Microcredit,the corporatization of nongovernmental organizations,and academic activism: The example of Professor Anu Muhammad

Abstract

Based on an interview with academic-activist Professor Anu Muhammad, this edited transcript illuminates the corporatization of nongovernmental organizations, with specific reference to perpetuating the negative effects of neoliberal microcredit practices in developing countries. It focuses upon how such corporatization is contributing to corruption and the weakened role of the state. The concept of poor-people-led cooperatives is proposed as an alternative as they are more congruent with actively maintaining cultural traditions, protecting social cohesion, and mobilizing collective community-level energy to alleviate misery and reduce poverty.

Introduction

Our concern is to highlight the corporatization of nongovernmental organizations (NGOs) in perpetuating the negative effects of neoliberal microcredit practices in developing countries, and to illuminate the challenge posed to these by academic activism.

Microcredit is an element within microfinance ¹ that provides credit services to poor clients (Fernando, 2005; Mannan, 2009). It is widely accepted in developing countries, such as Bangladesh, where NGOs, operating as quasi corporations under a veil of benevolence (Chowdhury, 2017), have deployed microcredit as a development tool that it intended to eradicate poverty and empower poor women. Top Bangladeshi NGOs, including the Grameen Bank, Bangladesh Rural Advancement Committee (BRAC), and the Association for Social Advancement (ASA), receive substantial foreign funds with which to mobilize microcredit services, resulting in their operation as quasi corporations (Fernando, 2005; Karim, 2011a).

The corporatization of NGOs as providers of microcredits is, arguably, the product of neoliberal, market-centric development policy. In the creation or extension of such NGOs as quasi corporations, the poor become increasingly vulnerable. Some scholars (e.g. Mair et al., 2011; Yunus and Jolis, 1998) claim that the process of NGO corporatization enables the poor to free themselves from poverty. In contrast, the ‘academic-activist’ approach (Hill Collins, 2012) that is articulated in the insights of Professor Anu Muhammad (A.M.), illuminates how microcredit practices bring the poor into the exploitative process of marketization as deregulation facilitates the institutionalization of profit-oriented activities—a scenario that is supported by other scholarly evidence (e.g. Fernando, 2005; Karim, 2001, 2008, 2011a; Mannan, 2009; Muhammad, 2009, 2015).

The interview with Professor Muhammad relates how market expansion has occurred through the process of NGO corporatization, unregulated distribution of microcredits, and a vicious circle of debt traps. The primary effect has been to disrupt and degrade the lives of the poor. Ahmed (2007) found that 1189 of 2501 respondents could not make their repayments for their microloans on time. A total of 72.3% of them had to borrow money from moneylenders and others at high rates of interest, while 10% had to sell assets to repay loans. The influential ethnographic studies of Karim (2001, 2008, 2011a) report how, in Bangladeshi villages, NGOs use ‘shame’ to collect loan repayments—which can be particularly devastating for the reputation of poor women. These studies challenge the conventional wisdom that microcredit gives a voice to the poor and empowers women. Arguments for microcredit as a vehicle for poverty alleviation (e.g. Mair et al., 2011; Yunus and Jolis, 1998) are cast in a new and unflattering light. As the veil of benevolence is lifted, the arguments are shown to be deeply problematical, if not empty. They are seen to form part of a wider, hegemonic discourse (cf., Gramsci, 1971) that is advanced through processes of cultural and political manipulation and perpetuated by neoliberal academic knowledge re-production.

In order to challenge the dominant discourse, it is necessary to develop and disseminate other ideas that commend and enable counter-hegemonic practices (Said, 1978, 1994; Scott, 1985; Spivak, 1999) and so expose propaganda and correct injustices, including the notion that corporatized NGOs empower poor women through microcredits practices. Social science that contributes to the debate of public issues, the origin of which can be found in W.E.B. Du Bois’s scholarly work and evidenced-based activism (see Morris, 2015), can dispute hegemonic rhetoric (e.g. Burawoy, 2005a,b). What has been termed an ‘academic-activist’ perspective (Contu, 2017; Hill Collins, 2012) is examined and commended as a way of undertaking management and organization studies. Such studies go beyond observation, or even participant observation, to engage directly and self-consciously in a form of ‘critical performativity’, where the academic ‘struggles against oppression and builds and participates in emancipatory politics’ (Contu, 2017: 2). Specifically, we consider the example of Professor A.M.’s involvement in challenging the justice of NGO microcredit practices and developing alternatives to them, such as cooperative-centric approaches, that are intended to empower the poor instead of regarding them primarily as a profitable business proposition.

A brief overview of microcredit practices in developing countries

Microcredit gained a new prominence and acclaim when the Grameen Bank and Professor Muhammad Yunus jointly won the Nobel Peace Prize in 2006. Microcredit is widely accepted and applauded by donor countries and international institutions (including the World Bank, the International Monetary Fund (IMF), United States Agency for International Development (USAID), and the Department of International Development (DFID), UK). Nonetheless, it is a politically contested and scientifically controversial phenomenon (Fernando, 2005; Karim, 2001, 2008, 2011a; Mannan, 2009; Muhammad, 2009, 2015). As early as 2001, Aminur Rahman, a Bangladeshi anthropologist, published a highly controversial book on microcredit that challenged its effectiveness and pointed to its dark side. When commenting upon this innovative study, Karim (2008) recalls that Rahman’s criticisms of microcredit made it impossible for him to publish his book through any Bangladeshi publishing house. Ten years later, Karim’s (2011a) own study of three villages in Bangladesh exposed and questioned the roles of powerful NGOs and heavily criticized the microcredit practices carried out by leading NGOs. Karim (2011a) reports that NGOs, such as the Grameen Bank, claim to have high loan-repayment recovery rates (around 97–98%). This is possible, she discovered, only because the poor are pressured to repay by deploying cultural manipulation, such as shaming practices. The BBC (2013) reported that the pressure was so intense that recipients of microcredits in Bangladesh sold their organs to repay their loans; and there have been numerous reports of Bangladeshi microcredit agencies being violent toward poor borrowers (Karim, 2008, 2011a; Rozario, 2007). Their activities have undermined social cohesion and created or widened social divisions. The use of microcredit is seen to bring further misery to the lives of the poor, and it has not brought the development, poverty eradication, and women’s empowerment that its proponents hail (see also Stiles, 2002). ²

Defenders of microcredit provided by increasingly corporatized NGOs, who include Professor Yunus, claim that his idea of microfinancing differs from the practices of SKS (a public company) and others who serve mainly their shareholders rather than the poor (Yunus, 2011). However, a study conducted in 12 Bangladeshi districts affected by Cyclone Sidr in 2007 has shown that powerful NGOs—such as BRAC, the Grameen Bank, and the ASA—forced Sidr-affected microcredit borrowers to sell off their cyclone relief materials to repay existing loans (Pasha et al., 2008, cited in Muhammad, 2009). The borrowers were also intimidated into using their government-provided housing compensation package to repay their microcredit loans. Instead of receiving a break from repayments, they fell victim to harassment and were thrown into further destitution by powerful NGOs. In order to gain some further illumination of the operation and ethics of microcredit practices developed by NGOs, and to remedy the deficit of critical analysis of their effects, it is relevant to pay attention to activists in the field.

Professor A.M. as an academic-activist

We chose to interview A.M., as he is a prolific writer and academic, as well as a renowned political activist (Appendix 1). Since 1982, he has been Professor of the Economics Department at Jahangirnagar University, Bangladesh. He also taught Anthropology at Jahangirnagar from 1991 to 2005. He is Member Secretary of the National Committee to Protect Oil, Gas, Mineral Resources, Power, and Ports, a leading activist organization in Bangladesh. In Bangladesh, no other academic has played a more consistent and forthright role as a grassroots political activist. ³

Following Gramsci (1971), we conceive of A.M. as an intellectual and activist, and we characterize his perspective as that of an ‘academic-activist’ (Hill Collins, 2012). We associate this identity with fearlessness, uncompromising outspokenness, and being free from the influence of powerful actors who offer monetary assistance. It is a perspective that has been forged organically in the process of participating in activist struggles, rather than simply observing them. It is academic because it incorporates the evidence and insights of scientific research and evidence when forming arguments against injustices, including those perpetuated by profit-oriented—as distinct from people-centric, environmental friendly and sustainable—agencies. ⁴ The academic activist appreciates how s/he is an ‘active co-participant in the co-constitution of the processes, relations and objects of which they speak’ (Contu, 2017: 6). While this participation is, in any event, inescapable, the academic activist self-consciously acknowledges the political formation and impact of knowledge and makes an ethico-political commitment to justice in the form of praxis oriented to the realization of the democratic values of freedom, equality, and solidarity.

With regard to the development of microcredit programs in Bangladesh, A.M. has been intimately involved with their development. In his early career, his participation in the Bangladesh Institute of Development Studies (BIDS) gave him access to conversations with many NGO personnel who later became influential. For over three decades, he has also traveled to numerous villages (Bangladesh has around 68,000 of them) to discuss and observe the effect of microcredit on the poor. In his capacity as an academic, he has written numerous articles and books on poverty, microfinance, and other development issues in an effort to illuminate but also to transform the world that he studies. A combination of firsthand experience and in-depth research informs his knowledge of how microcredit agencies and other powerful actors—such as foreign donors, government agencies, and multinational corporations (MNCs), have promoted and enacted a neoliberal agenda in developing countries (Muhammad, 2015). In this regard, A.M.’s work diverges from scholarship that reports but ‘makes little difference in challenging the actual differences associated with [social and epistemic] injustice’ (Hill Collins, 2012: 760 cited in Contu, 2017: 38). By taking the performative effects as an inescapable ethico-political point of departure, A.M. places his scholarship in the service of activism dedicated to social justice (Willmott, 2008). A particular merit of the interview format is its accessibility, especially for teaching purposes. It serves to ‘bring to life’ a particular form of scholarship and the insights that it generates. While this vehicle for dissemination is evidently reliant upon the capacity of the interviewee to respond to questions in an open and revealing way, it can provide at least a glimpse into a world that is conventionally reported in an impersonal and distant manner.

Corporatization of NGOs and its influence on corruption and the weakened role of the state

From the conversation with A.M., we have picked out three themes that enrich and may extend our current understanding of the roles of powerful NGOs and their microcredit activities, and so invite further exploration of these agencies by students of organization and management. We do not claim that these themes have been ‘scientifically’ identified or they are exhaustive or even the most significant. The availability of the transcript enables readers to make an assessment of their centrality and to consider other themes that we have not surfaced.

The corporatization of NGOs

A.M. highlights how, as a consequence of their contemporary embrace of a neoliberal agenda, NGOs have changed. Bangladeshi NGOs initially focused on development activities such as education and healthcare. Since the 1990s, the World Bank has legitimized the importance of microcredit in developing countries. More recently, leading Western banks have found that providing loans to the poor can be a potentially profitable market that fueled the rapid growth of the NGO sector in Bangladesh (see also Fernando, 2005; Karim, 2011a). NGOs started to receive significant foreign funding for microcredit projects, and foreign institutions lent NGOs money at markedly reduced interest rates (as low as 4% or less, depending on the subsidies the NGOs receive).

An abundance of foreign funding overlapped with the Bangladeshi government’s aim to privatize education, healthcare, and other essential public services. The combination of heavily funded NGOs and the Bangladeshi government’s encouragement of privatization legitimized NGOs’ use of funds from overseas sponsors and profits from their microcredit programs to expand their commercial activities. NGOs started providing education and healthcare as they took over many state functions. Often incentivized by tax concessions, NGOs also started other types of business, such as universities, farms, and telecommunication enterprises, in addition to manufacturing firms and hotel businesses that previously they had not dared develop (see also Chowdhury, 2017; Laasonen et al., 2012). These initiatives have enabled NGOs to frame and shape the privatization process across a number of sectors. A.M. terms such NGOs ‘corporate NGOs’, because they act as if they are corporations or quasi corporations.

One effect of the corporatization of NGOs has been to make the Bangladeshi government less accountable as NGOs are increasingly involved in all kinds of governmental decision-making (e.g. as subcontractors or consultants). The process exerts a domino effect: it not only affects the lives of poor people; it also weakens the democratic role of the state when NGOs operate as a kind of parallel government (see Haque, 2002; Karim, 2001 for more details) that can exert political pressures on the elected government. This became evident when, for instance, Professor Yunus attempted to build his political party, creating friction between the current government and Professor Yunus (see also Karim, 2011b).

Microcredit and corruption

By assessing the issue of corporatization of NGOs, A.M., sheds light on corruption. Due to ineffective state governance, corruption has increased significantly in Bangladesh. ⁵ In 2010, the Bangladeshi government found it to be politically expedient to be critical of Professor Yunus, but they turned a blind eye to the questionable operation and governance of microcredit programs and other NGO activities. ⁶ They made a scapegoat of Professor Yunus by isolating him from the Grameen Bank because it was feared that he could, as the architect and leader of a new political party, pose a threat to the status quo. Focusing upon Professor Yunus in response to his political ambitions suggests that, when founders or executives of leading NGOs do not challenge the government or threaten the interests of established politicians, the corruption and injustices harbored and perpetuated by microcredit or other NGO activities is overlooked, thereby further weakening the governance mechanisms within the NGO sector.

Strengthening government institutions

A.M. argues that effectively addressing poverty—and, more specifically, countering microcredit as a stratagem of poverty alleviation—requires strong government institutions capable of addressing the concerns of poor without exploiting them. With the introduction and enforcement of accountable governance mechanisms (see also Khan, 2003; Mir and Bala, 2015), it is possible to build an alternative, cooperative-based way of raising citizens out of poverty. However, as A.M. acknowledges, the Bangladesh government is no less corrupt than the system that accommodates the NGOs. The pervasiveness and force of the neoliberal agenda has become so powerful that the government has little incentive to change its policies or enforce laws that could fight corruption. A.M. concludes that substantial improvement of the current situation requires radical, and perhaps revolutionary, change.

Implications for future research in organization and management studies

An appropriate way to examine NGOs is to consider NGO-government or NGO-corporate nexuses from the perspective of poor and marginalized people. When researchers study an NGO or NGOs without incorporating the interrogation of this nexus (e.g. Mair et al., 2011; Yunus and Jolis, 1998), ill-informed representations of the poor are uncritically adopted, reinforced, and disseminated. When studying NGOs, it is necessary to analyze carefully how high-level networks, cemented by a comparatively homogeneous elite belief system, form between NGOs and other powerful actors, (cf., Mir and Mir, 2002). It serves to establish and sustain an integrative network or powerful ecosystem, where NGOs, corporations, and governments collaborate in their mutual survival, rather than challenging each other to better enable the development of materials and facilities to the direct and lasting benefit of the poor.

Research based upon a close and deep familiarity with the issues of development can generate penetrating and nuanced knowledge of the effects of neoliberal policies as they become embedded in economically deprived societies and institutionalized in the day-to-day lives of the poor. Such fieldwork can, relatedly, examine the operation and viability of alternatives to poverty alleviation whose inspiration and scope is currently confined largely within the neoliberal solution of microcredit provided by corporatized NGOs. In addition to challenging the conventional wisdom that NGOs can address the institutional deficit (Mair et al., 2011), and that they become more effective when they collaborate with corporations to deliver improved public benefits (Doh, 2008; Teegen et al., 2004), research can highlight and examine alternatives to existing approaches to poverty reduction, such as bottom-up cooperatives that operate to attain a common social purpose, without aiming to maximize profits from their activities (see critically Marcuse, 2015; Ratner, 2015). To support these initiatives, researchers could study how state funding and foreign donations may more directly and effectively be transferred to the poor as ostensibly they are the intended beneficiaries of poverty reduction funds.

Conclusion: poor-people-led cooperatives as alternatives

We hope that our examination of the role of microfinance in increasing inequalities and injustices from the standpoint of an academic activist will encourage management and organization scholars to examine the issues, including the role of corruptions, raised by A.M. in greater detail and depth. We also hope that future research will study and scrutinize alternatives to top-down microcredits, such as bottom-up cooperative based forms of self-determination supported by government funding as these initiatives may better enable the poor to fight poverty themselves.

In terms of the ‘critical performativity’ of such research, it fosters the prospect of the possibility of small cooperatives being formed in every village, facilitated by resources and expertise from government, so that the poor could manage the funds according to their wishes and decide what to do with them. Such small-scale cooperatives could be grouped together and a coordination committee, comprising representatives from several villages, could send feedback to the state representatives or donor agencies about their deployment of resources and the progress they are making.

A.M.’s work also shows why the arrogant and patronizing idea that elite actors (e.g. Mair et al., 2011; The Economist, 2012; Yunus and Jolis, 1998) have magic solutions to poverty, and that they know how to help the poor, even when their help is not sought, must be discarded. NGO expertise may nonetheless be helpful in initiating and managing entrepreneurial activities, so long as it is tightly controlled by, and accountable to, the community. But consultancy must not inhibit the poor from choosing the options that they can adopt and manage best. Cooperatives have been shown to offer an antidote to the marketization of microcredits and the corporatization of NGOs. They are also more congruent with actively maintaining cultural traditions, protecting social cohesion, and mobilizing collective, community-level energy to alleviate miseries and reduce poverty. In contrast to the provision of microcredits by corporatized NGOs, the championing of cooperatives exemplifies critical performativity as ‘academic activism’, as it regards the poor as highly knowledgeable resourceful actors who have, or are able to develop, the capacity to improve their conditions, but are systemically deprived of access to the resources required to do so.