Rahfin in Bangladesh

Rahfin is a sophomore President’s Scholar and member of the University Honors Program who is majoring in economics, political science and public policy in Dedman College of Humanities and Sciences, with minors in religious studies and Arabic. He was named an SMU Maguire and Irby Family Public Service Intern for summer 2012. He is interning at Grameen Bank in Bangladesh, a Nobel Laureate organization that has pioneered microfinance for the poor. He plans to work on the administrative and financial side of microfinance and also visit rural banks in an effort to understand microfinance from a grassroots level.

A 21st-century slave plantation

A woman picks tea at the Findlay Tea Plantation.

There are acres upon acres of tea fields in Syhlet, a western district of Bangladesh. Each day thousands of women wake up at dawn and work until dusk picking tea. Their families have been living the same life for more than 200 years. Brought from Assam, India, to work the Bengali tea fields by the British, these workers make a “living” wage — .5 taka per kilogram of tea harvest. .5 taka is half a penny. Think about that for a second. I have purchased a kilogram of tea for $10 before. These women might work a fortnight and not make that amount of money.

Willem Van Schendel in A History of Bangladesh writes, “What set the colonial period apart, however, was the organisation of cash cropping, the scale of its production, and a succession of new crops that began to be produced for overseas markets. European and South Asian capital was invested in the large-scale production of opium, indigo, tea, silk and jute. Some of these crops were grown under systems of coerced labour, others on plantations — capitalist agricultural enterprises run by Europeans” (p. 60).

When microfinance talks about alleviating poverty, it is important to note that almost no system targets the extreme poor. While microfinance has certainly helped families cross the poverty line, the poorest of the poor — who are often generationally poor — are rarely touched by microfinance programs. Microcredit institutions target “entrepreneurs,” which in developing nations usually means that the borrower already has some type of business. Whether that business is pottery, rice husking, or a fishery, it means that the borrower simply needs a loan to sustain or grow her business. For a tea picker, who has little capital and even less business knowledge, Grameen’s model of “borrower knows best” microfinance is not enough.

For those in extreme poverty, microfinance needs to be coupled with technical assistance and cooperatives. I would recommend that you all look up an NGO called BRAC (it is the largest NGO in the world). It has microloan programs that give borrowers the ability to learn a trade. Then, BRAC pays them for that trade at fair market price. Per example, BRAC realized that the aggregate demand for milk in urban areas far exceeded aggregate supply. However, milk produced in rural areas could not be delivered to urban areas because of a lack of technical infrastructure. Dairy cow owners also lacked knowledge about antibiotics and proper health techniques. In response, BRAC created a supply chain system that connected rural villages to urban towns; it also provided technical assistance along the way.

Day after day, hundreds of thousands of kilograms of tea are harvested in Syhlet. Girls start coming to the fields with their mothers when they are of “proper age.” And the system continues. “Borrower knows best” microfinance has not provided “tea picker” families with an answer.

Tea pickers bring in their daily picks to a tea factory, where the tea is processed.


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The Forgotten

A borrower's vegetable garden and home.

Grameen Bank and other NGOs have lifted millions out of extreme poverty. But, it is important not to get caught up in all the awards and achievements. The bank offers a struggling member’s loan to its borrowers. The loan is offered to beggars who usually rely on rice donations to get by day-to-day. In Bangladesh, as in many other nations, begging is seen as “a demeaning job.” The struggling member’s loan, which is void of any of the traditional rules and regulations the bank offers, gives beggars the opportunity to sell items — from fresh vegetables to ornamental jewelry — while they beg. This novel concept has lifted thousands out of the depths of extreme poverty. However, there is a great way to go.

A borrower's loan book, which keeps the record of her weekly deposit and repayment schedule.

At the Nowga office, I met a beggar by the name of Mariam. She was born to poor farmers, and she later married one. The landless are often the most destitute — a lack of capital can be absolutely devastating. Her two sons could not afford to go to school, and thus, the vicious cycle of poverty repeated itself. Both of her sons are now day laborers, and they do not make enough money to support their mother.

After Mariam joined Grameen Bank, her life improved to a certain extent. With her first loan of 500 taka (roughly $7), she purchased a goat (a source of milk). After paying back the loan of 500 taka, she then took a loan of 1000 taka and bought a calf, which she grew and then sold. Next, she took a loan of 3000 taka and bought a cow, which she raised and sold. Mariam now has a little extra money in her hand every month (about the equivalent of $2), which she is depositing in her Grameen checking account.

Mariam said, “I always lived hand to mouth and had a very hard life. I still don’t have a home. I was married before the Independence War [in 1971] , and I only have a few good years left in me. I need to work very hard now so I can feed myself in my elderly years.”

I hope that Mariam and women like her succeed. Her story put many things in perspective for me.

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Selected topics

At a center meeting early in the morning.

When many people learn that I am at Grameen Bank for the summer, they ask simple questions like “What is the interest rate on a loan?” or “How many borrowers pay back the loans?” But, when they begin to learn more and more about the bank and about Bangladesh’s society and economy, the questions become more complex. I have selected a few topics that I will shortly discuss. Most of the answers come from my five-day village visit.

Eventual competition

This question goes something like this: “If Grameen Bank continuously has more and more borrowers and if borrowers in a certain area all specialize in a certain business, won’t they crowd out the marketplace eventually? What happens then?”

Outside the rice mill of a borrower who took a loan of 300,000 taka.

When I asked the borrowers this question directly, their answers varied, but they always came back to one point: competition is usually good, and they have not experienced overcrowding. There are a few reasons for this: locational variety, aggregate demand, product diversification, high margin goods and cross subsidization. Per example, product diversification might help differentiate a store that sells snacks. One store may carry cold drinks while another store may carry ice cream (only relatively rich businesses can have both).

Proliferation of microfinance

Before coming to Bangladesh, I thought Grameen Bank had a virtual hold over the microfinance landscape. However, I was surprised to learn that in Nowga, the district I visited, about 75% of borrowers belong to Grameen Bank while 25% of borrowers borrow from other NGOs — namely BRAC and TMSS. When people learn this, their eventual question is: “Why would people not prefer Grameen Bank, a long-established institution?”

While Grameen Bank offers highly competitive interest rates in conjunction with a communal-based lending system, many people go to NGOs because of less lax regulations. The branch manager at the Kiratpur Nowga branch said, “It is usually easier to get a loan from an NGO. Borrowers do not have to go to weekly meetings. There is less technical assistance and support. For people that have don’t have time to come to Grameen’s weekly meetings or simply don’t want to, an NGO is often their choice.”


A borrower's motorcycle repair shop. Motorcycles are fairly common throughout Bangladesh.

Many doubt that Bangladesh’s microcredit model can be adopted in other places. They ask, “Aren’t the cultural and social barriers very different in other countries, especially in the West?” To a large extent it is true that cultures are different. But, Muhammad Yunus, the founder of Grameen Bank, believes that institutions must adapt to the cultural economy of the borrowers. He says in To Catch a Dollar, “If the borrowers fail, it is the bank’s fault.”

Grameen Bank has a deep understanding of what its borrowers need. The bank usually operates on a weekly repayment system. But, when borrowers buy cows to “fatten up,” they are given bridge loans, which allow borrowers to pay back loans at one given point — usually six to twelve months later. This works for a Muslim nation like Bangladesh because the supermajority of the population celebrates Eid-ul-Adha, which requires families to slaughter livestock. Thus, villagers can buy a cow and raise it for six to twelve months and then make a profit when demand for cows is at its peak.

If you, my loyal readers, would like to pose any more questions, please email me directly at rfaruk@smu.edu, and I will answer the questions (to the best of my ability) in one of my following blogs! Dhonobad amar “blog” porar jhono! (Thank you for reading my blog!)

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A uniquely unique experience

Rahfin crossing the Jumana bridge in Bangladesh

Crossing the Jumana bridge at a high speed.

We left for Nowga, a district in western Bangladesh, six days ago. It was the drive of my life. While Bangladesh has a fairly decent national highway system, no one follows any rules or regulations. Imagine a two lane highway that travels both ways. Now add trucks, buses, gas scooters, cars, vans and rickshaws to the equation. Someone in our group joked, “Armageddon or this journey?” But, all jokes aside, we arrived safely in Kiratpur, a region of Nowga, after a twelve-hour trip of traffic jams and crazed driving.

Rahfin's room in Kiratpur, Bangladesh

My humble abode in Kiratpur.

My stay at the village reminded me of how good life is in the West. The electricity was routinely gone for more than twelve hours. There was no working fan in the room I slept in. There was no hot water. There was a sanitary latrine yet no toilet. And yet, I felt content in a less complex setting. Every morning, we visited a center meeting where we met women (about 98% of Grameen’s borrowers are women) who had seen gradual improvements in their lives — a brick house instead of a mud hut, three cows instead of a goat and a small plot of land for vegetable cultivation instead of rented land. While life in the village is difficult to quantify or qualify in Western terms, the improvement is real when compared with the state of Bangladesh a few decades ago.

The front of the branch office in Kiratpur. My English friend bought a lungi, or loincloth, and forgot about the high shorts.

In 1974, a famine hit the newly-formed Bangladesh (it had previously been known as East Pakistan) and claimed the lives of more than 500,000 people. The famine, as many historians have concluded, was a result of poor governance and economic inequality. Rice was king (and still is in Bangladesh). But now, Grameen borrowers have a few options: They engage in micro enterprises that sell products ranging from fish to groceries to tea to snacks.

In my opinion, because of successful micro enterprise in many of Bangladesh’s villages — a rising industry of land cultivation, small businesses and service-oriented trades — a middle class has risen (a relative context in comparison to the village’s overall economy). A visit to some of Grameen’s long-term borrowers’ homes will reveal many luxuries: a television, a radio, sets of wooden furniture, a fridge and stable electricity. These modern luxuries should not be overlooked.

I hope to develop this theory further while I am in Bangladesh. Circumstances willing, I hope to visit another village in ten days. I will be sure to sample at least fifty storeowners and their storefronts from a microeconomic standpoint: their profitability, their luxury goods, their quality of life, etc. Perhaps I will be able to combine this data into an image of what Grameen Bank (and other microcredit programs) can do for the motivated.

I have returned to Dhaka and its internet cafes, and I will be sharing more about my journey soon!

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Borrowing and barriers

Rahfin with an Italian graduate student in Gazipur

An Italian graduate student and me at a center meeting in a Gazipur village. The center is one of more than 500 in the Gazipur district.

I made a visit to a Grameen Bank branch office today around the district of Gazipur (not further than 30 to 40 kilometers from the capital city of Dhaka). I learned a few important things about the bank today that I think hold great lessons for Green Riba, my zero-interest microfinance initiative in West Dallas.

Green Riba was in the planning stage for about three months, and I have learned that a business plan on paper is only that. While it feels great to have paired up with the award-winning non-profit PeopleFund and other business groups, I cannot wait to get started with the storefront aspect of the business. Green Riba’s for-profit storefront will fully subsidize the zero-interest loans from all angles: administrative, seed money, capital and technical assistance.

Muhammad Yunus theorizes in his book Creating Social Business that there is nothing like hands-on learning. I learned that Green Riba has to overcome cultural, social and economic barriers. The supermajority of the population in West Dallas does not have access to a traditional savings or checking account. This means that the people of West Dallas may need technical assistance and support when they first take loans from us. (Financial illiteracy, along with prejudice and asset evaluation, is a reason that traditional banking institutions have largely overlooked West Dallas.) We also face regulative, bureaucratic and language barriers in West Dallas.

Similarly, when Grameen Bank first started, it had to overcome barriers from many sides: religious leaders fearful of secularization, husbands afraid of a change in the gendered status quo, government officials apprehensive at collateral-less loans and academics stunned by Grameen Bank’s aberration from the status quo.

Rahfin with Grameen Bank employees in Bangladesh

The branch manager, me and a head office employee in the branch office.

Even today, as I learned from my branch-level visit, women borrowers are not completely liberated from the constraints of a gendered and male-dominant society. In fact, the majority of women borrowers take out loans to facilitate the businesses of their male relatives. Per example, a woman I spoke with borrowed 100,000 taka (a little more than 1,000 USD) to fund her husband’s cell phone store. At first glance, it may seem like Grameen Bank is doing very little to empower women.

However, when I pressed him on this issue, the branch manager replied, “Generational change happens slowly. If we allow a woman to become the money provider in the family, she has more rights, and she gets to make decisions with her husband.” I must remember the importance of working within the constraints of barriers when Green Riba begins distributing loans in August/September.

I will be spending the next week in a Grameen Bank village-level bank so this will be my last blog post for about a week! I thank you for following my blog, and I hope to share more parts of the bank that cannot be found by simply reading a textbook. Bhalo theko (Stay well)!

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Not your everyday bank

Other interns from various nations at Grameen Bank. From left: a British graduate student, a Canadian senior, a Polish senior and a British senior.

How does microfinance work? How do women (the majority of Grameen Bank’s borrowers) maintain successful loans? What type of loans does Grameen provide? Is Grameen more than just a financial institution?

Grameen Bank has many rules and regulations when it comes to administering loans, and I encourage you all to read more about how Grameen Bank has been so successful, especially in terms of its payback rates. But, I would like to focus on Grameen Bank’s loan offerings for one purpose: I want to differentiate Grameen Bank from other microfinance institutions.

In recent years, microfinance has received a bad name. Microfinance banks have been portrayed as abusive, and said banks have been accused of usury. Grameen Bank, on the other hand, offers a singular basic loan to its first-time borrowers. If borrowers pay back their loans in a timely manner, interest does not exceed 10 percent. If borrowers are successful in paying back their initial loans, they are given an opportunity to apply for larger entrepreneurship loans.

A view of Dhaka from the 11th floor of Grameen Bank.

I was most excited by Grameen Bank’s other loans, however. The bank offers housing loans and higher education loans to its long-run borrowers who have more than three years of experience. In a nation that is routinely ravaged by floods, weather-resistant housing is important for both the protection of life and capital. By the same token, the cost of a university education is expensive in Bangladesh. Grameen Bank offers both to its borrowers (and at lower interest rates). Per example, Grameen Bank members can take out a higher education loan at zero-interest for the first five years; their children pay back the loans (at around 8 percent interest) after they have graduated and have acquired some form of employment (self- or otherwise).

The bank has other humanitarian elements, as well. It offers free life insurance to its members. It forgives the interest payments on loans in areas that are hit by natural disaster. It offers beggars loans at zero-interest to encourage the most disenfranchised to pursue small-scale commerce.

While Grameen Bank is not perfect, the bank is nothing like a traditional financial institution. One senior bank official told me, “We were never a bank for the rich. We are a bank to aid people to come out of poverty and help their children lead better lives than they did.”

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More than just a vegetable

Beef is a luxury good in Bangladesh.

Grameen Bank targets those who live in extreme poverty. Muhammad Yunus writes in his book Banker to the Poor: “They have no control over capital, and it is the ability to control capital that gives people the power to rise out of poverty.” The bank targets those who are landless and assetless. It makes a clear delineation between the poor and the extreme poor — the latter have almost no form of agency.

It is often hard to visualize what poverty looks like in a third-world nation. Grameen Bank prides itself on alleviating poverty, but many foreigners state, “These people still have a low standard of living.” For the bank, access to education, clean drinking water, sanitary latrines, sustainable agriculture and a varied diet are no easy feats.

A rich variety of vegetables at the open bazaar.

Ratan K. Nag, who has worked at the bank for 29 years, said at my first day at the bank, “When I first went to the villages, there was nothing. There was feces everywhere I looked. But, slowly the bank has made great improvements in Bangladesh.”

A great way to visualize what it means to come out of extreme poverty is to look at the foods those who cross a poverty threshold can afford. To do so, I visited a open bazaar in one of Dhaka’s neighborhoods. Those in extreme poverty cannot afford anything but rice and very menial (and cheap) foods. However, those who have crossed a poverty threshold can afford a diverse diet: green vegetables, fruits and fish (meat, especially beef, still remains a luxury for the upper economic classes in Bangladesh). Access to food is a great indicator of a person’s quality of life. I would encourage you all to glance over Foreign Policy’s food edition.

A fish vendor cuts hilsha (one of the most expensive fish in Bangladesh).

Next up on the agenda? A discussion of Grameen Bank’s loan structures and my first impressions from my first few days at work.

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My goals, from West Dallas to Bangladesh

I will be spending a good portion of my summer interning at Grameen Bank in Bangladesh. It is a once in a lifetime opportunity, and I hope I learn a good deal from my experiences. This blog will update every few days, and I hope you follow my journey at the world’s first and largest microfinance institution.

First, I wanted to give everyone an overview of Bangladesh:

Bangladesh is a beautiful land. Historically, it has been home to a wide diversity of religions and cultures. Its fertile lands have grown rice for centuries upon centuries. While Bangladesh’s history is rich, it is best to examine the condition of the Bengali people with the start of British rule. The British empire, in the zealous pursuit of lavish profits, designed what is now modern-day Bangladesh to deliver cash crops like jute, indigo and tea. The empire’s strict enforcement of administrative and legal policies under a harsh colonial network has crippled Bangladesh to this day. Dr. Willem Van Schendel of the University of Amsterdam concludes in his book A History of Bangladesh: “The colonial framework proved long-lived: despite turbulent state formation since British times, it remains clearly visible in Bangladesh’s judicial, educational, health, engineering and military institutions today.”

British agricultural policies encouraged a high fertility rate (more children meant more labor to work the fields). As such, the population has grown by a factor of 7 since 1820, and the population of Bangladesh is supposed to rise to almost 250 million people by 2050. Van Schendel further writes, “It is one of the most densely populated countries on earth … it has 1,064 persons per square kilometer compared to 48 for the world, 124 for Asia and 345 for India.” To add context to this quote, Bangladesh is slightly smaller than the state of Wisconsin.

Beyond its problematic colonial history and its population problem, Bangladesh is also victim to routine flooding, famines and natural disasters. The Famine of 1943 killed an estimated 3.5 million people. In 1970, the Bhola cyclone wiped out nearly 400,000 people; it was the deadliest cyclone in recorded history. A cyclone in 1991 killed at least 138,000 people and left more than 10 million people homeless.

This relatively new nation, established in 1971, has many obstacles to overcome (and I have only named some of the hurdles it faces). But, in my humble opinion, the greatest barrier to success that Bangladesh faces is extreme poverty. It is important to remember that poverty is a result of systemic neglect and failures by those who have power. Mother Teresa said, “Being unwanted, unloved, uncared for, forgotten by everybody, I think that is a much greater hunger, a much greater poverty than the person who has nothing to eat.”

And, that is where the story of Grameen Bank, a 2006 Nobel Laureate organization and the world’s largest (and most famous) microfinance organization, begins.

The founder of Grameen Bank, a Fulbright scholar, Dr. Muhammad Yunus, is a man I have grown to admire. I would encourage all of you to read his book, “The Poor Man’s Banker.” But, if you’re short on time, I would encourage you to read this short interview in Time.

After winning the Nobel Prize in 2006, Yunus said, “58% of the poor who borrowed from Grameen are now out of poverty. 2005 was declared the Year of Microcredit and there are over 100 million people now involved with microcredit (programs). At the rate we’re heading, we’ll halve total poverty by 2015. We’ll create a poverty museum in 2030.”

I have now read more than 40 papers and 10 books on microfinance. I believe that microcredit is a valuable tool in solving poverty. I have been inspired. And now, I’d like to provide you with the source of my inspiration:

I took a wonderful class with Dr. David Doyle (a professor of history and the director of the University Honors Program at SMU) called “The Dallas Experience.” The class studied the historical and political development of the city of Dallas and the status of the city today. I will be concise: The history of Dallas is not a pretty one. It is one filled with racist development, gentrification, classism and artificial monumentalism. And today, areas of Dallas still suffer from great neglect. One of the best (or depending on which perspective you take, worst) case studies for this neglect is West Dallas.

Here are some statistics on West Dallas provided by the West Dallas Community Collaborative for Schools, Jobs and Housing

  • 67.1% of the adult population never completed high school.
  • Per capita income is only $9,813.
  • 60% of the population is uninsured.
  • Only 2% of residents are four-year college graduates.

With the aid of a Maguire and Irby Family Public Service Internship and other sources, I have financed a trip to Bangladesh to learn about Grameen Bank and the beautiful people of my Bangladesh (I should disclose here that I am of Bengali heritage). It is my goal to grow closer to the people of Bangladesh and to learn everything I can about microfinance partially because I have established a microfinance initiative in West Dallas: Green Riba.

The help of great organizations like PeopleFund, the City of Dallas’ Office of Economic Development, the West Dallas Chamber of Commerce, the Rees-Jones Foundation and many other advisers and SMU students, along with an SMU Big iDeas grant, have allowed for the creation of Green Riba, a microfinance initiative that will give out zero-interest loans (we have developed an innovative model to stay in business without interest) to bright, creative West Dallas entrepreneurs. With only a few thousand dollars of support, it is amazing to see what entrepreneurs can do with their small businesses. It is my sincere hope that the oft-neglected people of West Dallas succeed with the right tools much like many Grameen Bank borrowers have.

If you’ve made it this far, I congratulate you. I’m glad you’re interested in Bangladesh, Grameen Bank and/or Green Riba. No other blog post will be nearly this long. Most blogs will be less detail-intensive and instead focus on what I learn about Grameen Bank and experience in Bangladesh (I will officially start my internship in about a week). I just wanted to give an overview of my aspirations and goals for my internship. And, I also wanted to take this opportunity to apologize to you in advance. I will make mistakes in my posts. I may say things that upset some of you.

But, most of all, I want this blog to be a forum for discourse. Don’t be afraid to email me directly at rfaruk@smu.edu and engage me in great discussion. I am a believer in learning and constructive rhetoric. I hope that this blog can offer some of both to each of you.

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