The Origins and Evolution of Microcredit and Other Non-State Action
An understanding of the origins and evolution of microcredit is inseparable from an understanding of the origins and evolution of the non-governmental organizations and/or 'social enterprises' (as the larger entities now prefer) in Bangladesh. Both Yunus and Abed attribute their original motivations for founding what eventually grew into vast organizations to the foundational disasters in Bangladesh's history; other NGO leaders make similar observa- tions. The relatively generous aid flows to anti-poverty action at this time fuelled and to some extent directed their rapid growth. This situates the start of organized non-state action firmly within what I have called the subsistence crisis contract between the elites, the masses, and their donors.
Many post-colonial or democratic transitional settings feature well- intentioned middle class and elite activists that do not go on to found vast non-state organizations that reach across and beyond the borders of the country. So what in the institutional setting of newly independent Bangladesh made it possible to give birth to and grow such unusually large and powerful organizations? Lewis locates the answer in a unique combination of social organization, political history, and external dependence on aid:
Local traditions of voluntary action were deepened and transformed by the experience of resistance, war and natural disasters [coupled with a new] familiarity with the international 'aid industry' [which] facilitated their access to funds and outside ideas. Continuing mass poverty during the 1970s and 1980s generated widespread disillusionment with government-based rural development work... Relief and development NGOs were, therefore, established by various sections of the middle classes—by sincere members of the reformist elite, former student radicals alienated or restricted by formal politics and members of the new emerging middle class seeking to build socially useful careers in social work or in the professionalizing worlds of development. (Lewis 2011, 113-14)
Most established NGOs had their origins in the left-leaning idealism common to the post-war reconstruction period (Devine 1999; Hashemi 1995; Kramsjo and Wood 1992), but with leftist party politics aggressively suppressed from the 1970s, NGOs provided the 'non-party political space' in which progressive or pro-poor elites could operate (Kothari 1984; see my argument in Hossain
2005). White noted that:
It is likely that at least some of the NGO leaders would in different political conditions have gone into politics. With successive regimes dominated by the military, the NGO world offered a relatively open space in which people with a progressive vision could operate, and see concrete results which the formal politics of the time did not offer. (1999, 321)
An NGO leader told me he had returned to Bangladesh from being educated abroad with the aim of joining an underground (leftist) political party, only to find that
there weren't any. I found out about the NGOs then, I thought this will give me an opportunity to stay in the rural areas. Safer than an underground political party.
I stayed for nine months. Then at some point, I thought I would need some money to do what I wanted to do, I got some foreign money. I worked with the villagers, set it all up, wrote the constitution. Now we are one of the fastest-growing NGOs.
(Hossain 2005, 113-14)
Early approaches by these non-state actors were informed by critical views on agrarian structure and institutions, which identified grossly skewed land ownership and powerful ideological institutions (norms of benevolent patronage, samaj or moral community) as the basis and means of rural exploitation (notably BRAC 1986; see also Lewis 2011). Microcredit also had its historical precursors, in this instance cooperative credit schemes introduced under British rule, 'the beginning of the region's century-long experimentation with credit as an instrument of social policy' (Mader 2013, 47). The Agricultural Loan Act of 1885 established soft loans for peasants affected by natural disasters; exploitative credit relations were legislated on during Fazlul Huq's stint as Chief Minister of Bengal in the 1940s (Rutherford 1995). In the 1960s, rural development experiments under Akhtar Hameed Khan's Comilla model worked with cooperatives of landless peasants, presaging the group-based lending model. Strategies were devised to challenge local elite strongholds on rural communities, or to sidestep them by building organizations of the landless poor.
The leftist and socially progressive origins of (most) NGOs contrast with the view that non-state action in general and microcredit are vehicles for integrating the poor within neoliberal development policy. But in Bangladesh, at least in the early decades of independence, pro-market and progressive were by no means a contradiction in terms. NGOs have been accused by the left of perpetuating poverty as 'agents of international capital' (Hashemi and Hassan 1999, 130), yet many within the NGO movement still identify with the left, and there remain strong links and continuities. Important exceptions to the neoliberal drift include Nijera Kori ('We Do It [For] Ourselves'), which have had a significant impact on people living with poverty and vulnerability, as well as offering an alternative model to the private delivery of public services and the financialization of poverty (Kabeer and Sulaiman 2015; Kabeer etal. 2012).
Most non-state action on poverty moved away from leftist organizing principles and tactics to service provision and helping its members integrate into markets from the 1980s onwards, reflecting the wider embrace of experiments in the market as the solution to Bangladesh's development problems. In a setting where the state had not historically played an important role in mass or rural welfare, in which mass impoverishment left the majority on the brink of survival, and in which there was little national wealth to redistribute, a market- and growth-oriented strategy arguably made sense, even for leftists and social progressives (Hossain 2005). The shift to the market also uncoupled the rural poor from their dependence on landed patrons, giving them new patrons in the form of NGOs, 'freeing' them to sell their labour and their products beyond the old constraints of a moral economy that no longer afforded them protection or support, if it ever did (Lewis 2011; see also McGregor 1989). Even the far left took an accommodating view of the antipoverty technology, as Atiur Rahman found in his study of the impacts of Grameen Bank on the rural power structure. A Communist Party activist told him: '[w]e cannot stage a revolution with dead men. [Grameen Bank] is at least keeping them alive' (Rahman 1987, 53). Indeed, microcredit claims staunchly pro-poor origins, with its social mission powerfully framed by resistance to the ruinous usury of the traditional moneylenders (Osmani and Mahmud 2015; Rutherford 1995, 25).
Bangladesh's important NGOs have been organizations of the elite and the well-connected educated middle class; their eliteness has been important in their success, and helps to explain the part they have played in delivering on the subsistence crisis contract. These progressive NGO leaders were well placed to recruit other elites to their cause through the tightly knit personal networks and contacts of the upper classes. Professor Yunus notes that the 'handful of people' who ran the country included many old connections. In his case he was able to access the government funds he needed to expand his project into a bank through personal acquaintance with a former senior civil servant, later (and again, at the time of writing) Finance Minister Muhith, who took my proposal directly to the president. I had never met the president. As a military dictator he had no political legitimacy, and maybe he saw in Grameen a chance to score some political points by creating a bank for the poor. Whatever his thinking was, it worked in our favour. Muhith knew exactly how and when to present the proposal to him, and he must have given him the right sales pitch, for the president gave it his blessing. (Yunus andJolis 1999, 170)
The elite origins of (at least the more established) NGOs have helped them establish themselves as acceptable anti-poverty actors, as well as carving out what has largely been, to date, a non-party political space for progressive or pro-poor elites. NGOs enfolded significant frontline actors into the wider social contract between the elites, the masses, and the donors.
The national elite were also fully behind microcredit, as an apparently sustainable anti-poverty technology that worked and improved the international image of the country. When I interviewed members of the elite in the late 1990s, many viewed the country's image as 'a basket case' to be a serious and material problem, but also thought that image had improved, largely because of the work of NGOs, and that microcredit had been particularly successful. A top-ranking civil servant thought that ‘by giving the marginal people, particularly the women, some economic independence by lending small amounts of money', Grameen Bank and other organizations had improved the lot of many people, and given them more autonomy and confidence. An editor spoke of ‘an immense reservoir of entrepreneurial skill at the grassroots level' and of ‘capitalism at its most democratic best' (Hossain 2005,110). In the late 1990s, there was much talk of the Nobel Prize for Yunus (eventually awarded in 2006), and the Prime Minister Sheikh Hasina herself graced the 1997 Micro-credit Summit in Washington DC. But while the eliteness of these organizations has assured them clout, it also means they are organizations that represent the masses, not mass organizations. BRAC makes virtually no pretences to public participation in the governance or design of its programmes. Even Grameen Bank, which advertised the fact that its women borrowers were shareholders, issued no dividends for almost a quarter-century (Karim 2011). Matters are very different in Nijera Kori and other organizations, but these are by no means the norm.
-  Chen and Rutherford (2013) make the same point, albeit more succinctly.