I have lived and worked in Bangladesh for the past 5 years but first visited here about 17 years ago and have seen the growth of mf in Bangladesh. Whilst I am not familiar with the area in India from where the WSJ article was posted, certainly many parts of it resonated.

There are more than 20,000 functioning NGOs in Bangladesh and the vast majority of these are involved in MF. An ex-DFID employee described the industry to me as akin to having a McDonalds franchise – you buy the package and start to make money.

I work in the rural areas of Bangladesh where I have 34 rural production centres and employ almost 4000 women making hand knitted and hand crochet childrens toys for export (www.hathaybunano.com). I started it 5 years ago because it was so clear that mf was the only solution being offered and that alone, it would not reduce poverty.

When I visit some of the rural areas, particularly in the North of Bangladesh there are many many women who don’t even have a sari blouse (the small fitted blouse that is worn under the sari). For a conservative woman this is the ultimate indignity because it is almost impossible to keep your modesty entirely covered without this garment. My purpose of telling you this is to highlight that the poverty in such an area is so great that the community have no purchasing power. Certainly lend a woman money to buy a sewing machine but if there are no customers then she will never succeed.

In such communities mf is used largely for consumption and this is now widely accepted to be the case in Bangladesh. As such the only way to repay a loan used for consumption is by taking another loan and with many thousands of suppliers all looking for business it is not so difficult to get another loan. Hence the cycle begins.

I’ve lost count of the number of times that I’ve been told that the first loan was to buy a blanket because it was cold in the winter or was to educate her daughter. So many examples of loans which could never lead to income generation. For me, this is wrong. Surely if a person has no income then a loan should be linked to a business idea. But the world isn’t perfect and certainly in Bangladesh there are far too many instances of irresponsible lending within mf.

Of course, in Bangladesh the mf industry is well established and surely now is the time to look at it critically from here and to learn lessons which can be applied in other countries. Our work is worthless if we cannot open it up to scrutiny by our peers.

I, for one, would not like to see a backlash against mf which halted its use, but I would like to see in Bangladesh greater regulation so that the poor really are given opportunities but are protected at the same time, and I would like to see other countries learn from the Bangladesh experience, both good and bad, in order that mistakes aren’t repeated. Put yourself in the position of someone very poor and cold who is then offered a loan – who would say ‘no’! I would also like to see more independent research done to evaluate income levels at which it is most effective so that going forward it can be better targetted. From my experience it is clear that there is a level of poverty at the very bottom of the pyramid at which mf is not the most effective tool for poverty reduction.

For any economy to function well there is a need for a whole variety of options. The work that we do at Hathay Bunano of creating flexible and local employment is one option but again isn’t the only option. There is also a need for more formal employment options – in Bangladesh this might perhaps be through the garments industry moving rurally, and for the ongoing availability of day labouring in construction and agriculture, and for the migration of labour etc etc.

One big lesson to take from the Bangladesh experience is to accept that mf cannot solve poverty alone and that the creation of rural employment for the poor and illiterate is possible. Employment creation has traditionally been seen as more difficult to achieve than implementing mf and possibly for this reason mf became the preferred choice. Currently mf is still relied on too heavily in Bangladesh to make changes that it cannot make alone and more emphasis is needed, by all of us, to move ‘out of the box’ and develop a complete range of tools for tackling poverty.

Samantha