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Distant Voices: The Views of the Field Workers of NGOs in Bangladesh on MicrocreditAuthor(s): Mokbul Morshed AhmadSource: The Geographical Journal, Vol. 169, No. 1 (Mar., 2003), pp. 65-74Published by: Wiley on behalf of The Royal Geographical Society (with the Institute of BritishGeographers)Stable URL: http://www.jstor.org/stable/3451540 .

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The Geographical Journal, Vol. 169, No. 1, March 2003, pp. 65-74

Distant voices: the views of the field workers of

NGOs in Bangladesh on microcredit

MOKBUL MORSHED AHMAD

Department of Geography and Environment, University of Dhaka, Dhaka 1000, Bangladesh E-mail: [email protected]

This paper was accepted for publication in October 2002

Recently, microcredit has become a fashionable cure-all for most non-governmental organizations (NGOs) in Bangladesh. The provision of services to the poor is by definition always difficult, and even NGOs have problems. NGOs in Bangladesh define the poor in different ways when creating their target groups. The policies of nearly all NGOs in Bangladesh are formulated by their senior managers, and field workers are rarely consulted. This paper will explore the opinions on microcredit of selected field workers of four types of NGOs in Bangladesh - on how the problem of microcredit might be solved. Problems of microcredit programmes, they say, include non-accessibility to the poorest, low return, misuse and overemphasis on repayment. Field workers discuss what level of importance should be given to microcredit as against services like education, health or awareness creation. Most conclude that NGOs are overemphasizing microcredit, which leaves little time and few resources for other problems of the poor, so bringing the whole 'development' effort of the NGOs into question. Most field workers think that many microenterprises are not sustainable and that in many cases clients will remain dependent on the NGOs for credit.

KEY WORDS: Bangladesh, NGOs, microcredit, poverty

Introduction

This article reviews academic writings and what non- governmental organization (NGO) field workers have told me about specific aspects of microcredit.

In my view, field workers of NGOs are yet another under- utilized resource. I have therefore worked with the field workers of four types of NGOs of differing sizes in Bangladesh, each in one locality: one international NGO, MCC (Mennonite Central Committee) Bangla- desh; one large national NGO, PROSHIKA; one regional NGO, the RDRS (Rangpur-Dinajpur Rural Service) Bangladesh; and three small NGOs/GROs, which are 'partners' of SCF (Save the Children UK) Bangladesh'. The field work for this article was conducted between September 1998 and May 1999. Participant observation, semi-structured interviews and informal discussions with the field workers of NGOs, clients and mid-level and senior managers was used in the research. To obtain basic information on the field workers, 109 were interviewed by questionnaire.

There are probably more and bigger NGOs in Bang- ladesh than in any other country of a similar population

in the world. ADAB (the Association of Development Agencies in Bangladesh) had a total membership of 886 NGOs in December 1997 (ADAB 1998), but the ADAB directory lists 1007 NGOs including 376 non- member NGOs. The NGO Affairs Bureau of the Government of Bangladesh (GOB), which approves all foreign grants to NGOs working in Bangladesh, released grants totalling around US$250 million in the financial year 1996-97 to 1132 NGOs of which 997 are local and 135 are foreign (NGO Affairs Bureau 1998). NGOs have mainly sought to service the needs of the landless, usually with foreign donor funding as a counter-initiative to the state's efforts (Lewis 1993).

NGO initiatives in establishing income-generating activities have proved to be an effective alternative to top-down state programmes of rural works, but the extremely low rates of return on such activities have caused many to question their long-term sustainability (Ahmad and Townsend 1998). NGO relations with their clientele appear to have become increasingly credit-oriented, and there are now more restrictive rules (such as compulsory savings), all of which militate against participatory procedures. The likelihood of

0016-7398/03/0001-0065/$00.20/0 @ 2003 The Royal Geographical Society



66 The views of the field workers of NGOs in Bangladesh on microcredit

NGOs facilitating the empowerment of poor people seems to have diminished during their expansion (Ebdon 1995; Montgomery et al. 1996). I agree with Hulme and Mosley (1996) that NGOs are no longer vehicles for social mobilization to confront existing socio-political structures.

Most Bangladeshi NGOs are heavily dependent on foreign funds (Hashemi 1995). The volume of foreign funds to NGOs in Bangladesh has been increasing over the years and stood at just below 18% of all foreign 'aid' to the country in the financial year 1995-96. Donors increased their funding from 464 NGO projects in 1990-91 to 746 in 1996-97, a 143% increase in value over the period (NGO Affairs Bureau 1998). The disbursement of funds to NGOs is highly skewed. The top 15 NGOs accounted for 84% of all allocation to NGOs in 1991-92, and 70% in 1992-93 (Hashemi 1995). NGO dependence on donor grants has kept the whole operation highly subsidized.

Donors give funds for certain activities and evaluate the impact of that 'aid' on certain criteria (e.g. accessibility to the target population, improvement in education including dropout rates, enrolment, girls' enrolment, repayment of credit etc.). So, to ensure regular supplies of funds, NGOs have to ask their field workers to maintain performance and to show performance to donors according to their criteria. This seems natural as NGOs in Bangladesh are not membership organizations and the NGO agenda in Bangladesh is largely donor-driven.

The NGOs studied

MCC International first came to Bangladesh to assist the survivors of the great tidal bore disaster of 1970, centred at Noakhali, south-east of Dhaka. Now there are three main foci in the MCC programmes in Bangladesh: agricultural and family development, employment creation and emergency assistance. MCC Bangladesh has 141 full-time staff. I worked in Noakhali and found MCC leaders and field workers critical of microcredit, which they do not use.

PROSHIKA is one of the largest national NGOs in Bangladesh. Since its inception in 1976, PROSHIKA's effort has been to engender a participatory process of 'development' and it claims to have succeeded in pio- neering an approach that puts human development at the centre. PROSHIKA works in 10 166 villages and 654 urban slums, with nearly 1.3 million men and women from rural and urban poor households organ- ized into 68 897 groups. This translates into a total programme reach of over 7.1 million individuals (PROSHIKA 1997). In Sakhipur, where I worked, I found microcredit displacing other activities.

RDRS is one of the oldest NGOs in the country. Working in northern Bangladesh, with around 200 000 households, RDRS employs about 1500 staff.

Originally a branch of an international NGO, the Lutheran World Federation, it became a national NGO in 1997 (RDRS 1997). I worked in Kurigram District and again found the work of this NGO had changed from relief to microcredit.

SCF (Save the Children UK) is one of the leading international NGOs of Bangladesh. Work started in Bangladesh soon after independence in 1971. One major activity of SCF (UK) is to enable its beneficiaries to cope with floods, which frequently cause major dis- asters in Bangladesh. SCF (UK) has Coping with Flood programmes in various flood-prone districts in Bangla- desh. In Shariatpur, south-west of Dhaka, SCF (UK) decided in 1996 to hand over its activities and resources to local NGOs due to high operating costs. The 22 former SCF (UK) field workers formed three new NGOs and are working as 'partners' of SCF (UK). Their work is now all in microcredit, despite SCF (UK)'s published preference for emphasis on social problems in Bangladesh, which will be discussed later.

What is the work culture of these NGOs? Except for SCF (UK) 'partner' NGOs, the other three NGOs have service rules, policies on promotion, and transfer of field workers. The small size and greater inter-personal relations of the SCF (UK) partner NGOs seem to have created less necessity for such rules and policies. The large numbers of staff and large areas covered are the major reasons for the presence of these formal rules and policies in PROSHIKA and RDRS, while in the case of MCC this is mainly due to its international missionary nature.

All the NGOs studied have clear policies on casual leave, medical leave and other benefits, however there are two issues that merit discussion. First, many of these policies have been formulated in response to years of demands from the field workers. Demands which in some cases meant sacrifices, forced transfer or redun- dancy. Second, the mere existence of these policies is not enough for either NGOs or field workers. Most field workers know little about these policies. Many field workers told me 'What can we do when our superiors do not follow the rules? We cannot go on strike or afford to go to courts.'

Of the NGOs studied, only MCC has effective rules and hours of work. MCC field workers do not have to work at weekends or after office hours. For the others, the hours of work specified on paper are meaningless. Each field worker has a charter of duties and knows the performance indicators they must reach. It is these, rather than the contracted hours, which controls their use of time. In theory, a five-day week is worked in Bangladesh. All organizations are required to close on Friday, but they have the discretion with respect to closing, for example, from midday on Thursday to midday on Saturday. For field workers, however, it is much easier to find clients at home on Fridays, so many work on Fridays.



The views of the field workers of NGOs in Bangladesh on microcredit 67

Why do field workers work longer hours than they are contracted to? The answer is to keep their jobs and, if fortunate, to qualify for promotion. Staff evaluation is a major factor influencing what field workers do and how likely they are to retain their jobs. NGOs know they can apply these criteria to their field workers, for if any field worker fails to maintain the required standards, their contracts can be terminated and, due to high unemployment, the NGOs have little difficulty in recruiting new field workers.

Microcredit in Bangladesh The rise of both state- and NGO-sponsored microcredit programmes over the last three decades derives from various factors: capital scarcity, the inability of the formal system to reach the functionally landless (uncollateralized) poor, and the limited ability of the Informal Financial Market to meet the needs of the majority of poor people striving to survive in the off-farm sector (Bhatt and Tang 1998; Sharma and Zeller 1997; Montgomery et al. 1996). However, my research suggests three reasons.

1 International acceptance of the Grameen Bank model of 'development'. The initial success of this model has drawn international attention and many donors have accepted it as a cure-all for the problem of underdevelopment (Bhatt and Tang 1998; Hulme and Mosley 1998; Montgomery et al. 1996). Nayar and Faisal (1999) found that MFIs showed resilience to the most devastating floods in Bangladesh in 1998. The replicability of the model has been ques- tioned by many researchers like Reinke (1998).

2 A leading advantage of microcredit programmes is that their 'performance' can easily be measured, which enables the NGO to demonstrate achieve- ments and satisfy its donors. Now that development intervention is so much driven by 'performance indicators' (Mcnamara and Morse 1998; Gore 1998), this can be a decisive factor in its adoption.

3 NGOs seek self reliance and independence from donors. By working in microcredit, NGOs can use interest paid by their clients to pay some of their staff and other costs. Such charging of clients is one ave- nue for them to follow in order to become self-reliant (Edwards 1999; Yaqub 1998; Mcnamara and Morse 1998; Rutherford 1998; Popham 1998; The Inde- pendent 1998a; Abels 1998; Rhyne and Otero 1992). For example, PKSF (Rural Employment Foun- dation in English, a quasi-government organization) lends to NGOs at an interest rate of 4%, while NGOs usually lend to their clients at interest rates of between 12 and 16% (PKSF 1998). In the financial year 1996-97, one SCF (UK) 'partner' NGO had a total income of 384 000 Taka from interest on microcredit and a total expenditure of 241 000

Taka2. After studying six nineteenth century microcredit organizations, Hollis and Sweetman (1998) concluded that depositor-based microcredit organizations (MOs) tend to last longer and serve many more borrowers than MOs financed by donations or government loans. The other option for increased auto- nomy is to start commercial ventures like BRAC's (Bangladeshi Rural Advancement Committee) marketing outlet, printing press and cold storage or Ganoshasthya Kendra's brick field and pharmaceu- tical industries, which have also evoked comments from the critics of NGOs (The Daily Inquilab 1996). Although annual operational costs of BRAC's branch- level units are still more than three times their locally generated income (Montgomery etal. 1996), White (1999) points out that BRAC generates 31% of its income from its business sources.

These opinions are drawn from the literature; but what of the discourses of NGO field workers? When RDRS started, it was the largest NGO in terms of number of clients, but it was mainly a relief agency. After the appearance of BRAC, Grameen Bank and ASA (Assistance for Social Advancement) in the region in the late 1980s, RDRS also began to provide credit because it was losing clients to the big credit-giving NGOs like BRAC and was under great pressure from clients to provide credit. Nonetheless RDRS is still inexperienced in operating credit programmes compared to many large NGOs in Bangladesh. PROSHIKA field workers reported the same problem. In contrast, MCC clients borrow from their group's savings and NGO credit is of minor importance compared to other NGOs studied.

What NGOs say and what NGOs do

The policy statements of these NGOs promote their activities as diversified. However, to anyone visiting the areas where the NGOs work, the homogeneity of their activities becomes clearly visible. SCF (UK) is a good example of an NGO which differs between emphasis and disparity.

Since its arrival in Bangladesh, SCF (UK) has worked directly in 'development', and from 1996 onwards it has handed over funds and some physical resources to newly created 'partner' NGOs. The first group of 'partners' is run by its former field workers (all women) in Shari- atpur District. In my field work with these new, small 'partner' NGOs in Shariatpur, I found that the way the SCF (UK) 'partners' are now working is directly in contrast to the strategy paper of SCF (UK) Bangladesh (1997):

Nearly all development work in Bangladesh is targeted at the great mass of 'poor people' but actually neglects the poorest and most marginalised within this group. Thus, for example, the famous Bangladesh credit




Table 1 The NGOs' definitions of their target groups

MCC Bangladesh PROSHIKA RDRS Bangladesh SCF (UK) 'Partners'

Men or women from Landless and marginal Household should have Women from households households who cannot farmers (men or women). less than 1.5 acres of land. with less than 1.5 acres of produce or buy food for Not more than one The member should be from cultivable land, who are more than 3 months. Own member from the same the 18-45 age group. Not permanent residents of less than 1 acre of cultivable family more than one member from the NGO's working area. land. Not more than one the same family. A family Not more than one member member from the head, with not more than from the same family. same family 8 years of school education, Monthly household income

and a permanent resident of of less than 1500 Taka. the village Not service holders

Source: NGO literature and interviews

programmes typically do not benefit the poorest strata of society and although, they are targeted at women, may tend to exploit or burden women further. At the same time, the poverty alleviation programmes which much of the development community in Bangladesh are engaged in treats poverty as an almost purely economic phenomenon. Many of the most serious situations in Bangladesh are not the 'inevitable consequences of poverty' that both NGOs and policy makers seem to see them as. Such situations are associated with poverty but are caused by social factors. They are not likely to be solved within the next fifty years by the slowly rolling poverty alleviation programmes which dominate the development scene in Bangladesh . . . Many of the problems of the most poor and marginalised are both economic and social in nature but social problems are especially neglected in much development practice. We will therefore focus much of our attention on them

SCF (UK) Bangladesh 1997, 3

The 'partners' of SCF (UK) in Shariatpur, however, work only on a single activity - credit.

Only the MCC proved in practice in the field to have a different philosophy and to spend little time on credit. On working with two other NGOs, I found that they also had a heavy bias to credit. PROSHIKA usually has two types of field workers - EDWs (economic development workers, working on credit) and DEWs (development education workers). Most field workers told me, 'If you want to get quick promotion, try to be an EDW, and show success in credit'. Although RDRS documents (RDRS Bangladesh 1996a 1996b) report a range of services, all the field workers I interviewed are pre- occupied with credit and most complained that they cannot give enough time or importance to other services. Generally, RDRS field workers leave their homes or hostels each morning to reach their clients to collect or disburse microcredit.

If the general NGO priority is to provide resources and opportunities to those currently excluded, it seems a waste of time and money to begin work where these resources and opportunities are already available and sometimes duplicated. Ebdon (1995) found NGOs competing for the same clients to facilitate rapid expansion of their programmes. A similar situation occurred in all my study areas with the exception of the area where MCC was active. Such competitive behaviour contradicts NGO claims to cooperation and coordination with the common interest of empowering the poor. Instead, it creates and perpetuates factions and conflicts at all levels (Ebdon 1995).

Defining the target group

More than 50% of the rural population of Bangladesh is poor3. NGOs claim that their target should be not only those who are materially poor but also those who are vulnerable, vulnerable to natural hazards like flood, river erosion and cyclones, and who have very few ways to escape poverty. Here I want to explore the 'target groups' of the NGOs and to demonstrate that NGO field workers would like broader target groups in MCC and PROSHIKA, to include some of the less poor, and RDRS and SCF (UK) 'partners' would like to reach even poorer people than they do already.

Most NGOs in Bangladesh have specific target groups (Table 1). Most field workers of MCC Bangla- desh said that the definition should be extended to richer farming or fishing households. Many argue that both small and marginal farmers need help of the type that MCC provides to its clients, not just the poorer people in the target group.

PROSHIKA's target group consists of landless and marginal farmers; but most field workers would prefer to include medium-scale farmers (owning less than 3 acres of land). They think these farmers deserve PROSHIKA




services to facilitate their 'development'. Such farmers would, of course, be clients with a greater ability to repay and therefore easier for field workers to deal with. Of the four NGOs, PROSHIKA reaches most poor people, but this is not in line with the preferences of their field workers.

Field workers of RDRS and SCF (UK) identified groups in poverty currently excluded from their target groups. For example, RDRS field workers pointed out that a household with five members owning 3 acres of land has less land per capita than a household of three members. Similarly, the requirement for a client to become a permanent resident in the NGO area may exclude many. Poor families cannot survive in many localities during lean periods (when there is scarcity of jobs), and many male members of such households migrate sea- sonally. Since women are the NGO members and depend on their husband's income to make most of the repayments on the loan, the criterion of residence excludes a major group in poverty. RDRS chooses the age group that can work hard and repay their loan in time, but ironically the over 50 age group, which is the most vulnerable in Bangladesh, is excluded from the 'target' group of RDRS. Additionally, the educational qualification of eight years of formal education excludes many of the poor. However, most field workers told me that this qualification should be raised to the Secondary School Certificate level, which is equivalent to ten years of formal education, since this helps with record keeping. This would further exclude the poor. Most SCF (UK) 'partner' field workers interviewed argued that their target group is inappropriate to reach the poorest people because of the problems of landholding and permanent residence, which have already been alluded to. The rules do have some positive features: for instance, Montgomery et al. (1996) argued that a bar on dual membership from the same family ensures more peer pressure and partly reduces the risks.

Why do so many field workers want clients who are less poor? It is clear that the targets already exclude the poorest people, those who do not own land and/or are less well educated, are migrant and people over 45. Undoubtedly this is related to the evaluation of the performance of the field workers, which is mainly measured in terms of their performance in microcredit and, in the case of MCC, technical assistance. Field workers would prefer not-so-poor, more educated clients (Khandker etal. 1998; Tonah 1994), which would mis-target and deepen credit disbursement (Matin 1998; Sinha and Matin 1998). This is against the stated objectives of all of the NGOs studied.

Credit: problem of repayment and pressure on the field workers

Field workers are under tremendous pressure to produce high credit repayment rates to secure their

jobs (e.g. Rahman 1999 on Grammen Bank). So, they prioritize microcredit at the expense of other activities.

In Bangladesh, all microcredit is designated for income generation; there is no consumption credit. Many borrowers have to devote some of the credit to consumption (food, marriage, house repair), which makes it difficult for them to generate enough income to repay loans. NGO credit for the poor in Bangladesh can be exploitative. A senior manager at MCC told me that he thinks this is the case for most NGOs (Shafiqul Islam, personal communication). This is also the opinion of most of the MCC field workers I interviewed. However, it must be that MCC differs from the other NGOs I worked with, as its priorities and working methods are different. I ascribe these differences to its missionary nature.

PROSHIKA is a good example of an NGO which has changed its priority from conscientization to credit over the last 25 years. Many older field workers reported the changes that PROSHIKA has gone through:

When I joined PROSHIKA 10 years ago, my work was to go to the farmers and to organise them in groups, motivating them through music and lectures. So, I learned how to sing and use the harmonium and the 'Dhole' (the drum). People came to listen to our music and lecture. Some days, I found some people crying after listening to our music which was describing how an affluent farmer became landless through the exploitation of moneylenders. My life was easy. There was no credit programme but little skill or literacy training.... Now I ride hundreds of miles, I have no leisure. I have to show good repayment rate of my disbursed credit to save my job. To get money back sometimes I abuse my members. Now my life is full of tension. Many nights I cannot sleep due to the anxiety about what I shall do if I lose the job.

Qamrul Islam, Training Coordinator, Sakhipur, February 1999

In general, it appears that PROSHIKA groups are working well. Some groups are very committed to attending the training programmes for microcredit. But many field workers also told me of ineffective groups and groups which have split. There are four reasons for this:

1 Most field workers and even many group members thought that PROSHIKA groups (normally 20-25 people) were too large for credit though not for conscientization or mobilization activities. As training of members in group work is almost non-existent, it is difficult to keep the groups from being controlled by one or two people (e.g. Rahman 1999 on Grammen Bank). Some members discourage others from repaying loans or depositing monthly savings, stat- ing that PROSHIKA has no legal authority to take




action if they default or disobey. The high costs of court action discourage the NGOs from taking legal redress. But there are exceptions to this, as in one case seven NGO clients were sent to jail for default- ing on loans (NFB 1999b). Unlike banks, NGOs such as PROSHIKA have no collateral against loans and depend on their social capital.

2 Repayment is a major problem with the poorer groups. Often they cannot repay loans regularly, and when they utilize their loan money for consumption (e.g. food or house repairs) they may be unable to repay at all. In theory, members are required to utilize the loans for the purpose for which they have been granted and field workers monitor utilization, but poorer borrowers often disobey (e.g. Sinha and Matin 1998; Rahman 1999 on Grammen Bank).

3 Usually clients must save 5-10 Taka a month, to be deposited in the group's bank account. But often group members collude and start credit businesses instead, due to the fact that moneylending is profit- able in rural Bangladesh, where interest rates of 10% per month are commonplace. Diversion of the group savings to moneylending deprives other members of the profit, which creates conflict in the groups. Groups often split because of the conflicts moneylending creates.

4 Groups also split or become inoperative when group members migrate (often to south-east Asia or the Middle East to work). Migrants do not usually tell other members or the field workers that they are planning to leave the country since that will disqual- ify them from becoming members. When a group member leaves the country an immediate problem arises: who will repay the loan? Sometimes the absent member's close relations repay the loan from the person's remittances, but often nobody takes responsibility.

Credit is now the main activity of RDRS, but their field staff identified several problems with credit repayment:

1 Most clients 'do not utilize their credit properly', although credit is given only for specific projects. Some simply buy food with the credit and do not invest money in the proposed project. Basically, there is a lack of supervision of credit utilization. In addition, many clients borrow money from busi- nessmen and professional moneylenders and repay these debts with the RDRS loans. This view was shared by some PROSHIKA field workers who argued that clients should not be given credit on more than three occasions, if self reliance is the ulti- mate goal. This was because most members use half the credit for the approved project and the other half in business, which gives a larger and quicker profit.

2 Many field workers complained that RDRS' management of loan repayment is lax, while other organizations such as Grameen Bank, BRAC, and ASA are

much more strict in loan recovery. Chowdhury (1998) provides information on the strict policy of loan recovery by ASA. Several field workers complained that many clients have not re-oriented their relationship with RDRS from relief to credit, but simply assume that credit is a non-repayable relief.

3 It has already been noted that there is competition among NGOs in rural Bangladesh in disbursement and repayment of credit. In some cases one RDRS client simultaneously becomes a client of another NGO. So, one member of a household takes a loan from one NGO and repays the loan taken from another NGO by another member of the same household. In general, the policy of most NGOs is that only one member from one household can be an NGO member. But this does not work in all cases. In some cases field workers force their client to resign their membership when someone from the same household becomes a member of another NGO. However, field workers cannot expel a client if they argue that the loan is inadequate, or if they repay loan(s) and attend other activities of the NGO.

4 RSDS workers pointed out that it is almost impossi- ble to pursue defaulters through the courts for the same reasons outlined by the PROSHIKA workers.

5 Many people (mostly men) migrate to other districts in search of jobs during the planting and harvesting seasons. As they are away from home for three to five months, they do not repay loans during this time; and after they return, they often default on the pre- text of low income.

To keep a good repayment record SCF (UK) 'partners' exert group pressure through members of a group on a defaulter as their main tool, although field workers also go to local leaders to exert pressure on clients to repay loans. Field workers from influential families in villages are in an advantageous position because clients are under obligation to abide by pressure exerted by local leaders, and, therefore, their loan repayment records are usually good. Some clients still default, arguing 'What can you do if I do not repay (my) loans?' Some clients reported that field workers sometimes verbally abuse clients for not making regular repayments. As the NGOs do not train clients in record keeping, problems follow. In particular, illiterate clients who do not under- stand arithmetic or accounts often have misunderstandings with field workers. I found bitterness amongst both clients and field workers. Although Kabeer (1998) has suggested that there is some degree of flexibility in loan repayments, most of the field workers I interviewed disagreed with this because it makes their work more difficult.

Field workers are not in theory supposed to be debt collectors and 'development' workers simultaneously. Usually the cashier or secretary of the group should collect the money from the clients. In most cases this




does not happen due to the poor mobilization of the groups and the problems mentioned above (Johnson and Rogaly 1997).

Most field workers I interviewed, however, thought that technical advice on agriculture, education and health education should be given equal importance to that of credit, and feared that, with increasing emphasis on credit, other aspects of 'development' are being left aside. Interestingly, Sharma and Zeller (1997) reported the same concerns fuelled by the demands to keep up a good repayment rate, and the World Bank noted similar issues in the context of poverty alleviation (Micronews 1999).

In some cases field workers feel they are under great pressure to retrieve the money borrowed, and this has led to anti-social behaviour amongst some field workers. As one PROSHIKA field worker said:

When I lend money, I always keep pressure on my clients that they have to repay it by whatever means. I tell them that if you die without repaying my loan I will kick on your grave four times because you have not repaid the money.

Atiqul Alam, EDW, Sakhipur, February 1999

The emphasis placed on credit repayment can be illustrated by the following example. If the repayment rate of a RSDS field worker goes below 75%, the worker's food allowance is stopped for the next month. Although RDRS field workers have to provide many services (e.g. providing advice on education programmes, plantation work, fisheries and livestock projects) to their clients most of their time is spent on credit, since their job performance is mainly measured in terms of credit repayment. Some field workers I interviewed, though very hard working, were poor at record keeping. This caused further misunderstandings with their clients.

On average, the women who work for SCF (UK) 'partner' NGOs walk 6-8 km a day in the morning to collect money and disburse loans and after lunch they work in their offices finalizing their daily accounts. Their working day often lasts ten hours. The NGOs have to keep two months' salary for its staff in the bank to ensure staff obtain regular salary disburse- ments. The long working days and lengthy arrears in salary payment create extra burdens on pressurized NGO field workers.

Does microcredit benefit the poor? In general, microcredit benefits the less poor more than it does the poorest people, even if it reaches them. Hulme and Mosely (1996) found that the impact of microlending on the recipient household's income tends to increase, though at decreasing rates, as the recipient's income and asset position improve. This

relationship can easily be explained in terms of the greater preference of the poor for consumption loans, their greater vulnerability to asset sales forced by adverse income shocks and their limited range of investment opportunities. Lenders, they argue, can either focus their lending on the poorest and accept a relatively low total impact on household income, or alternatively focus on the not-so-poor and achieve higher impact (Hulme and Mosley 1996; compare Khandker et al. 1998; Evans et al. 1999). My research findings are in line with their observations. In Bangladesh, the impact of microcredit on poverty has been limited, despite its fame. Hashemi (1998) argues that although microcredit in Bangladesh (through Grameen Bank, BRAC, PROSHIKA, ASA and other governmental and non-governmental agencies) has succeeded in reaching a quarter of all poor rural households, poverty still persists. One major reason for this may be the limits to microcredit in effectively targeting all of the poor; more specifically in leaving out large sections of the 'hard core' poor - the distressed (Khandker et al. 1998; Hashemi 1998; Kabeer 1998; The Independent 1998c; Johnson and Rogaly 1997; Evans et al. 1999). For Hulme and Mosley (1996), the main problems worldwide in the practice of microcredit are overemphasis on credit delivery, social exclusion in the delivery system and a professionalization of management under which incentive structures for staff, such as bonus payments and promotion prospects, favour concentration on groups other than the poorest. All these features are highly developed in Bangladesh. Khandker and Chowdhury (1996) hold the relatively positive view that, for the targeted credit programmes in Bangladesh, it will take, on average, about five years for poor programme participants to rise above the poverty line and eight years to achieve economic graduation (i.e. to stop taking loans from a targeted credit programme). Montgomery et al. (1996), however, found little evidence that BRAC's clientele are altering their structural position within the rural economy. Their conclusion, that credit may be insufficient and inappropriate for alleviating extreme poverty (Montgomery et al. 1996), 1 feel is borne out by this research. Ebdon (1995) found in the case of the Grameen Bank that most women would simply be given the money by their household to cover the weekly repayments and hence their economic status was not improved (Ebdon 1995; The Daily Star 1999). Karim and Osada (1998) found that of those members who dropped out of Grameen Bank groups within their seventh year of membership, 88% did not move out of poverty.

Hulme and Mosley (1996) challenge the claim that every loan to women is a step forward in their empowerment (Rahman 1999 on Grameen Bank) and suggest that NGOs need to pay much greater attention to their




capacity to assist target groups within the female population (particularly the assetless, widowed and divorced) rather than treating women as a homogene- ous group (Hulme and Mosley 1996). My field work with the case study NGOs supports this argument. Among the SCF (UK) 'partners', the very small loans give clients very little economic lift. With this nominal economic progress, other aspects of 'development' of their lives have remained largely ignored. One client reported to me that her husband had lost most of his money this year because of the low price of his product - chilli pepper - and to repay her debts, her eldest son stopped attending school to catch fish. This is directly comparable to Wydick's (1999) observation from Gua- temala that the relationship between access to credit and investment in child schooling is not unequivocally positive.

Turning to the potential for the improvement of microcredit, the field workers of two other NGOs - RDRS and PROSHIKA - said that normally about 30% of clients are successful in their microenterprises, and these are mainly those involved in petty trading, cottage industries, and fishery, livestock or poultry projects (Rutherford 1998; Khandker et al. 1998). At the same time they pointed out that all microenterprises have limited growth potential, being constrained both by their inherent nature and by contextual conditions such as market demand. They argue that few clients can improve their economic position through agriculture, mainly because they have so little land. Of the rest, the majority of clients show some improvement, but remain dependent on NGO credit to retain this position. As one PROSHIKA field worker put it, 'clients have to run very fast to stay in the same place'. Most field workers agreed that the poor marketing system hampers the sustained growth of microenterprises. At the same time, however, most thought that if NGOs became involved in marketing there would be a strong possibility of exploitation of clients by the NGOs.

Field workers emphasized the importance of skills training and of adult literacy programmes, as these help the clients to become efficient sellers of their products. This supports the recommendations of Khandker and Chowdhury (1996), Johnson and Rogaly (1997) and Evans et al. (1999). Most field workers interviewed advised that before considering the sustainability of a microenterprise it is important to make provision for the sustainability of the groups. They suggested more emphasis on training in literacy and book-keeping, which would enable the groups to become self-operating, as well as helping the individual clients. MCC differs from the other NGOs in that most of the microenterprises they support are agro-based. Most MCC field workers recognized that these agro-based enterprises cannot be sustainable, because clients have very limited land and agriculture is always vulnerable to natural environmental fluctuations.

Microcredit has clearly made the relationship between the NGO and its clients primarily economic (Hulme and Mosley 1996). However, this is not always the case. Schuler and Hashemi (1995) and Schuler et al. (1997) found that women's access to credit aug- ments use of contraception and that there may be a positive association between women's contributions to family support and reduced domestic violence. They further argued that much more extensive interventions will be needed to significantly undermine men's violence against women (Schuler et al. 1996). They also found that wife beating was never discussed in NGO meetings, the discussions mainly being about credit, and conclude that NGOs (the Grameen Bank and BRAC) are interested in providing credit not in changing patriarchy in rural Bangladesh.

Conclusion

It is clear that the vast majority of the very poorest people are not reached by the NGOs investigated because of their definitions of their target population and because of the preferences of field workers. This situation has been made worse by the overemphasis on microcredit, which has compelled field workers to approach the slightly less poor to achieve good repayment rates.

The misuse of loans is a major problem. The initial success of the microcredit programmes may be attrib- uted mainly to close supervision by the field workers. The MCC system, where the field workers go with the members to buy the cattle from the market, seems a good model of close initial supervision.

For field workers there is pressure both to disburse loans and to keep a good repayment record. If 'development' is to be participatory then they have to let the clients decide whether they will borrow and how much. The present evaluation system of the field workers, which is mainly based on their credit performance, has put the 'development' effort of the NGOs into question.

NGOs are losing clients due to competition between them to lend. Coordination among NGOs to formulate a common policy is urgently needed. This is particularly necessary to combat the present problems of clients switching NGOs to obtain credit or having clients of different NGOs in the same household.

Microcredit is necessary for the poor but is no pana- cea (Hulme and Mosely 1996). NGOs should provide microcredit along with other services, particularly on the basis of priorities identified by field workers and clients. The other services are not only necessary for the poor for other reasons: some are necessary for sustain- ing the groups and microenterprises. For example, non-formal education, skills training and adult literacy help the members to keep good records, which will assist in making the microenterprise sustainable. The




great emphasis on microcredit also means that groups break up both when they do not get microcredit and when they misuse it. Many people join the groups only to get credit. This is not mobilization of the poor. Groups of the poor are the cornerstones for their 'development'. If groups are formed for credit the whole effort becomes banking for the poor. This does have benefits but, as Hulme and Mosley (1996) argue, it does not replace other state and NGO initiatives.

Acknowledgements The author would like to thank Dr Janet Townsend at Durham University for her comments on the initial draft of the paper. The usual disclaimers apply.

Notes

1 These NGOs will be discussed in this order, from international to local, throughout the paper.

2 The US dollar was equal to 57 Taka in October 2001. 3 The poverty line is defined as monthly per capita expenditure

which permits a daily intake of 2122 calories (World Bank 1996).

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