By Nasheeta Sarwar
In recent years, governmental and non-governmental organisations in many low income countries have introduced credit programs aimed at poverty reduction and alleviation. Many of these programs specifically target women in developing countries, based on the view that they are more likely than men to be credit constrained, have restricted access to the wage labour market, and have an inequitable share of power in household decision making. The Grameen Bank of Bangladesh is perhaps the best-known example of these small-scale credit programs for the poor, with over 90% of its clients being women. Microcredit has had a significant impact on many women in Bangladesh, and has the potential to help the female population in Iraq in the same way.
The model of micro finance applied in Bangladesh involved loans of very small amounts to women with fixed terms and repayment amounts, group liability, weekly meetings, essentials in micro finance training, forced payments into a group savings account, and a set of 16 social pledges chanted each week while standing to attention. The Grameen model spawned imitators around the world, involving a large share of micro finance clients in India, the Philippines, Latin America and East Africa, among other places. Microfinance is commonly associated with the Grameen model, however Grameen itself, as well as the other micro finance institutions in Bangladesh, have, over the years, re-engineered their models since inception in order to pursue an expanded vision. The most dramatic shift occurred in 2002, with the introduction of Grameen II. Throughout the past decade, most micro finance institutions (MFIs) in Bangladesh have followed suit, experimenting with new lending methodologies, products and support services. Borrowers now can often select the length of loan they need, and loans are now available for small businesses (up to about $15,000). At the same time, many MFIs have developed loan and support programs for the “ultra- poor.” These are all major departures from the original model. The biggest change has been the relaxation of formal group liability. Providers have learned how to manage risk more flexibly, rather than adhering to the original rigid formula of stepped loans, forced savings and zero delinquency tolerance. These changes all make micro finance more valuable for clients, both in terms of better products and easier access to loans, as well as the training offered borrowers. They occurred as a result of learning and increased competition while the Bangladesh micro finance sector matured over two decades. Microfinance has grown significantly in Bangladesh, with a reported approximate 23 million borrowers in a country of roughly 160 million people. These numbers reveal the highest population saturation of micro finance in any country. Moreover, the MFIs in Bangladesh have continually sought to make a greater difference in clients’ lives. This drive appears in the broader array of financial products — savings, insurance, and specialised loans (including energy, education and housing loans, in addition to small business and ultra-poor loans). Additional benefits have also been experienced in the form of other development services (such as schools, training, or health services) and often through sister companies, such as Grameen Phone as well as non-governmental development organisations such as BRAC that has more than 5 million micro finance clients and operates over 32,000 primary schools in Bangladesh. These compelling facts are crucial to understand how micro finance works, what its prospects are, and identify the various ways such a model could fit into the Iraqi economy
The other important consideration to assess the viability of micro finance in Iraq is the cultural context, and fortunately parallels can be drawn between Iraqi and Bangladeshi societies. In a conservative, pre-dominantly Muslim country like Bangladesh, traditions and family imposed restrictions may forbid women from leaving the family compound or may regulate when, where, and with whom they travel. Additionally, issues of safety often prevent women from traveling alone for short distances even to places such as the market, bank, health clinic, and so on. Marriage in Bangladesh is characterised by patrilocal residence and village exogamy—when a woman marries, she leaves her home, family, and village and moves into the household of her new husband, often in a new village. Many married women are not even allowed to visit their parents without their husband’s permission. Wives may not have many close relationships and friendships outside the household. As a result, the availability of a network to tap into for obtaining emergency funds for women is very limited and even if she manages to borrow from a family member or a close relative, she needs to seek permission from her father/brother/husband/son before spending the money. Bangladesh, consequently, has reaped the benefits of micro credit programs targeted at women. Statistically the effects of program participation differ importantly by the gender of program participant, with women having a higher propensity to spend their incomes on their families, compared to men, and that credit provided to women importantly improves measures of health, nutrition and education for both boys and girls, while credit provided to men has no significant effect.Bangladesh therefore presents an excellent case study for the Iraqi Microfinance Network (IMFN) as it tries to strengthen the micro finance industry infrastructure in a similarly orthodox society.
The example from Bangladesh shows that women’s participation in micro credit programs can help to increase women’s empowerment and financial independence. Credit programs have led to women taking an enhanced role in household decision making, having greater access to financial and economic resources, having larger social networks, having improved household bargaining power, and having greater freedom of mobility. They also tend to increase spousal communication in general about family planning and parenting concerns. In addition to women’s empowerment, successful introduction and growth of micro credit programs can also propel economic development and cultural change, which can play a significant role in the post-war era as Iraq transitions from a traditional community to modern society. Relief International has been making micro-credit loans in Iraq since 2006 , and their Rural Women’s MicroCredit Fund has been growing rapidly, with an outstanding loan portfolio worth more than $10 million today showing there is possibly a huge micro finance potential that waits to be unlocked in Iraq.
Banu, Dilruba, Fehmin Farashuddin, Altaf Hossain, and Shahnaj Akter. “Empowering Women in Rural Bangladesh: Impact of Bangladesh Rural Advancement Committee’s Impact” (n.d) pag. BRAC. Web.
Khandker, Shahidur R. 1998. Fighting Poverty with Microcredit: Experience in Bangladesh. New York: Oxford University Press.
Pitt, Mark, Shahidur Khandker, O. Choudhury, and D. Millimet. 2003. “Credit Programs for the Poor and the Health Status of Children in Rural Bangladesh.” International Economic Review 44 (February): 87–118.
Rhyne, Elisabeth. 2012 Microfinance in Bangladesh: It’s Not What You Thought. The World Post