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Money talks
Women's economic independence in Muslim societies

October 23, 2004

The following case study (written in 1998) might shed some lights in transforming the old to a careful selection of the new. To address the core decay of a Muslim society, I often questioned the status of women in the society first and foremost. Naturally, children born from the mother, seek special bond with the mother. Prosperous women implant fertile prospects in the society. The trend in recent decades discussing women’s plight in Muslim societies has raised important questions regarding the economic independence of women in Muslim societies.

Muhammad Yunus' independent movement in Bangladesh began when he walked out of the Chittagong University campus, and into the village of Jobra. When he assumed his post as professor of economics at Chittagong University in 1972 Yunus established a Rural Economics Program to do research in the villages. There, he learned what kind of social intervention was needed to improve people's living standards.

In 1972, Yunus began by providing thirty dollars in loans to forty-two people in the village. In 1976, Jobra Grameen Bank Prakalpa (Jobra Bank Project) was organized. In 1998, this bank served two million borrowers, 98% of whom are women (Krishna 10). The success of the project (in scaling up to a program) depended upon the internal and external coordination that Yunus orchestrated between Bangladesh government agencies as well as international organizations. Eventually, Yunus landed grants and loans.

The process began by changing official's perceptions about poor women. It was decided that they could be granted loans in exchange for only "trust" as social collateral. Loans and grants from national and international agencies were granted. In 1982, Yunus opened the Bank after receiving grants from the Ford Foundation and low interest loans of 3.4 million from the International Fund for Agricultural Development (IFAD). Between 1976 and 1983, the bank underwent a process in which it became formally established as a lending institution.

Yunus first hypothesized that if "poor" people (including women) were provided with fair access to credit, they could generate productive self- employment without any external assistance. Yunus writes that, when he first began granting loans, he strove to ensure that at least 50 percent of the borrowers were women. He was extremely aware of the plight of women in Muslim society. Yunus states (Krishna 15) that women are confined, first to their father's house, then to their husband's. And they have very little security in either place. Yunus knew women were vulnerable in terms of social capital (a public or private welfare system), and that the Bank could provide future security for them. He says that women want to do something about their plight, but that the doors of opportunity are closed to them by social custom, by tradition, and by what passes as religion in Bangali villages (Krishna 15).

When the Grameen Bank was established in 1983 as a formal financial institution, it was designed exclusively to help only those people who had less than 0.5 acres of land, or assets not exceeding the value of 1.0 acre of land. Yunus reports that it was not easy to give money to women. The Bank faced opposition from husbands and religious leaders. The village Mullahs told women that if they took loans from the GB, they would violate religious precepts, and would not be assured of a decent burial. They would face eternal condemnation (Krishna 16).

"Credit," said Yunus, "Should be accepted as a human right." The Grameen Bank's work is performed by 11,000 staff members at 1,041 branches around Bangladesh. Grameen also has managed to record very low default rates. The goal of Grameen is to alleviate the poverty of the rural poor through credit and social intermediation. Its success as a financial institution is its creation of a unique market niche, such as training women to establish micro-enterprises. Its success as a poverty alleviation program, on the other hand, is targeting of poor, mostly rural women (Yunus 12). The symbiotic relationship between the women and Grameen Bank is a strong bond. According to Yunus, "We realized that by addressing the mothers we will be building a better future for the children" (Yunus 10).

Poverty alleviation is Yunus' main goal; therefore he must eliminate all forces that contribute to stagnating living standards for the poor. To eliminate the vicious cycle of poverty, a good manager must resolve all possible obstacles that may prevent him from staying in business. So, Yunus carefully avoided the creation of riots and other types of opposition. But he still had to plan to eliminate the causal forces contributing to poor living standards. One of those causal forces that persist in Bangladesh is the patriarchy, which imposes non-wage labor on women.

The material base of patriarchy in Muslim societies is men's control of property, income and female labor. The structural elements of this control include aspects of the kinship system, political system and civil religion. Thus, there are two distinct processes of economic differentiation that occur in the society. One is the process of class formation, which governs the economic mobility of the households. The other is the system of patriarchy, which governs the economic mobility of women within the household, independent of class (Cain 406).

Ideology is used to institutionalize male dominance within the social context, both in public and in private. The male interpretation of the holy book Quran is responsible for further stagnation in the condition of poverty-ridden Bangladesh. Since agriculture remains central to the nation's economy, labor is an intensely sought-after commodity.

Ninety percent of Bangalis are Muslims. The explicit interest of most males is to maintain their dominant role in relationship to females. Their Quranic interpretation represents a strong apology for patriarchy. The current Islamic interpretation is explicit about the sexual division of labor and is responsible for sanctifying male dominance. According to this interpretation of Islam, man is the earner, woman the server of man. It states: "Men are the managers of the affairs of women, for that God has preferred in bounty one of them over another" {Quran, Sura 4, Verse 38} (Cain 407). Under Sharia law, formal institutions such as commercial banks do not lend money to women without approval of a male relative.

The present seclusion of women under the current Islamic interpretation of religious law is one of the strongest forces responsible for the personal and social degradation of women. It keeps them in stagnating conditions of poverty. According to Sharia Law, women should be viewed in both a public and a private context. "Pardeh" is a system of secluding women and enforcing high standards of female modesty. Its cultural manifestation in Bangladesh includes severe restrictions on women's movements outside their immediate homestead, a "bari" consisting of an open compound surrounded and shielded by huts, foliage and fencing. Women who move out of the homestead and into the public "male space" are considered both provocative and offensive (Cain 409).

Purdeh is a complex institution that entails much more than restrictions on women's physical mobility and dress. It denies women access to many opportunities and confers upon them social status as a protected group (Cain 408). Women, who form half of the labor force, are held back by the force of such religious doctrine. Widespread social use of these doctrines causes women to remain in none formal sector of the economy, where they remain dependent on male relatives. These women are hard-working laborers, both in the household and on the farm.

Poverty alleviation also requires a better-educated populace. The total illiteracy rate was reduced from 80 percent in 1970 to 65 percent in 1993. Female illiteracy is about 78 percent. If the current high birth rate continues, the 1996 population of 119.8 million will double in 35 years. Among the sixteen planks adopted by Grameen members who become borrowers is a commitment to education for their children. Members of many centers have opened nursery schools, which also provide day care. Over 16,000 such center-operated schools are functioning today, with more being opened each year (Krishna 20).

Among the entire female workforce, the majority (64.9 percent) perform non-wage work, according to the International Labor Statistics, ILO (World Development Report 1995). The persistence of non-wage work among women is a conscious scheme enforced by the patriarchy. Its significance is to psychologically convince women that they are not the bread-winners in their household. Again, among the sixteen planks that women agree to, prior to receipt of their loans is to promise to educate themselves and their family members. They also promise to make a financial provision for that education.

Another promise is to not take any dowry at their sons' weddings, or to give any dowry at their daughters' weddings. They shall keep the Center free from the curse of dowry. They shall not practice child marriage (Krishna 19). The promises kept are a way to change socially constructed rituals freeing women from popular culture that is responsible for keeping women in private spaces. Yunus says, a simple solution -- credit -- can create self-employment. He believes that the self-esteem that one gains from paying off credit is more important than the money itself.

It is not an accident that the majority of GB members are women. The causal chain reaction that begins when women adopt the sixteen decisions ends up with women becoming decision-makers in their own right. At the national workshop held in March 1984, one hundred women delegates representing the five zones were in attendance. The delegates developed a social program consisting of the sixteen decisions, reflecting the social aspirations of Grameen borrowers (Krishna 18).

Yunus is trying to deal with socially-constructed problems by starting with a change in mindset. By empowering the mind, the relationship between spouses is altered. Yunus believes that social norms and cultural factors are actively constraining advances in development. A management analysis of Grameen enables one to see that its objective is to eliminate poverty by encouraging people to help themselves and to include half of the labor force, women, in the GDP. Grameen encourages members: To grow vegetables, an important source of vitamins and nutrition for poor rural people; to keep their houses in good repair and to construct new houses at the earliest opportunities; to plant as many tree seedlings as possible during planting seasons; to act collectively in the interest of the group when they receive loans; etc. (Krishna 19).

Women are now allowed to formally leave their compound to go to the Grameen Bank branches; whereas under the "purdeh" system, they were not allowed to do so. Women are now partial bread winners in their households. Husbands are accepting this change. While there have been riots, an empirical sign that this behavior change is taking place is that these women remain married, and Grameen Bank continues to do well. Indeed, for more than two decades Grameen bank has been functioning smoothly. The fact that the opposition has not been destructive enough to cause Grameen to lock up its business means that behavioral change is actually taking place:

At the household level, the simple act of giving women loans is doing two things: First, it allows women to feel differently about themselves, building up self-esteem and self confidence. Second, it is changing the nature of the relationship between husbands and wives. In order to continue this behavior, women have begun activities outside of the household that previously were considered unacceptable, but are now being tolerated. At the community level, the Mullah's position has changed because they are now allowing GB managers to work with women. At the national level, women are now enabled to obtain loans from a formal lending institution, such as the Grameen Bank.

The savings of Grameen borrowers now exceeds US $70 million. Collectively, Grameen borrowers (94% women) could buy-out the largest enterprise in Bangladesh (Yunus 1). Grameen has gone from a tiny project in one village, to a nationwide bank, to a worldwide movement. Today, Grameen Trust has funded 41 projects in 14 countries, all modelled after the Grameen Bank. The female borrowers who comprise the bulk of Grameen Bank's clients maintain an admirable repayment rate of 98 percent. Among the Grameen family of companies are Grameen Fisheries Foundation, Grameen textile company, Grameen Agriculture Foundation (producer of nontraditional crops) etc. Grameen Trust has an experimental health-care program available to all villagers, whether or not they are Grameen borrowers. This incentive will attract more women. The premium price is $1.25 per family per year. Individuals also pay a nominal co-payment fee of US $0.02 for each doctor's fee. Non-Grameen villagers pay a higher fee (Yunus 4).

The project's sustainability is due to a "peer-lending" system that Yunus created, as well as mandatory training sessions. "Working Capital" employs the same principles and partners. If the borrower cannot pay back the loan, no one else (a group of five) in his or her lending circle can get one. The system creates friendly pressure and an atmosphere of support. This is another example of the strategic managerial wisdom of Yunus. He arranged repayment plans that reflect a deep understanding of human behavior under the conditions of poverty.

At first, the repayment was daily - if someone borrowed 1000 taka, the repayment was 3 taka a day. This arrangement motivates borrowers to repay without hesitation. Yunus asserts that people have a psychological aversion to paying back large sums of money all at one time, especially when they are poor. Poor people find it difficult to accumulate money, as there always exists pressing needs on which they have to spend money. A daily or weekly payment routine makes it easy for them to repay (Krishna 17).

At the top of the Grameen hierarchy is the Board of Directors, which is responsible for guiding managerial performance. Since the members are shareholders, their representatives are on the Board. Most of the central decision-making functions are based on field-level information, which is systematically collected, analyzed and disseminated by the monitoring and evaluation unit of the bank. Monitoring and evaluation plays a crucial role in operations and expansion. Continuous feedback is provided by a range of operational and financial reports. Information from the branches on flow of funds, disbursement, repayment and defaults is also monitored from daily statements prepared by the branch managers for the head office (Yunus 7).

The long-term viability of Grameen Bank depends upon the size of the subsidy received from low-cost funds provided by donor agencies of different countries, as well as the Bangali government. Of course, the bank's ability to operate without such a subsidy may also be crucial to its continued success. While the repayment rate for banks and other developmental financial institutions in many developing countries, including Bangladesh, has been quite low (in the 25 to 50 percent range), Grameen Bank has recorded an exceptionally high overall recovery rate of about 98 percent. The loan recovery rates are lower for male borrowers than for female ones, contradicting the general assumption that women are a higher credit risk than are men (Yunus 8).

Yunus continues to pursue his project goals based on the hypothesis that it is wise to make credit available to the poor, because most people are determined to lift themselves up out of poverty. Yunus proved to be right -- Grameen borrowers have succeeded in crossing the poverty line in ten to fifteen cycles of Grameen loans (GB Report 97). Another goal for Yunus was to prove to commercial banks that the poor are credit-worthy. He believed that, with a good loan management system in place, borrowers would pay back loans without collateral. It was Yunus' managerial tactic to win the cooperation of those who would appear to be natural opponents of his poverty reduction (eradication) efforts.

Husbands, religious leaders, and regulatory institutions such as commercial banks have provided both formal and informal resistance to Grameen's growth. They have attempted to discourage women from borrowing from GB. But women have defied them by consistently and faithfully cooperating with Grameen. The women continue their daily routine, and try to convince the village elders to invite the GB branch managers back to the village, in those cases when they were asked to leave (Provost 24).

Initially, Yunus's philosophy was that the poorest members of the society would become the primary "source" of contributors to the Bank, that they would provide the backbone of its existence. He also wanted them to be able to retain as much as possible of the surplus generated by their labor. The Grameen Bank's intervention has produced the classic multiplier effect of development theory (Provost 16).

As of November 1997, Grameen borrowers number 2.3 million. Loans are processed at over 1080 branch offices throughout Bangladesh. Each month, $30 million in loans is distributed. Twenty-percent interest is charged on regular loans, and eight-percent on housing loans. The 8.5 percent interest is paid on member’s savings. Grameen Foundation also depends on the generous donations of individuals, and of both domestic and international organizations.

These include Founders Circle, Chase Manhattan Foundation, and Citicorp Foundation. (See here). As of June 1993, the proportion of foreign funds amounted to 74.54 percent of total resources available for GB; 43.2 percent of total funds were provided in the form of grants, both for on-lending and revenue. By 1993, the suppliers of funding to GB included the Dutch, Norwegian, and Swedish aid agencies (Yunus 4).

The Grameen Bank's board of directors consists of the following: A chairman, appointed by the government; The managing director, Muhammad Yunus; three people, at least two of which are government employees appointed by the government; one woman with experience working with the landless, appointed by the government; two persons appointed by the government from among the managing directors of nationalized commercial banks, the Bangali Krishi Bank, all of which provide financing and some organizational infrastructure; and four persons, preferably including two women, to be elected by the borrower-shareholders, and with a term of three years on the board (Provost 21).

The GB office in Dhaka is responsible for liaison with donor agencies, the national banking institutions and government ministries. Since the Bangladesh government provides much of the financing, it is vitally important that good relations with the government are maintained. The staff of the head office also directly deals with IFAD, UNICEF, the Ford Foundation, other international organizations, and the management of other local commercial banks who have joined the GB banking network. These links to other countries' government agencies, NGOs, and other organizations are increasing because they need GB advice to design their own projects (Provost 19-20).

The management director controls, influences, and monitors the work that is done by the staff. GB field staff does not negotiate or even socialize with the government officials of the Upazila in order to retain the image that GB is only there to help the poor. The GB branch offices are located far from the Upazila office (smallest administrative units), and the Upazila chairman's village is often the last to be approached by the GB (Provost 21).

The protocol and dignity characteristic of GB field staff is very much in evidence in their relations with village and religious leaders. For instance, if the village elders ask a new GB branch manager to leave, he does so. More often, the poor of the village who are eager to be given loans go to the elders and ask them to invite the GB branch manager back. Also, if there is jealousy on the part of a local NGO or government extension agent, the GB tries to limit the banks own membership only to those people not serviced by those agencies (Provost 22).

The branch managers' role is extremely vital. He must exert his authority with great discretion. He commands loyalty that rivals the authority of the traditional village leaders. Yunus has tried to hedge against this by making the borrowers the majority shareholders. The danger that the Grameen movement could be harnessed by some political party is much greater than the bank admits. I agree with Michele Provost, who believes that part of the reason for Dr. Yunus' international travel is to build up an international reputation which could strengthen him in his own country. This way he can reduce the fear that he will be co-opted by Bengali politicians (provost 14-22).

A GB branch covers 12 to 24 villages with one manager, six to ten bank field workers, one account clerk, and one security guard. The field workers go to the villages to explain the program and its requirements to prospective clients. The landless clients then organize themselves into groups of five. The landless themselves are vital to attract new borrowers, because in order to get a loan, they must convince four other like-minded poor to join them in a group. Every five or six groups are federated into a "center." There are typically one or two centers per large village (Provost 24).

Yunus says that, due to the difficulties he initially faced in persuading the banks to lend money to the poor, he paid a lot of attention to the procedures and rules that the bank devised. He wanted to show the banks that their fears were unfounded: That the poor would repay because they had a strong sense of dignity (Krishna 13). Yunus astonished the nation with the brilliant procedures he established. These include: the incentive to become a shareholder, the built-in savings to clients, and the formal and informal structures for receiving and paying loans. They all work to motivate people to become involved.

Yunus says: "Four elements of the Grameen strategy have been responsible for our success: Group-based lending, taking the bank to the poor rather than taking the poor to the bank, a focus on women, and a system of regular weekly installments for loan repayment." (Krishna 13) This system performs some useful functions by coordinating and homogenizing forces. The modes of interest intervention can make it easier and more manageable to come to agreement.

An individual in need of credit must find four other partners in the same economic situation who are not relatives. They must own less than half an acre of land. There should be only one member from any particular family, and women are preferred over men (Krishna 13). The set-up is organized to create as much homogeneity as possible, which makes participation easy. The group elects a chairperson and a secretary who hold office for one year only. The same person cannot be reelected until other members have had their chance.

The fairness of the electoral system, the homogeneity that allows consensus, and the sense of responsibility that is instilled among members are the key elements reinforcing active participation. The homogeneous nature of the group gathering at Grameen, including the gender homogeneity, tends to produce fewer disputes and more participation. Good managers always promote participation, in order to allow people to feel that they are integral to a larger process.

The managerial structure includes a built-in monitoring process. The loan selection and applications are discussed by all group members at the mandatory weekly meetings of the centers. All transactions and discussions between group members are publicly administered and decisions are made on a consensual basis. The open banking procedures mitigate any vested interests in the system, limiting the chances of corruption and embezzlement of funds (Kandker 2).

The smooth functioning and rapid expansion of Grameen Bank is owed to this monitoring system, which effectively responds to the needs of the poor. This is done through intense attention paid to the performance of individual staff members (Fuglesang 63). GB branch managers usually have a Bachelors degree and undergo two years of intense training at the headquarters. They also do field internships supervised by current GB managers (Provost 40). Records are updated continuously, and the staffs are encouraged to write narrative reports.

The staffs are also encouraged to bring in their own ideas and criticism, helping to create democratic workplace participation. Trainees perform case studies of the poor. These become part of the monitoring and evaluation database. The scale of this is appreciable, since GB once trained 400 to 500 people annually. Socio-economic data are also collected by social development officers in the course of their work with female members. This data is analyzed, and the results incorporated into staff meetings, training seminars, and management decision-making. Without exaggeration, staff members are remarkably knowledgeable concerning the Bank's operations and its plans for the future.

Eastern philosophy promotes a humble and generous attitude toward humanity. It is indicative of the spirit of Grameen Bank that staff use the term miss-happening to describe such events as mistakes, theft, bribery, corruption, fraud and embezzlement. That term reflects a gentle view of human frailty. This does not mean that miss-happenings are not dealt with whenever they occur. The auditors, however, prefer to look at themselves as social workers among the Bank staff. Auditors usually have a negative reputation; news of their arrival precipitates an audit panic. Grameen auditors, however, say, "We are not bloodhounds, but watchdogs for the benefit of all." (Fuglesang 67).

To stay in business, Yunus had to remove obstacles presented by the opposition. He used discretion to prevent the incitement of riots. The Bank established authority concerning borrowers by getting them to sign the sixteen-decision commitment clause. The cycle of success with the poor established by Grameen is likely to carry on, but it is at risk if foreign resources not to continue to donate 74.54 percent of its resources as they do now.

Certainly, Grameen could not function if the loans and grants were terminated. The Grameen Bank must function for at least two more generations before the population, especially men are fully adapted to the new position women occupy in public space. By then, the position of women will be much less vulnerable. Channels of information will have been fully established. Field managers and zonal managers will have perpetuated themselves to the point where there the bank is at little risk of failure.

Grameen's reputation is by now well-established worldwide. It will be able to sustain its work as long as funds flow and beneficiary feedback continues to be heard. Since this program began by working with the people, it can only last so long as the people remain supportive. The trade-off with this kind of program is that progress is incremental. Quick fixes are usually a chimera, in any case. Human adaptability to change is by nature slow and incremental. Fortunately, change is occurring, and, to the extent that there is change, there is reason for hope.

Fatima Farideh Nejat holds a Bachelors degree in Interdisciplinary Studies of Anthropology, Psychology, Sociology and Women's Studies; and a Masters of Arts degree in International Training and Education from the American University in Washington, DC. She served in diplomatic corps of Iran working at the Iranian Embassy in Washington, DC, from 1970-80. She is currently Assistant Professor at the Department of the Army, Defense Language Institute in Monterey, California.

Works cited

-- Arnold, Steven; Morgan, Philip. "Projects, Plans, and Programs." The American University.
-- Cain, Mead; Rokeya Khanam; Nahar Shamsun. "Class, Patriarchy, and Women's Work in Bangladesh" Population and Development Review. September 1979. V5, 3. PP404-438.
-- Delp, Peter et al. "Systems Tools for Project Planning" International Development Institute. 1977.
-- Fuglesang, Andreas. Participation as Process / Process as Growth. "What we Can Learn From Grameen Bank Bangladesh"
-- Provost, Michele, M. "Learning From the Grassroots: The Grameen Bank in Bangladesh and Its replicability Elsewhere and in Baltimore (The Beginning of an Action Research Project)" 1989. The American University. Master Thesis.
-- Yunus, Muhammad. "The Grameen Bank Story: Rural Credit in Bangladesh" in Reasons For Hope. Kumarian Press. 1997.
-- Yunus, Muhammad. "Does the Capitalist System Have to be the Handmaiden of the Rich?" Grameen Dialogue (20). October 1994.
-- The World Development Report 1995.

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