e Business beds UNCTAD

Antoni's Wire Service

Date: Sat, 21 Nov 1998 19:28:57 -0400 (AST)
From: Antoni Wysocki au120@chebucto.ns.ca
To: Undisclosed recipients
Subject: UNCTAD in bed with business


Of all multilateral institutions UNCTAD more than any other has traditionally been viewed as defending ordinary people against corporations and the South against the North. However, this past summer the agency came under heavy fire from NGOs for holding a joint summit with CEOs of multinational enterprises. Yet, the following item from BRIDGES trade news digest (Vol. 2, Number 44) suggests that, far from heeding the complaints, UNCTAD is seeking still closer relations with business.

The pitfalls of such an approach appear in the coda to the BRIDGES report where we here that UNCTAD has been impressed by "entrepreneurial successes in the developing world made possible via micro-finance". Evidently in their enthusiasm for commerce the UNCTAD crew have missed recent research discrediting the claim that micro-credit has been a boon to the poor.

The Grameen Bank, the world's prototype micro-credit institution, has long been noted for its policy of making funds available to indigent women, first in Bangladesh and later internationally. In the past attention has been drawn at once to the progressive ideal underpinning the program - i.e., the desire to alleviate women's disadvantaged economic status - and the unusually high rate of repayment on the loans.

Governments have found very attractive the idea that poverty and sexism alike can be redressed by pure market mechanisms with little or no infusion of public monies. Lending institutions have noted the very low percentages of defaults and the public relations points that can be scored by supporting a (seemingly) socially beneficial undertaking. Both groups, of course, were delighted at the notion that income redistribution policies could be dispensed with in the face of the supposed income generating capacity of micro-credit.

The reality is somewhat different. In speaking to Bangladeshi women who had obtained loans from the Grameen Bank, University of Manitoba sociologist Aminur Rahman found that roughly 5 in 6 had requested the loan under orders from a male relative, and that 60% of the loans obtained were appropriated by men. Fully 70% of the women reported increased verbal and/or physical abuse from male relatives after taking out loans.

Rahman further noted that 78% of the loans went for purposes other than those approved by the Bank. Often the money is required for sustenance. New York economics reporter Gina Nepp relates that, "After 8 years of borrowing, 55% of Grameen households still aren't able to meet their basic nutritional needs - so many women are using their loans to buy food rather than invest in business".

Meanwhile the famously high rate of return on Grameen loans, it turns out, is due to borrowers being driven by their male relatives to local loan sharks who cover the Grameen payments in return for usurous remuneration.

To be sure, Grameen has lately instituted some reforms : e.g., borrowers now pay weekly interest not on the total amount of the loan but rather on the remaining balance (though this is no more than standard practice with regular commercial borrowing). It is also possible that, at the outset, Grameen loans did actually go to the women that requested them and it was only later that opportunistic men began to coerce women into taking out loans on the males' behalf. The salient point, however, should not be whether those associated with Grameen are cynical or malign but that micro-credit is a dubious strategy for fighting poverty. It is a strategy which is of doubtful value for raising the standard of living of the impoverished while it all too readily lends itself to the aims of the powerful.


References :

Bangladeshi Women and the Grameen Bank, by Jennifer Pepall
International Development Research Centre Reports, August 4, 1998

Microcredit, Microresults, by Gina Neff
Left Business Observer #74, October 1996

BRIDGES weekly trade news digest - Vol. 2, Number 44
November 16, 1998 (excerpt)


The United Nations Conference on Trade and Development (UNCTAD) November 9-12 held "Partners for Development" in Lyon, France. The event brought together over 400 private companies, nearly 100 non-governmental organisations, a number of government delegations and entrepreneurs from developing countries in an effort to foster mobilisation of resources for development.

"Partners for Development" is part of a drive by UNCTAD to match-up development projects of interest to the private sector with private sector investors and put a strong emphasis on information technology for trade, finance and development. At the event, UNCTAD announced three bio-trade initiatives to be carried out in conjunction with the Spanish government, a Brazilian bank and a private Brazilian investor, which would promote the commercial use of Amazon forest products. UNCTAD also announced a string of transportation partnerships to accelerate the flow of goods by road, rail and sea in developing countries.

The exposition also highlighted the entrepreneurial successes in the developing world made possible via micro-finance, or small loans made to individuals or small groups in the amount of US$20 to US$1,000 dollars. Micro-entrepreneurs, a high-percentage of them women, pay back their lenders at impressive rates, with an overall default rate of three percent. UNCTAD hoped the Lyon event would encourage other lenders to follow the lead of the flagship micro-lender, The Grameen Bank, by implementing micro-credit programmes.

"UN in push on private sector," FINANCIAL TIMES, November 9, 1998; "Transportation partnerships launched at 'Partners for Development' meeting in Lyon," UNCTAD PRESS RELEASE, November 12, 1998; "Developpement: les miracles de la microfinance," LE FIGARO, November 10, 1998.