***Has the time not come yet to re-orient the banking system of Bangladesh in light of the successful experiences of the micro credit operations? Instead of finding fault with the Grameen approach, let the mainstream banking system come forward to clean up the mess it has created, and play the role assigned to it by the nation regarding economic development.***

THE Grameen Bank has been systematically institutionalising the world famous micro-credit programmes of Bangladesh, which are designed more or less in line with the path-breaking innovations in collateral-free banking for the poorer classes, primarily in the developing countries. And they have since been carried forward in a big way by the proliferating numbers of non-government organizations {NGOs) to every nook and corner of his least developed country. An overwhelming proportion of the more than 1200 NGOs operating in Bangladesh have now been actively engaged in the micro finance delivery programmes of different hues and character, though their joint efforts are still dwarfed by that of the pioneering giant in the field, the Grameen Bank. In spite of this dominance of the Grameen Bank in the realm of micro credit regarding both coverage and loan disbursement, the so-called NGO model of development is being increasingly identified with micro credit delivery system, which is believed to be a viable mechanism of reaching the 'poor' target groups. As many of us fondly remember. Prof. Yunus, the founder-philosopher of the Grameen Bank, consistently insists that the Grameen Bank should be considered a bank, not an NGO. because, its principal mission is to challenge the traditional concept of banking based on collaterals, which is designed to be used by the elite beneficiaries of the modern banking system to keep out the overwhelming majority of the productive sections of the population from these intermedi aries of artificially cheap institutional capital, which might have played the role of 'lifeblood' for the capital-starved producers fighting for survival in the poorer strata of the population, who are considered by the traditional banks as 'unbankable' because of their inability to provide 'good collat-

We believe, as does Prof. Yunus, that poverty is created , by the social system; it is not a creation of the poor themselves.

Bangladesh is one of the most prolific breeding grounds of endemic poverty, which is an end product of the system of exploitation, economic inequality and deprivation in a society trying to emulate the capitalistic principles centering around the philosophy of "open market economy’. The economy is characterized by a relatively small 'enclave-type' modern sector in the midst of a vast and mostly pre-capitalist agrarian rural economy where, in spite of the gradually increasing penetration of market relations. the peasant mode of production still reigns supreme. The 'disarticulation' of the modern capitalist sector and the different pre-capitalist modes of production is responsible for the 'development of underdevelopment', which is conceptualized by Samir Amin as "Peripheral Capitalism", a weak and distorted form of capitalism co-existing with precapitalist modes of production in the post-colonial, least developed countries of the Third World. In a country like Bangladesh, which is situated at the periphery of the world capitalist system based on inter-state relationships characterized by dominance of the few developed capitalist countries and virtual hegemony of the world's only remaining super power, the USA peripheral capitalism is symptomatic of machinations of the neo-colo-nial world order causing underdevelopment in a society mired in 'dependency syndrome.'

The nature of the state of Bangladesh remains largely bureaucratic as a colonial legacy because of the relative 'over-development' of the state compared to class formation. In this scenario, the state enjoys a sort of 'relative autonomy' zealously protected and maintained by the bureaucracy, the main beneficiary of this autonomy. In order to safeguard their privileged positions in the power nexus of the state comprising the military and civil bureaucrats, comprador bourgeoisie and the politicians, the state functionaries tend to play one group of the ruling elite against the other(s). The constant struggle for sheer existence of

the vast majority of the people helps to keep the class consciousness level of the working people at an underdeveloped stage on the one hand, and hinders the emergence of any particular dominant class or classes in the society and polity, as occurred in the capitalist countries of Europe and North America. One of the groups in the power nexus, the comprador bourgeoisie, flourish through marketing of goods and services produced_ by multi; national companies, which implies that their business critically depend on the fiscal, monetary and commercial policies of the state. This means that the nascent comprador capitalists in Bangladesh need state patronage for their trade-oriented endeavours. The resulting liaison among the policy-makers, bureaucrats and the businessmen has evolved through time into an institutionalized network of rent-seeking, corruption prone and patron-client connections. This institutionalized system of corruption tends to make state policies trade-promotive rather than production-friendly. Industrialisation was pursued in the Pakistani era mostly on the basis of import substitution principle, and also in the traditional export sectors. but many of the import -substituting industries nurtured upto the mid-eighties in a protected market are now suffering from the "sick industry syndrome', as the tariff and the non-tariff barriers are being lifted too rapidly under the dictates of the 'open market economy' philosophy prescribed by the donors and the international agencies/organizations. In order to accelerate the rate of industrialization, generous amounts of artificially cheap institutional credit were channeled to the favoured sections of the elite having close connections with different ruling

parties, military officers, civil bureaucrats and bankers or on the basis of rent-sharing arrangements, but the whole industrialization exercise has all along been thwarted by the massive diversion of capital to legal and illegal trade, capital flight, real estate, hoarding ahd conspicuous consumption with the help of the increasingly expanding and elaborate system of institutionalized corruption mentioned above, which is fast becoming all-pervading.

In the perspective described above, the rural economy has long been, and continues to be. subjected to a process of transfer of surplus, which has resulted in virtual stagnation or slow progress in the rural productive sectors. This transfer of surplus from the productive segments of the population to the small groups of middlemen, traders, middle and big landowners, bureaucrats, overseas migrants, importers, in-dentbrs. contractors, supplies, smugglers and politicians continues unabated. The process impoverishes an increasing number of people, because, the surplus is mostly diverted away from the extended circuit of reproduction of capital, and may even be transferred abroad through the 'extraverted' circuit of capital in a neb-colonial world order.

Recurrent natural disasters like floods, cyclones, river erosion. coastal erosion, salinity, water logging, droughts, etc.

frequently undermine the economic sustainability of the poorer sections of the people. Diseases, medical or other types of emergencies and man-made crisis and economic disruptions also act to marginalize them. The combined effects of environmental/ecological disasters and economic forces tend to accelerate the trends of landlessness. marginalization, pauperization and despondency, thereby constantly swelling the ranks of the poor people.

The system of "poverty creation" briefly outlined above appears to be too formidable an adversary for the micro credit movement started by the Grameen Bank and carried forward by the NGOs along with the pioneer. It is widely recognized that Grameen's 'bank to the people’ approach based on group lending, peer pressure, intensive field-level supervision, minimization of paper'work and formalities, weekly repayment routines, participatory Insblubons, strategies and pro-grammes and support mechanisms has evolved into a viable and replicable system for delivering credit to the poorer target groups of the population, especially the women of the landless and near-landless rural families. It should also be put on record that the continued success of the micro finance institutions (MFIs) has already demolished several myths surrounding the traditional 'banking for the elite' practised in

Bangladesh. The poor women of rural Bangladesh have proven that they are immensely .bankable, if the proper institutions are innovated, and the rules of the game are properly framed. Il is good business to lend to these borrowers, as they are maintaining a fantastic repayment performance hovering above 90 per cent for more than two decades of Grameen's success story. The 'unbankability' myth was a deliberately systematized hoax perpetrated to keep the segmentation of the institutional credit market intact, which benefits the property-owning rich and the ruling groups. Prof. Yunus goes even to the extent of claiming that the right to obtain credit becomes a fundamental human right for someone who has built up an impeccable record of timely repayment, as the borrowers of Grameen Bank have indeed done. The performances of the majority of the NGOs and Grameen-repllcators are also quite impressive relating to repayment of loans advanced. Some researchers of the Grameen System have lent credence to Grameen Bank's claims that about one-third of its borrowers have crossed the 'poverty line' for the time being, though they are still unsure about the sustainability of these borrower families out of the poverty trap. The recent devastating flood of Bangladesh has renewed the doubts and the fears in this regard, and has

also added a new dimension to the sustainability issue by questioning even the continued survival prospect of many of the MFIs. Some over-zealous critics of Grameen Bank have even started circulating the sensational news of the impending demise of the Grameen ’dream’.

As I see it. the sustainability issue has two crucial dimensions :

1) Sustainability of the MFI without external support of foreign donors; and

2) Sustainability of the borrower family at asset and income positions above the poverty line after the withdrawal of support from the micro credit programmes.

There are conflicting claims regarding both the issues mentioned above, and more research is needed to come out with more satisfactory findings on these two crucial issues. The issue of graduated borrowers also becomes important every day. There is a growing need to cater to the investment needs of the graduated borrowers once they succeed in their business endeavours. Prof. Yunus has never claimed that the Grameen Bank has evolved into a model for poverty alleviation in Bangladesh, because, he recognizes the systemic nature of the problems of poverty. But. some of his optimistic utterances regarding poverty eradication from the face of the globe have given the impression that he is z perhaps claiming too much about the efficacy of the Grameen approach as a potent tool to fight the endemic poverty of Bangladesh without changing the status quo. We are happy to note that he has come out with a clear statement about the issue in a recent encounter

with two of his critics published in a popular daily of Bangladesh.

Therefore, we feel that it is time to put the record straight. Micro credit movement has evolved into a viable mechanism to deliver institutional credit to the poorer target groups, though at a somewhat higher delivery cost compared to interest rates formally charged by the traditional banks from their favoured borrowers. but it has not yet provided a potent tool to combat the ’system' of poverty creation, for which a systemic transformation enshrined in appropriate institutional changes remains a necessary requisite. The burden of poverty alleviation within a system of surplus expropriation and appropriation. which are getting constant boosts from the 'open market economy' disguise of capitalism remains too back-breaking to bear for the micro credit camel alone. But, let us not belittle the successes achieved in this front. Therefore, godspeed to the 'banker lo the poor’.

I have one humble appeal to our policy-makers: Has the time not come yet to re-orient the banking system of Bangladesh in light of the successful experiences of the micro credit operations? Instead of finding fault with the Grameen approach, let the mainstream banking system come forward to clean up the mess it has created. and play the role assigned to it by the nation regarding economic development. It is time to abandon the collateralbased banking — the 'holy cow' of the wilful bank loan defaulters of Bangladesh.

Director General. Bangladesh Institute of Bank Management.