Thursday, February 19, 2009

Nobelist Smackdown Watch

. Thursday, February 19, 2009

Somebody who is probably Daniel Davies took exception to this effusive rave-up of Muhammed Yunus' Grameen Bank:

One doesn't want to be too mean about Grameen, because their heart is in the right place, (albeit their bank is in a very different place on the Bangladeshi income scale than it used to be pre- the massive restructuring in 2001, a fact which is not always made clear in publicity material). But they really do have a strong habit of overselling their projects. Sobi Rani, the woman quoted in the article "'gets' the basis of successful banking". How much does she get it? She sells yoghurt door to door, that's how much she gets the basis of successful banking. Well, she doesn't actually sell yoghurt any more because the yoghurt didn't taste very nice, but there's a profitable Grameen yoghurt business now and she's involved in it. Well, maybe it's not profitable, but it's been redesigned and it's going to be all over the country! Well, it might not get distribution right away, but they're still growing and opening up factories. Well, they're not actually opening up any more factories, but if the sales get better and they solve all the problems and make a profit, then they might. But at least it's Bangladeshi people helping themselves. Well, Danone is doing most of the managing at the moment, but anyway, the point is, ADVANTAGE: GRAMEEN! In your face, capitalism and foreign aid! Microfinance rules!

Maybe-Davies says later that microfinance has a place in the world, but his over-arching criticism still rings: if microfinance is so great, then why haven't outcomes in Bangladesh improved in the 30+ years since Grameen has been operating? Is it a problem of scale? Because there are 2,462 Grameen branches in Bangladesh, and the bank has loaned nearly $8bn in a country where GDP/capita is < $500/year.

Of course there are great success stories as well, so the worst that could be said is that the record is uneven. But the popular narrative is that microfinance is a panacea for all that ails the least-developed world, and that simply appears not to be true.


Anonymous said...

Thanks for the cite! In fairness, poverty has come down a bit in Bangladesh - it was at 75% in the 70s versus 45% now. But it's come down in a lot of other places too, and the timescale of the Bangladeshi improvements suggests that they've more to do with "macrofinancial" developments like the growth of the textiles industry. At the end of the day, the most cogent criticism of Grameen is simply - when was entrepreneurship, rather than working for a wage ever the main source of income for the mass of the population?

Nobelist Smackdown Watch




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