The Ugly Truth About Micro Loans

Micro loans. They're presented as a benevolent force, especially the NGO's operating in Bangladesh. Most forms of capital, i.e. loans, have been traditionally denied to the poor, who had no collateral to offer. However,  micro loans in Bangladesh are offered without the expectation of collateral, barring the strategic use of honor and shame. 

According to Lamia (1998), honor and shame already play a heavy role in Bangladesh society, beginning with women. Honor is an exemplarary asset to wield in rural Bangladesh, and can be measured and lost by how honorable a woman behaves. Even as micro loans are offered to women,  Lamia (1998)concludes that over 90% of the loans are used by the men of the household. Therefore, the practice of lending money to rural women under the pretense of economic freedom seems a bit misleading, further complicated by the issue of shame.

As theorized by Spradley & McCurdy (2009), philanthropic efforts and/or gifts, usually come with unseen strings attached. With micro loans, the unseen string is shame. To lose face, or experience shame, in Bangladesh is something a family might not recover from. Since women are the extensions of family honor, and therefore shame, when the loans are not paid on time, shame is a powerful instrument used by NGO's to secure a return on their investment.  Lamia (1998) goes into detail about how women are shamed into paying back their debt: spitting on them as they go by, pulling their hair, hitting, cursing them publicly.  Lamia (1998) suggests that the 98% repayment of micro loans can be viewed in a whole new way when shaming is considered.

Overall, micro loans in Bangladesh have positives and negatives,  but mostly negatives.  One positive thing about the micro loans would be the 50-60% interest, compared to that of rural loans, which can inflate to 120% interest (Lamia, 1998). Many negatives attached to micro loans stem from the revolving sides of honor and shame.  If not for those two societal elements already present in the society of Bangladesh, the high success rate in repayments would probably be a lot lower than it is. 

Read more about micro loans here.

Or

Watch the documentary Women's Bank of Bangladesh.