the borrowers. The rate of interest on reducing balance basis works out to be an unbelievable 482 per cent per annum. Mobile vendors using pushcarts normally pay between Rs. 15 and Rs. 200 as the monthly rent for hiring these carts from the owners who also happen to be moneylenders.
In the process of earning their livelihoods, women vendors fall under the trap of informal ‘money-regulators’. They are not able to create assets, which can generate income without any ‘indebtedness’. Wageworkers are jobless during lean seasons. In the light of such problems faced by women workers, governments and NGOs in India and Bangladesh felt the dire need of micro-level financial services for them. It has been proved as an important tool which helps to improve their livelihoods, consolidating their position in the family and in the society at large.
NGO-operated micro-credit programmes in Bangladesh cater to over 10 million people with 90 per cent of borrowers being women. Rural credit programmes support services that include training, savings mobilization techniques and group formation. Approximately 2 million women were estimated to be self-employed in individual or group enterprises (UNDP, 1995).
1.2 ABOUT MICROFINANCE:
The term micro finance is of recent origin and is commonly used in addressing issues related to poverty alleviation, financial support to micro entrepreneurs, gender development etc. There is, however, no statutory definition of micro finance. The taskforce on supportitative policy and Regulatory Framework for Microfinance has defined microfinance as ‘Provision of thrift, credit and other financial services and products of very small amounts to the poor in rural, semi-urban or urban areas for enabling them to raise their income levels and improve living standards’. The term ‘Micro’ literally means ‘small’. But the task force has not defined any amount. However as per Micro Credit Special Cell of the Reserve Bank Of India , the borrow amounts up to the limit of Rs.25000/- could be considered as micro credit products and this amount could be gradually increased up to Rs.40000/- over a period of time which roughly equals to $500 ‘ a standard for South Asia as per international perceptions.
The term micro finance sometimes is used interchangeably with the term micro credit. However while micro credit refers to purveyance of loans in small quantities, the term microfinance has a broader meaning covering in its ambit other financial services like saving, insurance etc. as well.
The mantra ‘Microfinance’ is banking through groups. The essential features of the approach are to provide financial services through the groups of individuals, formed either in joint liability or co-obligation mode.
The other dimensions of the microfinance approach are:
– Savings/Thrift precedes credit
– Credit is linked with savings/thrift
– Absence of subsidies
-Group plays an important role in credit appraisal, monitoring and recovery.
Basically groups can be of two types:
Self Help Groups (SHGs): The group in this case does financial intermediation on behalf of the formal institution. This is the predominant model followed in India.
Grameen Groups: In this model, financial assistance is provided to the individual in a group by the formal institution on the strength of group’s assurance. In other words, individual loans are provided on the strength of joint liability/co obligation. This microfinance model was initiated by Bangladesh Grameen Bank and is being used by some of the Micro Finance Institutions (MFIs) in our country.
1.3 ROLE OF MICROFINANCE:
The micro credit of microfinance prename was first initiated in the year 1976 in Bangladesh with promise of providing credit to the poor without collateral , alleviating poverty and unleashing human creativity and endeavor of the poor people. Microfinance impact studies have demonstrated that
1. Microfinance helps poor households meet basic needs and protects them against risks.
2. The use of financial services by low-income households leads to improvements in household economic welfare and enterprise stability and growth.
3. By supporting women’s economic participation, microfinance empowers women, thereby promoting gender-equity and improving household well being.
4. The level of impact relates to the length of time clients have had access to financial services.
1.4 WOMEN’S EMPOWERMENT AND MICRO FINANCE: DIFFERENT PARADIGMS
‘ Concern with women’s access to credit and assumptions about contributions to women’s empowerment are not new. From the early 1970s women’s movements in a number of countries became increasingly interested in the degree to which women were able to access poverty-focused credit programmes and credit cooperatives. In India organizations like Self- Employed Women’s Association (SEWA) among others with origins and affiliations in the Indian labour and women’s movements identified credit as a major constraint in their work with informal sector women workers.
‘ The problem of women’s access to credit was given particular emphasis at the first International Women’s Conference in Mexico in 1975 as part of the emerging awareness of the importance of women’s productive role both for national economies, and for women’s rights. This led to the setting up of the Women’s World Banking network and production of manuals for women’s credit provision. Other women’s organizations world-wide set up credit and savings components both as a way of increasing women’s incomes and bringing women together to address wider gender issues. From the mid-1980s there was a mushrooming of donor, government and NGO-sponsored credit programmes in the wake of the 1985 Nairobi women’s conference .
‘ The 1980s and 1990s also saw development and rapid expansion of large minimalist poverty-targeted micro-finance institutions and networks like Grameen Bank, ACCION and Finca among others. In these organizations and others evidence of significantly higher female repayment rates led to increasing emphasis on targeting women as an efficiency strategy to increase credit recovery. A number of donors also saw female-targeted financially-sustainable micro-finance as a means of marrying internal demands for increased efficiency because of declining budgets with demands of the increasingly vocal gender lobbies.
‘ The trend was further reinforced by the Micro Credit Summit Campaign starting in 1997 which had ‘reaching and empowering women’ as its second key goal after poverty reduction (RESULTS 1997). Micro-finance for women has recently been seen as a key strategy in meeting not only Millennium Goal 3 on gender equality, but also poverty Reduction, Health, HIV/AIDS and other goals.
1.5 MICRO FINANCE IN INDIA
Nationalization of banks in 1969 led to a massive push in increasing the branch network in rural areas, increasing direct lending to agriculture and small industry by establishing priority sector lending. Establishing Regional Rural Banks in 1975, NABARD in 1982, and above all, initiation of the Integrated Rural Development Programme (IRDP) in 1982 have been major steps in this direction.
The bureaucratic control over the funds and unprofessional management led to the failure of these programmes. Above all, women workers of the unorganized sector were mostly left ‘untouched’ due to their inability to arrange for collaterals. So, women workers could not get easy access to the formal credit until the efforts made by NABARD through its pilot project in Karnataka (1991-92) of linking self-help groups with formal bank, mediated through the NGO, MYRADA which produced encouraging results. The apparent success of MYRADA in building a bridge between the banks and the poor led to its institutionalization in 1996 by the Reserve Bank of India as a normal lending activity of banks under priority sector and service area approach.
NABARD
NABARD’s scheme was targeted towards fulfilling the credit demand-supply gap for the women workers. Credit needs of the poor, especially, women and particularly, those in the unorganized sector, have not been adequately addressed by the formal financial institutions of the country. Varied experiences in this sector had established the need for a quasi-formal credit delivery mechanism, which is client-friendly, with simple and minimal procedures, quick disbursal and flexible repayment schedules.
Although the government made its effort to start the SHG movement in early 1990s with the MYRADA experiment, establishment of SEWA Bank had already laid the foundation of micro-finance movement in India.
The formation of SEWA Bank by members of the Self-Employed Women’s Association was the pioneering event in the micro-finance sector in India, catering exclusively to the needs of women workers. The Bank offers the womenfolk financial advice, helps them with market and feasibility surveys, provides them with technical training and special programme called ‘financial planning’ to help them in better planning for the future.
1.6 MICROFINANCE CHANGING THE FACE OF POOR INDIA
Micro-Finance is emerging as a powerful instrument for poverty alleviation in the new economy. In India, micro-Finance scene is dominated by Self Help Groups (SHGs) – Banks linkage Programme, aimed at providing a cost effective mechanism for providing financial services to the ‘unreached poor’. In the Indian context terms like “small and marginal farmers”, ” rural artisans” and “economically weaker sections” have been used to broadly define micro-finance customers. Research across the globe has shown that, over time, microfinance clients increase their income and assets, increase the number of years of schooling their children receive, and improve the health and nutrition of their families.
A more refined model of micro-credit delivery has evolved lately, which emphasizes the combined delivery of financial services along with technical assistance, and agricultural business development services. When compared to the wider SHG bank linkage movement in India, private MFIs have had limited outreach. However, we have seen a recent trend of larger microfinance institutions transforming into Non-Bank Financial Institutions (NBFCs). This changing face of microfinance in India appears to be positive in terms of the ability of microfinance to attract more funds and therefore increase outreach.
In terms of demand for micro-credit or micro-finance, there are three segments, which demand funds. They are:
‘ At the very bottom in terms of income and assets, are those who are landless and engaged in agricultural work on a seasonal basis, and manual labourers in forestry, mining, household industries, construction and transport. This segment requires, first and foremost, consumption credit during those months when they do not get labour work, and for contingencies such as illness. They also need credit for acquiring small productive assets, such as livestock, using which they can generate additional income.
‘ The next market segment is small and marginal farmers and rural artisans, weavers and those self-employed in the urban informal sector as hawkers, vendors, and workers in household micro-enterprises. This segment mainly needs credit for working capital, a small part of which also serves consumption needs. This segment also needs term credit for acquiring additional productive assets, such as irrigation pumpsets, borewells and livestock in case of farmers, and equipment (looms, machinery) and work sheds in case of non-farm workers.
‘ The third market segment is of small and medium farmers who have gone in for commercial crops such as surplus paddy and wheat, cotton, groundnut, and others engaged in dairying, poultry, fishery, etc. Among non-farm activities, this segment includes those in villages and slums, engaged in processing or manufacturing activity, running provision stores, repair workshops, tea shops, and various service enterprises. These persons are not always poor, though they live barely above the poverty line and also suffer from inadequate access to formal credit.
Well these are the people who require money and with Microfinance it is possible. Right now the problem is that, it is SHGs’ which are doing this and efforts should be made so that the big financial institutions also turn up and start supplying funds to these people. This will lead to a better India and will definitely fulfill the dream of our late Prime Minister, Mrs. Indira Gandhi, i.e. Poverty.
One of the statements is really appropriate here, which is as:
‘Money, says the proverb makes money. When you have got a little, it is often easy to get more. The great difficulty is to get that little.’Adams Smith.
1.7 THE NEED IN INDIA
India is said to be the home of one third of the world’s poor; official estimates range from 26 to 50 percent of the more than one billion population.
‘ About 87 percent of the poorest households do not have access to credit.
‘ The demand for microcredit has been estimated at up to $30 billion; the supply is less than $2.2 billion combined by all involved in the sector.
Due to the sheer size of the population living in poverty, India is strategically significant in the global efforts to alleviate poverty and to achieve the Millennium Development Goal of halving the world’s poverty by 2015. Microfinance has been present in India in one form or another since the 1970s and is now widely accepted as an effective poverty alleviation strategy. Over the last five years, the microfinance industry has achieved significant growth in part due to the participation of commercial banks. Despite this growth, the poverty situation in India continues to be challenging.
Some principles that summarize a century and a half of development practice were encapsulated in 2004 by Consultative Group to Assist the Poor (CGAP) and endorsed by the Group of Eight leaders at the G8 Summit on June 10, 2004:
‘ Poor people need not just loans but also savings, insurance and money transfer services.
‘ Microfinance must be useful to poor households: helping them raise income, build up assets and/or cushion themselves against external shocks.
‘ ‘Microfinance can pay for itself.’ Subsidies from donors and government are scarce and uncertain, and so to reach large numbers of poor people, microfinance must pay for itself.
‘ Microfinance means building permanent local institutions.
‘ Microfinance also means integrating the financial needs of poor people into a country’s mainstream financial system.
‘ ‘The job of government is to enable financial services, not to provide them.’
‘ ‘Donor funds should complement private capital, not compete with it.’
‘ ‘The key bottleneck is the shortage of strong institutions and managers.’ Donors should focus on capacity building.
‘ Interest rate ceilings hurt poor people by preventing microfinance institutions from covering their costs, which chokes off the supply of credit.
‘ Microfinance institutions should measure and disclose their performance ‘ both financially and socially.
Microfinance can also be distinguished from charity. It is better to provide grants to families who are destitute, or so poor they are unlikely to be able to generate the cash flow required to repay a loan. This situation can occur for example, in a war zone or after a natural disaster.
1.8 MICRO FINANCE IN BANGLADESH
A brief history of microfinance in Bangladesh ‘ experiment, expansion, innovation
In 1971 Bangladesh emerged as an independent nation, ravaged by war and natural disaster, populated by destitute and a significant cadre of young activists full of hope, energy and commitment to reconstruction and nation-building.
As the new government failed to meet the substantial challenges, even with overseas assistance, small non-governmental organizations emerged over the 1970s to organize relief and rehabilitation through community development. As noted above, however, ??lite capture of resources plagued community development experiments, so targeted approaches began to be tried.
The Grameen Bank was started as an action research project in 1976, when a Chittagong University team led by economics professor Muhammad Yunus began to lend small amounts of money to poor households in a few nearby villages. Borrowers were organized into small ‘peer monitoring’ groups of four or five people (soon becoming single sex groups, with a focus on women’s groups) that met weekly with other groups to make loan repayments.
Demand for credit grew rapidly and repayment rates were good, so the project was able to secure loans for on-lending from the state-controlled Bangladesh Bank and other commercial banks. In 1984, the Grameen Bank became a government-regulated bank through a special government ordinance, and remains the only body regulated in this way.
Over the next two decades NGOs grew in number and scale, and by the early 1990s the experiences of BRAC, Proshika and ASA, as well as the Grameen Bank, dominated development discourse in Bangladesh. The early 1990s in particular was a period of rapid expansion of access to microcredit.
Procedures were by then established and standardized, and computerization became more common, allowing the MFIs to intensify disbursement and repayment monitoring. The Grameen Bank and NGO MFIs used donor funds, and, increasingly, member savings and interest payments, to replicate new branches across the country. During this period, a wholesale financing institution (PKSF) also emerged (see below).
But by the mid-1990s it seemed that the very success of ‘first generation’ MFIs led by the Grameen Bank was hindering the development of new and different approaches to microfinance (Hulme in Rogaly, 1996). The movement of the integrated, socially-focused programming of ASA in particular, but also of BRAC and other NGOs, towards that of the finance-minimalist Grameen Bank was clear and noted by many. 8 Zaman (2004:51) notes that ‘the benefits of a narrow focus on microcredit during the expansion phase was that it kept costs low, operations transparent, and management oversight relatively straightforward.’
From the mid-1990s, however, a range of ‘second generation’ innovations began to emerge, as it became increasingly clear that the poor required a wider range of financial services; that the existing services, particularly savings, needed to be made more flexible; that the needs of vulnerable non-poor micro- and small entrepreneurs were not being met; and that the poorest were often excluded from microfinance.
This change in focus was based on feedback from the field in Bangladesh and internationally, and a large amount of research, conducted both in-house, as well as by national and international academics and consultants. The emergence of Safe Save in 1997 as an experiment dedicated to investigating the possibilities of savings-led, individual-oriented microfinance was a forerunner of the period.
Bangladesh has been described as the ‘Mecca’ of micro-finance with a remarkable variety of institutional arrangements for delivering micro-financial services to the poor. These include:
‘ Three nationalized commercial banks (NCBs)
‘ Two development finance institutions (DFIs)
‘ Several bilateral projects in the formal public sector
There are also Grameen Bank and Palli Karma-Sahayak Foundation (PKSF) in the formal sector as public/private institutional hybrids; more than 1000 non-governmental organization (NGOs) and 18 credit unions in the private semi-formal sector; apart from hundreds of thousands of private (mostly disorganized) informalntermediaries.
Bangladesh’s pre-eminence in the micro-finance industry has also come along because of its spectacular achievements in getting micro-financial services out to almost 12,696,574 poor people in which the number of total active female members are 10,922,314, and is one of the biggest growing industries in Bangladesh.
1.8.1 BRAC
BRAC is one of the leaders in the micro-finance sector along with the Grameen Bank and Proshika. From its modest beginning in 1972, it is now the world’s largest national NGO, diverse in its operations with over 55,536 regular staff and 53,205 part-time teachers, working in villages in all the 64 districts of Bangladesh. BRAC has progressed with learning from experience and through a responsive and inductive process. Adjusting its strategy to prevailing circumstances, it does not pursue any rigid development rules.
The aim of BRAC’s Savings and Credit Programme is to help create a financial base for the VO members, through savings mobilization and credit, in order to cater to various income-generating activities.
1.8.2 GRAMEEN BANK
The Grameen Bank is a ‘finance-minimalist’ bank that offers a wide range of financial products, and limited organizational support. It was started as an action research project in 1976, and became a government-regulated bank through a special government ordinance in 1984. In 2001-2, all Grameen Bank branches began to operate the new, simpler and much more flexible ‘Grameen Generalized System’ (also called ‘Grameen II’), which offers four types of loan products: basic, housing, higher education and struggling members (beggars) loans.
There is also a facility for larger small enterprise loans and a range of companies (commercial and not-for-profit) in the ‘Grameen family’. This includes Grameen Shikka (GS), established in 1997 to promote the education of non -literate Grameen Bank members; provide financial support in the form of loans and grants for education; and use and promote new and innovative ideas and technologies for educational development.
In March 2005, the Grameen Bank was working in almost 51,000 villages. It claimed over 4.3 million members, over 95% women, and a cumulative disbursement of over US$4.7 billion.
1.8.3 PROSHIKA
Proshika, also established in 1976, started microfinance programmes in the 1990s. It matches member savings with credit and provides technical and marketing assistance where needed. Initially it fulfilled its social intermediation objectives through group formation and than service provision, but it has moved into the provision of a wider range of social programmes. The present status of Proshika is unclear as it clashed with the government in 2002 and its registration, as an NGO, has been cancelled.At the end of 2004, Proshika reported over 1.5 million active borrowers, 80% of whom were among the poorest. 65% of the poorest ‘ or 0.8 million people ‘ were women .
1.8.4 ASA
The Association for Social Advancement, known as ASA, was established as an NGO in 1978, with a focus on consciousness raising, group development and training among the rural poor. In 1991 it started its microfinance operations and recreated itself as a finance-only MFI. It is now the third largest MFI in Bangladesh, and offers a range of savings, credit and insurance facilities. Its non-financial activities are now limited to providing capacity development to small Bangladeshi NGOs and MFIs worldwide.
At the end of 2004, ASA had over 2.7 million active borrowers, about 90% of whom were among the poorest. 96% of the poorest ‘ or almost 2.4 million people ‘ were women.
1.9 WHAT HAS BEEN ACHIVED BY MICROFINANCE IN BANGLADESH?
Bebbington and McCourt (2005) define ‘development policy success’ as the tangible enhancement of the human capabilities of a significant population of otherwise disadvantaged people, whether through direct investments and improvements in their assets or through the improvement of the environments in which poor people pursue their well-being.
It is clear that microfinance in Bangladesh at least reaches ‘a significant population of otherwise disadvantaged people’ ‘ people with low and unstable incomes, little or no land or assets, low social status, and few if any alternative sources of financial services that are both accessible and affordable. The extent to which there has been a ‘tangible enhancement of their capabilities’ is of course a more normative and debated issue, but on balance the evidence suggests that this is the case, particularly through asset enhancement but also via positive effects on the socio-economic environments in which the poor work and live.
1.9.1 THE NUMBERS
The selection of which numbers to highlight is, of course, an equally normative decision, and unsurprisingly different institutions and networks, in Bangladesh and globally, choose different statistics to collect and publish. Here we only touch on the immense scale of the Bangladeshi microfinance sector, in terms of numbers of MFIs and numbers of clients, both in absolute terms and in relation to the microfinance sector globally. We also note the dominance of a few large MFIs.
Most NGOs are involved in microfinance to a greater or lesser extent. According to the Credit and Development Forum (CDF), in 2002 there were as many as 1,200 MFIs; a more recent CDF estimate suggests that about 1,500 MFIs currently operate in Bangladesh, with another 500 entities soon to join the industry. Most MFIs ‘ except those run by government bodies ‘ consistently report repayment rates of 98% or more.
In 2002, about 13 million poor households had access to credit and other financial services through the 1,200 MFIs. This figure excludes over three million Grameen Bank borrowers, but also is likely to overestimate the total number of poor households with access to microcredit due to the practice of individuals and households borrowing from more than one source. On its website, PKSF notes that ‘There is debate on the extent of overlap general consensus is that a national average would be that 15% of all borrowers are borrowing from more than one MFI’.
In this case, the effective coverage is about 11 million households. Out of 11 million households covered by microcredit programmes, about 80% are below poverty line and so about 8.8 million poor households are covered by microcredit programmes. With an estimated number of households of 26 million, out of which about 46% are poor households, the total number of poor households is approximately 11.96 million. Therefore, there is still scope of extending the coverage of microcredit programs to an approximate 3.16 million households.
From this estimate, it seems that at least 80% of poor households are covered by microfinance services. While the figure is certainly substantial, the assumptions around the proportion of MFI clients who are among the poorest are questionable and up for redefinition and debate.
According to data gathered by the Microcredit Summit Campaign, by the end of 2004, 330 ‘verified’ Bangladeshi MFIs (which include the Grameen Bank, NGOs, MFI networks,government bodies, and commercial banks offering some form of microfinance) had 24.4 million active clients, three-quarters of whom were poor and two-thirds of whom were poor women (see Tables 1 and 2 below). The majority of borrowers are clients of the handful of very large organisations discussed above: the Grameen Bank, BRAC, ASA and Proshika. Of the remaining organisations, only twelve have over 100,000 borrowers, but many of the smaller MFIs join ASA, BURO Tangail and TMSS as the most profitable MFIs in South Asia (Tazi 2005).
Table 1 Bangladeshi MFI data verified by Microcredit Summit, in global context
Number of Number of Proportion Number of Proportion
of active poorest
Number poorest active of poorest
clients who who are
of MFIs clients clients who are
are ‘poorest’ women
(millions) (millions) women
(millions)
Verified 103 18.4 24.4 16.1
Bangladeshi 75% 88%
(31%) (31%) (29%) (33%)
MFIs
Total verified 330 58.5 77.9 75% 49.2 84%
MFIs
Total reporting 3,164 66.6 92.3 72% 55.6 84%
MFIs
Source: Daley-Harris 2005 (Appendix 1 and personal communication with Microcredit Summit team).
Table 2 Top 10 Microcredit Summit-verified Bangladeshi MFIs, based on number of poorest clients
Number of Number of Proportion Number of Proportion
of active
‘poorest’ active ‘poorest’ of ‘poorest’
clients who
clients clients who are who are
are
(31/12/04) (31/12/04) women women
‘poorest’
Grameen Bank 4,060,000 4,060,000 100% 3,897,600 96%
BRAC 3,630,000 3,990,000 91% 3,630,000 100%
Bangladesh Rural 3,528,041 3,713,728 95% 2,399,068 68%
Development Board (BRDB)*
ASA 2,490,000 2,770,000 90% 2,390,400 96%
Proshika 1,236,104 1,545,130 80% 803,468 65%
Sonali Bank** 500,000 3,800,000 13% 365,000 73%
Caritas 251,273 284,947 88% 173,378 69%
Thenamara Mohila Sabuj 250,664 278,516 90% 238,131 95%
Sangha (TMSS)
BURO Tangail 221,366 221,366 100% 219,152 99%
Rangpur Dinajpur Rural 175,713 228,199 77% 140,570 80%
Service (RDRS)
TOTAL 16,343,161 20,891,886 78% 14,256,767 87%
Source: Daley-Harris 2005. Notes: *Government body acting as a network of MFIs not included elsewhere; **nationalised commercial bank.
1.10 MICRO-FINANCE BOTH IN INDIA AND BANGALDESH
Micro-finance has been used as an important tool for the promotion of livelihoods, both in India and Bangladesh. There are several micro-finance institutions and NGOs which are running micro-finance programmes. While in case of Bangladesh, the government has been very supportive and NGOs and MFIs were provided assistance in promoting the programmes, the Government of India is still not clear as to how to regulate the micro-finance programmes. However, in India also, several NGOs and MFIs are running the programme successfully and it has been proven as an important tool for creation of more employment and making women self-reliant.
This project suggests that economic activities help women in improving their condition in the family as well as in the society. Sustainable economic activity is necessary for women workers and thus the financial services play a vital role in improving their livelihoods.
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2.1 INTRODUCTION
‘ Informality
Various groups of workers have been termed ‘informal’ because they share one common characteristic: they are not recognized or protected under the legal and regulatory frameworks. Moreover, this is the only defining feature of informality.
Informal workers and entrepreneurs are characterized by a high degree of vulnerability. They are not recognized under the law and, therefore, hardly receive any legal or social protection and are unable to enforce contracts. Similarly, they do not have security of property rights. They are rarely able to organize themselves for effective representation and have little or no voice to make their work recognized and protected. They are’ excluded from, or have limited access to public infrastructure and benefits. They have to rely as best they can, on informal, often exploitative institutional arrangements, whether for information, markets, credit, training or social security. They are highly dependent on the attitudes of the public authorities as well as the strategies of large formal enterprises.
They are placed at competitive disadvantage because they do not hold the type of influence, which those in the formal economy are often able to exert, which sometimes violates essential feature of the market economy, i.e., free and equal access to markets based on efficiency rather than influence. There is no simple relationship between working informally and remaining poor, and working formally and escaping poverty.
However, it is certainly true that a much higher percentage of people working in the informal sector are poor as compared to those in the formal economy. As a matter of fact, it is also true that larger shares of women working in the informal economy are poor as compared to the men.
‘ Informal Activities
Many informal activities are hardly legal, public authorities sometimes confuse them with criminal activities and therefore subject them to harassment, extortion, repression and even bribery. There are, of course, criminal activities in the informal economy, such as drug- trafficking, human trafficking and money laundering. There are also other illegal activities, including deliberate tax evasion. However, the majority in the informal economy, although they are not registered or regulated, produce goods and services that are legal.
The term ‘informal’ does not mean that there are no rules or norms regulating the activities of workers or enterprises. People engaged in informal activities have their own ‘political economy’ their own informal or group rules, arrangements, institutions and structures for mutual help and trust, providing loans, organizing training, transferring technology and skills, trading and market access, enforcing obligations, etc. What we do not know is what these informal rules or norms are based on, and how they observe the fundamental rights of workers.
Causes of Informality
The root causes of informality include:
‘ legal and institutional obstacles that make it difficult, if not impossible, for either enterprises or workers to become or to stay formal;
‘ policies of national governments that often directly or indirectly constrain employment creation in the formal economy, the absence of, or lack of, access to strong and effective market and non-market institutions, demographic trends including large-scale rural-urban migration, direct and indirect discrimination against women and other disadvantaged groups;
‘ Lack of representation and voice of those in the informal economy.
Until and unless the root causes are dealt with effectively, there can be no sustainable move towards recognizing and protecting the decent work. However, because the root causes of the informal economy are multifaceted, legalization alone is not enough to promote decent work. Strong and effective judicial, political economic and other equitable access to these institutions are equally essential.
Women workers, who are particularly disadvantaged and discriminated against, may need special measures. For women without property rights, measures are required to ensure that the legal system records their property and titles assets in standardized, simple and cost-effective ways.
It would enable them to transform their assets into productive capital and investments. Most importantly, women workers in the informal economy need representation and voice as a fundamental right and on enabling right to enhance their access to a range of other rights at work.
Women in South Asia suffer from discrimination in all spheres of life, and at all ends. The economic discrimination that they endure reinforces other discriminations and perpetuates their low status.
Although there are differences among the countries of the region, some key conclusions emerge from the statistics and analyses, especially, in context of India and Bangladesh concerning women’s participation, recognition, and remuneration in economic activities, which needs to be mentioned before analyzing the socio-economic status of women workers in both the countries.
According to UNDP Human Development Report in 1995 to bring glaring facts such as the following:
‘ Women’s reproductive and productive work, both so essential for caring, nurturing, household maintenance’ and income earning, are intertwined and indistinguishable in men’s as well as women’s minds. Within the household, South Asian men rule and women obey across religious and cultural divides. The question of recognition for women’s labor does not even arise.
‘ Statistics show that the majority of economically active women work in the informal sector.
‘ In the informal sector, whether self-employed or worker, women (and men) are exploited by all and sundry from law enforcement authorities to petty money lenders.
‘ In formal sector employment, women are concentrated at the lower ends, with little job security and few benefits.
‘ Large wage differentials between men and women’s work in rural areas but in urban and modem sector, wage gaps are closing.
‘ The globalization wave has benefited urban educated women, leaving the vast majority of women in the agricultural and informal sector to cope with the negative impacts of liberalization.
2.2 REASONS FOR STATISTICAL INVISIBILITY OF WOMEN IN NATIONAL ACCOUNTS
Some reasons include the nature and style of women’s work, the dominance of domestic work as compared to women’s other work, culture, tradition and perceptions about women’s economic roles, and the intermingling of production for self-consumption with production for sale.
2.2.1 Women’s work, domestic chores and other tasks
Especially, the invisibility of women’s work, domestic chores and other tasks are part of a cultural/traditional attitude which views man as the primary breadwinner. Indeed, women report themselves as non-workers because they tend to regard their labor as ‘domestic responsibilities’ and therefore, outside market-related or remunerative work.
In the non-market sector where most women work, the distinction between economic and non-economic activities is seldom clear and is arbitrarily applied. In fact, amongst the poor, virtually all adults and sizeable number of children engage themselves in ‘economic activities’ in order to help the family meet its basic needs; much of this work occurs outside the market place.
2.2.2 Influence of perception on measurement by India
A striking example of the significant influence of perception on measurement is indicated by a small survey commissioned by UNIFEM India, which found that 98 out of 100 enumerators did not even put questions regarding work to women; it was simply assumed by them that women did not work. Out of the 2002 women in the 1000 households covered, only 4 women were asked any question about the work they had done in the past year. Prevailing cultural norms ascribe low status to women doing manual work outside the home. In India, the growth of women in the informal sector has been slower, rising from 93.97 per cent in 1981 to 95.79 per cent of the workforce in 1991 (UNDP, 2000).
2.2.3 Influence of perception on measurement by Bangladesh
The figures for Bangladesh tell a similar story. Between 1983-84 and 1995-96 the informal sector share of the female labor force increased from 44 per cent to 75 per cent. Women’s participation in the formal sector grew in that period at an average annual rate of 2.9 per cent but that of women’s informal sector labor grew at an average annual rate of 32.9 per cent.
2.3 SOCIO-ECONOMIC STATUS IN INDIA
An overwhelming majority of Indian working people are employed in the unorganized sector. Of the total working population of 317 million, about 290.2 million (92 per cent) are employed in this sector, and the population of labour within it, has been growing very rapidly throughout the economy, from 89 to 92 per cent over the past 15 years. An overwhelming proportion of 97 per cent of women workers are still employed in the unorganized sector.
Social security is a major concern for the unorganized sector. Workers in this sector are not covered by social insurance, provident fund, maternity benefits, and the like. Whatever little they earn is spent on paying for expensive health services. When they grow old and are no longer in a position to work, their condition is pitiable and abject.
Any social, economic or industrial system that ignores the potential, talents and special aptitudes of this half will be flawed on many counts. It will be guilty of gross underutilization of the human resources or human potential available to the nation. It will be guilty of denying equal opportunities, and thus creating conditions that cause or perpetuate exploitation and disparities. It may even result in conditions of near- slavery for a large section of our population. Therefore, it is necessary to ensure
‘ Equal opportunities for employment;
‘ Equal remuneration for equal work;
‘ Equal opportunities for the acquisition and up gradation of skills;
‘ Equal opportunities for promotions;
‘ Equal opportunities for access to positions and responsibility;
‘ Equal respect, and protection from indignities, harassment and humiliation at place of work;
‘ Equal opportunities for the redressal of grievances; and
‘ Equal access to by lanes and highways and summits of entrepreneurship, and all the requirements of entrepreneurship including credit. These must be backed by equal rights and properties.
2.4 Example of Bidi Workers’ (indigenous cigarette rollers) story of exploitation is:
The Bidi industry in India is one of only four industries in which female employees outnumber male employees. More than three times as many women are employed in this activity as men, or 76% of total workers involved in bidi manufacturing. This means approximately 1.5 million women work in this industry, of which majority are bidirollers. 68% of these women carry out their work at home. Their work consists of acquiring the materials, Getting the trend leaves, filling them with tobacco, folding the ends, tying them closed with thread, and binding them into bundles of a given size.
Most women work for two or three different contractors at a time. They are not asked to sign when they receive payment. They are not registered, so the employer will not have to provide maternity benefits. Employers change the falsified name every few months. They deduct provident funds from the women’s wages, but give no receipts. In Tamil Nadu, only 20% of the collected provident funds are officially recorded.
Some women said that they get 1 kg tobacco from the contractor who expects 1500 bidis in return. They can only make 1,250 bidis out of this amount of raw material. Because women have to replenish the shortfall, they make only Rs.8-9/day. Women said they had difficulty supporting the family on Rs.9/day, so they often had to take loans from the money- lender who charged Rs.1/day 011 a Rs.10 loan.
These are the realities of women’s work in the informal sector, and as long as there are no alternatives provided, or appropriate and effective protective measures introduced, the acute need faced by many poor women will continue to drive them into exploitative situation such as this.
Sources: National Commission on Self-Employed Women (Shramshakti Report) 1988; and Sudarshan& Kaur, 1999 (UNDP, 2000).
2.4.1 Trends in Women Participation in the Labour Force
There are over 397 million workers in India, out of which 123 million are women workers. Only small proportions, 18 million, are in the urban areas while 106 million are in rural areas.
Estimates of Usual Status Workforce (PS+SS) for 1999-2000 in millions)
Particular Male Female Total
Rural 198.6 105.7 304.3
Urban 75.4 18.2 93.6
All areas 274 123.9 397.9
Note: PS: principal status; SS: subsidiary status workers
Source: K. Sundaram, EPW, Volume 36, Number 34, August 2001.
2.4.2 Work Participation Rate
The participation of women in economic activity is much lower than those of males. Female workers constitute only about one-third of the total workforce in the economy.
Workforce Participation Rate according to Usual Status during 1999-2000 (All data in per cent).
Rural Urban
Status Male Female Person Male Female Person
Usual-ps 52.2 23.1 38.0 51.3 11.7 32.4
Usual-all 53.1 29.9 41.7 51.8 13.9 33.7
Note: ps = principal status; all = principal status + subsidiary status (ss) workers.
Source: NSSO, 55th Round,(July1999-June 2000),Report No:45
2.4.3 Distribution of Women Workers
Agriculture is the most important activity of women workforce in the rural area with the highest number of women workers being agriculture laborers. However, the percentage of women workforce in agriculture is declining as shown earlier. Manufacturing and services are the other two sectors where women are employed in large numbers.
The top ten manufacturing industries which employ women in large numbers are:
‘ Tobacco
‘ Cotton textiles
‘ Cashew nut processing
‘ Machine tools and parts
‘ Matches, explosives and fireworks
‘ Clay, glass, cement, iron and steel
‘ Drugs and medicines
‘ Grain mill and bakery
‘ Garments
‘ Coir and coir products
TABLE. 3 Percentages of Workers in Various Industrial Categories
Activity % of Female Workers
Rural Urban
Agriculture 84.1 14.6
Mining and Quarrying 0.4 0.4
Manufacturing 7.7 23.2
Electricity, Water etc. – 0.2
Construction 1.2 5.5
Trade, Hotels and Restaurants 2.3 16.4
Transport, Storage 0.1 2.0
Services 4.3 37.8
Total 100 100
2.4.4 Unorganized Sector
The unorganized sector in India is large and includes every sector of the economy, including agriculture. Over the years, the organized sector has been shrinking and the unorganized sector has been growing globally. No formal working contract, irregular employment, no fixed wage relation, uncertain earnings and uncertain hours, no permanent employment and legalprotection generally characterize the unorganized sector. Workers in the unorganized economy can be broadly distinguished into wage employment and non-wage employment.
Non-wage employment consists of own account workers-employers/owners of informal enterprises with at least one hired worker. Wage employment consists of employees in the enterprises of informal employers: home workers, working to produce goods or services on a contract or order for a specific employer or contractor. It also includes independent wage-workers not attached to only one employer and providing services to individuals, households and enterprises, e.g.,maid-servants, and watchmen. Informal employment in formal sector enterprises where pay and benefits of the workers do not conform to existing labour regulations are also included in this category.
2.4.5 Unorganized Sector’s Contribution to Net Domestic Product
The Central Statistical Organization has been calculating the share of the unorganized sector in the Net Domestic Product during the last 25 years. This calculation is done directly by estimating the value added per worker in each sector and multiplying it by the number of workers. In the unorganized sector, the value added per worker is calculated by undertaking small studies in each branch of each sector and on the basis of these studies, calculating the value addition. The unorganized .sector contributes about 60% to the NDP. The share in NDP of the informal sector over the last twenty years. The share has declined from 64.8% in 1985-86 of total NDP to 60.5% in 1997-98 and 58.5% in 2001-02 but it still forms a significant percentage.
Agriculture still is the major source of employment as far as women are concerned. The labour market trend towards flexible specialization of production and actualization has affected women adversely. Women’s employment in manufacturing, especially, within the household, has declined drastically. Unorganized and informal sectors are emerging as the largest absorbent of women workers. This trend indicates clear signs of in formalization of the female workforce.
Source: NAS 2000. Statement 76.1: Factor incomes by kind of economic activity (at current prices).
2.4.6 Social Status of Women Workers
It is being observed across the Third World that in a situation where women are economically active, their condition is better than those who are totally dependent on their husbands/ family members. India faces a similar situation and with the growing number of women becoming self-sufficient economically, the social status of women is also changing.
Among Muslim community women, a very prominent social phenomenon which restricts women to enter public life as well as economic activity is ‘purdah’. It not only diminishes the social status of women but also forces them to accept their subordinate existence . Other communities in rural areas also follow this tradition but it is prevalent among the Muslim community.
2.4.7Health and Nutrition
Health is one of the important indicators for assessing the status of women in any society. The state of an Indian woman’s health is intrinsically related to her socio-economic status and affects all aspects of her life. The circumstances in which many women live are pathetic and there is no’ importance given to personal hygiene. Degradation of the environment has resulted in lack of clean water, one of the greatest health hazards faced by rural households, even more so when water becomes scarce (UNDP, 2002). Urban women workers living in congested slums are more vulnerable.
Women in India are acknowledged to be biologically stronger than males, but their mortality rate is higher. Nutrition level remains low in the lower socio-economic groups. This is mainly due to poverty and the family responsibilities.
Women are the last to eat-if anything is left over to eat at all. In the lower middle-income groups, the general neglect of food intake, accentuated by discrimination in favour of males, has also resulted in low levels of nutrition. Wasting and stunting take place during the early years due to precocious multiple pregnancies.
2.4.8 Education and Skill
In India, formal school education has not been a primary source of personal power – many women who cannot read still wield considerable power in their families. School education doesn’t really play a significant role. Many projects have been very successful in education out-of-school, for children and adults. But Nowadays, all but very low paid jobs depend on primary education (Raju et al);’ without elementary education, especially the ability to read and write, it is impossible to make any real impact on poverty. It is also difficult, despite economic liberalization, for India to compete in the world market even as it is opening up its economy and seeking to compete in the production of goods in the world market (Dreze and Sen, 1989).
2.5 SOCIO-ECONOMIC POSITION OF WOMEN IN BANGLADESH
Similar to the neighboring country India, there is a continuous growth of informal or unorganized sector in Bangladesh. Bangladeshi women contribute substantially to their households and to the country’s economy. The majority of women workers are primarily involved in the informal sector of the economy. Even though 62 per cent of the women are economically active, which is not only the highest rate in South Asia but also ranks above the average of 50 per cent for developing countries, under-reporting of female economic activity is a serious problems in Bangladesh, as elsewhere. Despite a high proportion of women in the labour force, the female share total earned come is less than one-quarter.
2.5.1 The Growing Labour Market for Women
Bangladesh is one of the 49 countries classified as ‘least developed’ by the United Nations. It is also among the world’s more patriarchal societies. It belongs to a wider regional belt which stretches across northern Africa, the Middle-East, Pakistan and the northern plains of India which is characterized by the practice of matrilineal principles of descent, patriarchal structures of family organization, the practice of female seclusion and marked son preference .
Women are not merely discriminated against in access to education and employment, a pattern that is not unique to this region, but also in access to basic life-preserving resources such as health and food to the extent that this region is characterized by excess levels of female mortality in almost all age-groups, and fewer women than men in the overall population, in contrast to most other regions of the developed and developing world, where there are generally more women than men.
2.5.2 Labour force in Bangladesh
The large number of poor people, especially, women looking for any kind of work and the growing garment industry caters to the need of each other. The Bangladeshi employed labour force is estimated at 41.7 million or at 54.6 million using the extended definition and it increased in size by nearly 5 million since 1990-1991. In other words, around one million people enter the Bangladeshi labour force annually. The share of female employment between agriculture and non-farm work is changing. The non-farm sector is generating female employment at an increasing rate mainly due to the fact that government and non-government interventions are more concentrated in this sector (ADB, 2001). The growing employment opportunity in the garment sector has been providing livelihoods to thousands of young and old aged women, but there are many occupational hazards attached to it.
2.5.3 Labour Market and Women’s Participation
Urban Situation
In urban areas, employed women are almost equally divided between unpaid family workers and employees. Nearly two-fifths of employed women are engaged as unpaid family helpers, in sharp contrast to 83 per cent in rural areas.
Last decades ago: rural women have always been involved in different kinds of informal activities like cottage crafts, horticulture, livestock and poultry rearing, etc. Although women are primarily responsible for homestead production, in most cases the husband is the dominant seller and handles the money himself.
In recent years: more and more women are showing greater preference to sell the produce themselves even in rural areas. Nearly two out of every five urban employed women are found in the formal sector, as opposed to only 4 per cent of their rural sisters.
This is mainly because of the readymade garments factories that provide employment to thousands of urban women. The readymade garments industry alone absorbed nearly one-fifth of the women employed in the manufacturing sector and in the 1990s, the average annual growth rate of the female labour force in the industry sector was 16 per cent, nearly double the growth rate of 9 per cent in the 1980s (World Bank 1997). However, the government and NGO sectors helped create self and contractual employment of about 15 per cent of women who live in the rural areas (15+ years) (ADB, 2001).
Public Sector Recruitment
A quota system was recently introduced for female recruitment in the public sector: 10 per cent and 15 per cent quotas were reserved for women for gazetted and non-gazetted posts, respectively. Existing studies suggest that this is one of the major contributing factors for increasing female participation; although quota fulfillment is far short of the target (only 5 per cent and 8 per cent of quotas for class I and class II officers have been filled). A small number of women are found in the administrative, managerial, professional, and technical services of government (ADB, 2001).
Industry
The manufacturing sector in Bangladesh is small, constituting less than 10% of total employment. Rural industries where women form the majority of workers include: jute handicrafts, lime making, and paddy husking. Women’s representation tends to be highest in those rural industries with the lowest productivity. Most women in rural industry are engaged in home-based, low productivity, low return production.
Rural Situation
Good numbers of rural women are also involved in rural construction work. Women workers are found in certain activities traditionally falling within the male domain (e.g., earthwork, construction, and agri. work in the field).
‘ Rural Income Activities
Rural income-generating activities include post-harvest activities, cow rearing and milking, goat farming, backyard poultry rearing, pisciculture, agriculture, horticulture, food processing, cane and bamboo works, silk reeling, handloom, garment-making, fishnet making, coir production, and handicrafts.
Agriculture
In recent years, an increase in women’s participation as agricultural labour, previously an exclusive preserve of men, has been noted. However, this fact of employment is highly seasonal and women receive considerably lower wages than men.
Agriculture Income &Activities
Women have also been displaced from traditional agro-processing activities such as paddy husking, rice milling and oil pressing, with increasing mechanization in these activities. Women participate together with men in preparing seedbeds and seedlings, transplanting, weeding, and stripping and setting jute stalks. Women also work in the field on farms, which may sometimes be self-owned but more frequently sharecropped or owned by her husband. Women are also hired as agricultural labourers.
Income from homestead production in Bangladesh is found to range between 28 to 47 per cent of total family income, and 50-60 per cent of the fruit, vegetables, and spices grown in the homestead by women are sold to meet household expenses, the rest being used for household consumption. The marketing of the produce is however done only by 10 per cent of the women engaged in homestead gardening.
2.5.4 Comparative Situation of Worker’s Participation
The growth rate of female employment at the rate of 7.7 per cent in comparison to males’ 3.5 percent is a positive trend and shows increasing participation of women in employment.
2.5.5 Wage Differential and Working Condition of Women
Percentage Distribution of Salaried Workers by Weekly Income and Urban/Rural, 1995-96 (In Percentages)
TABLE. 4 Wage Differentials and Working Condition of Women
Weekly Income (TK) Bangladesh Urban Rural
Both Sexes M F Both Sexes M F Both Sexes M F
<250 21.4 11.9 51.6 16.8 7.0 43.9 26.8 16.8 61.6
250-500 32.2 33.8 27.0 30.6 30.9 29.9 33.8 36.8 23.1
501-750 17.3 19.8 9.3 17.0 20.0 9.5 17.7 20.2 9.2
751-850 5.0 5.7 2.7 4.4 5.0 2.9 5.6 6.4 2.5
851-950 2.7 3.0 1.8 2.7 3.0 1.9 2.8 3.0 1.8
951-1050 6.0 7.1 2.8 7.6 8.7 4.7 4.3 5.4 0.3
1050-1150 0.7 0.9 0.1 0.8 0.9 0.2 0.6 0.8 -
TK.1151+ 14.7 17.8 4.7 20.1 24.8 7.1 8.7 10.7 1.5
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Unemployment and Underemployment
The unemployment rates of female graduates are strikingly high (17 per cent) compared to those of male graduates (2.3 per cent) (Hamid, 1996). The high level of unemployment requires further investigation.
The failure to fulfill government quotas and the low level of representation of women in clerical, administration and managerial positions suggests that much could be done to reduce female unemployment at graduate level.
Women and Technology
The introduction of modem technology in Bangladesh is threatening the productive employment of a large number of people below the poverty line, especially women. The mechanization process makes women workers more vulnerable as they are 'less-preferred' than men to work on heavy machines. However, proper skill-training and up gradation of skills for women workers is very essential, otherwise they will not be able to complete with their male counterparts.
Domestic Work Load
One of the biggest disadvantages working women have to face is the double burden of work. Due to economic reasons as well as cultural practices, even a full time job does not excuse Bangladesh women from their regular domestic chores. Moreover, the greatest obstacle women face in the informal sector is their low access to resources whether in rural or urban areas. They lack the capital required for building the permanent structure of the enterprise, labor-saving tools to ease domestic burden, raw materials and improved machineries needed to increase productivity in both the informal and formal sectors.
Women and Education in Bangladesh
South Asia generally, and Bangladesh particularly, suffers from low educational enrolment levels, high drop-out rates and low literacy rates. More specifically, there are marked gender disparities in literacy, enrolment and drop-out rates. The proportion of females enrolled in primary level is 45%, its share of enrolment decreases with the level of education and is less than a quarter of that of males at college level.
Women and Health in Bangladesh
Women in Bangladesh have lower life expectancy at birth than men and the gender difference in life expectancy persists over the whole lifetime. One of the reasons for lower life expectancy is the high maternal mortality ratio but the risk of higher mortality continues beyond the reproductive age group. The prevalence of morbidity is also higher for women than men.
Legal Status and Rights of Women in Bangladesh
In Bangladesh, several parallel legal systems exist i.e. law derived from religion, civil law derived from English common law and rights defined under its Constitution. According to Adnan (1989), within institution such as the Shamaj i.e; Community Group, women become pawns in a power game where undercurrents are played out. Within urban areas, however, the influence of Shamaj and other such social institutions over the private affairs of the household have become diluted (ADB, 2001).
2.6 IMPACT OF NATURAL DISASTERS ON WOMEN
Bangladesh is prone to a variety of recurrent environmental problems such as floods and cyclones, which have gender specific impacts. A further study of the worst affected southern coastal regions, found that in all groups, death rates of women were higher than those of men.
Three major reasons why the female death rate in 1991 was higher than that of the male rate. Women were left by husbands at home to care for children and to protect property. There is a need to increase the access of women and girls to information, which will improve their disaster-preparedness. The consequential impact of disasters on health is severe.
2.7 CONCLUSION
This chapter gives us extensive idea about the features of the informal sector in both countries and how the sector is growing. In the era of globalization, where most of the countries are participating in the market competition, both India and Bangladesh have the potential to provide a very good market for their human resources. Secondly, the uneven growth of economy of both these two countries have left poorer people far behind in the race for development. Due to this poor people could not cope with the changes in the market relations where people with lower skills could not compete with the powerful and modern intelligent machines.
The effort of organizations like SEWA and BRAC is praiseworthy in the field of microfinance, promoting livelihoods and social security, providing supportive services. Moreover SEWA's effort in organizing these women workers around their issues and advocating for better policies for them at the state, national and international level is remarkable. Due to globalization, there are a number of opportunities coming up for poor women workers in the informal sector. However, to avail these opportunities, their skill levels need to be increased in terms of meeting the requirements of the market.
(MEMBERS) (SELF HELP GROUP)
(BANK) (NGO)
FIGURE:1 SELF HELP GROUP MODEL
3.1 INTRODUCTION AND BACKGROUND
Throughout history, people have formed groups with others who have something in common with them, and oppressed people have joined together to overcome the conditions they face. Self Help groups, as we know them, go back at least to the 1930s, when Alcoholics Anonymous started in USA. While self help groups have distinct characteristics, the philosophies of the self help movement overlap with various other ways of working. Community Development, which became established as a discipline in the late 1980s, shares the concept of empowerment. In the past two decades, the self-help movement has mushroomed. AA, the largest self-help group, reports over one million members in the US. One estimate places the total number of people in self-help support groups at 20 million. There are groups for addictions--Alcoholics Anonymous, Gamblers Anonymous, Debtors Anonymous; for families--Families of the Mentally Ill, Mothers of Twins Clubs; for illness/disability'National Association of People with AIDS, Tourette Syndrome Association; for mental illness'Emotions Anonymous, Recovery, Inc., GROW; for bereavement--The Compassionate Friends, Survivors of Suicide, Widow to Widow; and for lifestyles--Single Mothers by Choice and Society for the Second Self (cross dressers),etc.
Self Help Group is about people coming together with others who are affected by a particular issue (experience, disadvantage, discrimination, etc) to support each other and to work together to change the disadvantage affecting them. Activities that groups do include community education, information, mutual support etc.
Self Help group (SHG) is a self-governed, peer-controlled small and informal association of the poor, usually from socio-economically homogeneous families who are organized around savings and credit activities. Funds for credit activities are coming through regular savings deposited by all of its members on a weekly or fortnightly basis. In the meetings they discuss common village problems and plan solution, share information; make efforts to improve their health and literacy skills.
Self Help Groups are not charity or simply community based groups. They are made of and controlled by the people affected. Group members are not volunteers. Although the work is usually unpaid, members work to change their own situation and the support is mutual. The knowledge base of self-help mutual support groups is experiential, indigenous, and rooted in the wisdom that comes from struggling with problems in concrete, shared ways. Self-help groups build on the strengths of their members.
SHGs have another very important role to play particularly in the transfer of technology to user group population. It has been found by the members of SHGs that they offer them organizational base, large resources, and access to modern technology leading to employment and income generation. Thus, SHG movement among the rural poor in different parts of the country is emerging as a very reliable and efficient mode for technology transfer. However, it is strongly felt that the pace of transfer and popularization of technologies must be accelerated so that even the small farmer can benefit from new technologies.
3.2 EMERGENCE OF SHG MOVEMENT
While no definitive date has been determined for the actual conception and propagation of SHGs, the practice of small groups of rural and urban people banding together to form a savings and credit organization is well established in India. In the early stages, NGOs played a pivotal role in innovating the SHG model and in implementing the model to develop the process fully. In the 1980s, policy makers took notice and worked with development organizations and bankers to discuss the possibility of promoting these savings and credit groups. Their efforts and the simplicity of SHGs helped to spread the movement across the country. State governments established revolving loan funds which were used to fund SHGs.
By the 1990s, SHGs were viewed by state governments and NGOs to be more than just a financial intermediation but as a common interest group, working on other concerns as well. The agenda of SHGs included social and political issues as well.
The spread of SHGs led also to the formation of SHG Federations which are a more sophisticated form of organization that involve several SHGs forming into Village Organizations (VO) / Cluster Federations and then ultimately into higher level federations (called as Mandal Samakhya (MS) in AP or SHG Federation generally). SHG Federations are formal institutions while the SHGs are informal. Many of these SHG federations are registered as societies, mutual benefit trusts and mutually aided cooperative societies.
SHG Federations resulted in several key benefits including:
' Stronger political and advocacy capabilities
' Sharing of knowledge and experiences
' Economies of scale
' Access to greater capital
3.3 CONCEPT OF SELF HELP GROUP
The concept of self help groups had its origin in the co-operative philosophy and the co-operators by and large, including the National Federations in the credit sector, could not think of any better SHG than a primary co-operative credit society itself.2 As SHG are small and economically homogenous affinity groups of rural poor, they are voluntarily coming together for achieving the following.
1. To save small amount of money regularly.
2. To mutually agree to contribute a common fund.
3. To meet their emergency needs.
4. To have collective decision making.
5. To solve conflicts through collective leadership mutual discussion.
6. To provide collateral free loan with terms decided by the group at the market driven rates.
Today, the self help group movement is increasingly accepted as an innovation in the field of rural credit in many developing countries including India to help the rural poor considered a vehicle to reach the disadvantaged and marginalized section, which in the normal course cannot avail of credit facility from the bank.
A self help group is defined as a group consisting of people who have personal experience of a similar issue or life situation, either directly or through their family and friends. Sharing experiences enables them to give each other a unique quality of mutual support and to pool practical information and ways of coping.
Self help groups are small informal association of the poor created at the grass root level for the purpose of enabling members to reap economic benefits out of mutual help solidarily and joint responsibility. Self help groups are formed voluntarily by the rural and urban poor to save and contribute to a common fund to be lent to its members as per group decision and for working together for social and economic uplift of their families and community.
A self help group is defined as a "self governed, peer controlled information group of people with similar socio-economic background and having a desire to collectively perform common purpose." Self help group have been able to mobilize small savings either on weekly or monthly basis from persons who were not expected to have any savings. They have been able to effectively recycle the resources generated among the members for meeting the productive and emergent credit needs of members of the group.
3.4 SHG IS A TOOL TO EMPOWER WOMEN
In recent years, women empowerment has become a subject of great concern for the nations all over the world especially in poor and developing countries. The progress of any nation is inevitably linked with social and economic plight of women of the particular country. Empowerment means emancipation of women in harmonious co-existence with men in the society. Power provides social recognition, dignity, prosperity, property, value and security; hence empowerment has acquired a considerable importance.
Empowerment as a concept was introduced at the International Women's Conference at Nairobi in 1985. In the conference empowerment is defined as 'A redistribution of social power and control of resources in favour of women. Empowerment is not only essential in political field; but also it is a process having personal, economical, social, and political dimensions with personal empowerment'. Empowerment by the way of participation in SHG can bring enviable changes and enhancement in the standard of living of women in poor and developing nations. Self Help Group (SHG) is a process by which a group of 10-20 women with common objectives are facilitated to come together voluntarily to participate in the developmental activities like savings, credit and income generation and thereby ensuring economic independence. A landmark in the history of women's development is the emergence of the concept of 'Empowerment of'. The government of India declared the year 2001 as the 'Year of Women's Empowerment'.
When a woman becomes a member of SHG, her sense of public participation, enlarges the horizon of social activities, high self-esteem, self-respect and fulfillment in life expands. It enhances the status of women as participants, decision makers and beneficiaries in the democratic, economic, social and cultural spheres of life. Thus undoubtedly SHG can be an effective tool to empower women socially and economically. SHGs are formed for the purpose of empowerment of women.
Source: Arth Prabhand: A Journal of Economics and Management Vol.1 Issue 8, November 2012, ISSN 2278'0629
3.5 THE GENESIS AND GROWTH OF SHGS IN INDIA
SHG's originated in the year 1975 at Bangladesh by Mohammed Yunus. In the eighties, it was a serious attempt by the Government of India to promote an apex bank to take care of the financial needs of the poor, informal sector and rural areas. And then, NABARD took steps during that period and initiated a search for alternative methods to fulfill the financial needs of the rural poor and informal sector. NABARD initiated in 1986-87, but the real effort was taken after 1991-92 from the linkage of SHGs with the banks.
In other words, the Self Help Group (SHG) in India has come a long way, since its inception in 1992. The spread of SHGs in India has been phenomenal. It has made dramatic progress from 500 groups in 1992 (Titus 2002) to some 16, 18,456 groups that have taken loans from banks. About 24.25 million poor households have gained access to formal banking system through SHG-bank linkage programme and 90% of these groups are only women groups (NABARD2005). The NABARD (2006) homepage declares that more than 400 women join the SHG movement every hour and an NGO joins the Micro-Finance Programme every day. There are also agencies which provide bulk funds to the system through NGOs. Thus organizations engaged in micro finance activities in India may be categorized as Wholesalers, NGOs supporting, SHG Federations and NGOs directly retailing credit borrowers or groups of borrower. The spread of the SHGs is highly concentrated in the southern part of the country with very few in the north and the east. Over half a million SHGs have been linked to banks over the years but a handful of States, mostly in South India, account for almost 60%. Andhra Pradesh has over 42%, Tamil Nadu and Uttar Pradesh have 12% and 11% respectively, and Karnataka has about 9% of the total SHGs.
Since the advent of SHG in India, its growth rate has been very low in the states of Rajasthan, Bihar, Utter Pradesh, Madhya Pradesh, Orissa and union territory of Andaman Nicobar Islands where the status of women is still very backward and pathetic. The formation of SHGs have benefited its members in numerous ways; not only have the assets, incomes and employment opportunities for the women but also enhance the equality of status of women as participants, decision-makers and beneficiaries in the democratic, economic, social and cultural spheres of life (Ritu Jain 2003). The basic principles of the SHGs are group approach, mutual trust, organization of small and manageable groups, group cohesiveness, sprit of thrift, demand based lending, collateral free, women friendly loan, peer group pressure in repayment, skill training capacity building and empowerment .
The growth of self help groups in India is shown in the table given below.
TABLE 5: NUMBER OF SHGS IN INDIA (2005-06 TO 2009-10)
YEAR Number of SHGs Growth Rate
2005-06 2238565 109.47
2006-07 2924973 30.66
2007-08 5009794 71.28
2008-09 6121147 22.2
2009-10 6959250 13.6
Source: NABARD Reports 2005-06 to 2009-10
It is shown that how the number of SHGs are increased in the period 2005-06 to 2009-10. In 2004-05, 10, 68,697