When Muhammad Yunus and the Grameen Bank won the Nobel Peace Prize, everybody was behind them and the micro loan system. Tom Heinemann, a Danish journalist has a rather different story to tell in his film “Caught in micro debt”.
In 1976, a young man is working on a university project in economics. He visits a village close to his university and wants to find the root of poverty. The women in the village work mainly as basket weavers ““ and are all in the hands of a local loan shark. They needed his money to buy materials and never made enough from their sales to fully pay him off and gain independency.
The young man calculated the debt of the village. Together they owed $27. He was shocked ““ such a small amount kept these people in poverty?
This is the story of how Muhammad Yunus invented the micro loan. These loans give to poor the chance to independency, to start their own business ““ to finally get out of crippling poverty. Because, as Yunus detected, very often it is not a big amount of money people need to make it happen.
The concept has since become famous, micro loans can now be obtained in many countries and Mohammad Yunus and his Grameen Bank have received the Nobel Peace Prize.
In 2010, the Danish journalist Tom Heinemann makes a documentary, which is shown on Norwegian TV in November. The film is about micro loans and about some of the bigger providers, among others the Grameen Bank. It is a very critical film.
One point of critique in the documentary goes directly against the Grameen Bank and Yunus. In the film, the Grameen Bank is accused of transferring $100m of Norwegian financial aid to Grameen Kayla, a new and different part of the organization. So what is the story behind this? It really happened. The money was received in 1996 for the purpose of helping with financing micro credits and then it was transferred. This is noticed in 1997 and the Norwegian ambassador id not happy. In 1998, the entire amount is transferred back, and Yunus writes a letter to the ambassador saying that the money transfer had been made to establish the subsidiary as a sort of control body for the bank. After the documentary was shown on TV, a spokesman of the Norwegian foreign ministry says that the matter has been investigated thoroughly and that the ministry considers the case closed.
So the allegations of misappropriation against Yunus not new and they have been resolved.
But the documentary also discusses micro loans in general. Heinemann points out that interest rates on these loans are between 30% and 200%. When he asks the bank about that, they say that the poor are a higher risks , because they do not have any securities and that administrating many small loans is more expansive than a few big loan. Heinemann also says, that the first payments are expected after already one week.
After reading this I googled micro loans to find out more. I always thought that the point of these loans is to help people start their own business. But if that is the point, how can you expect payments after one week already?
I did not find much about schedule of the payments. But the high interests are mentioned everywhere. And always with the argument of high administration costs. And very often I also read the sentence: “Yes, the interests are very high ““ but they are still lower than the ones demanded by loan sharks.”
In one article, the German journalist and manager praises Yunus for another detail in his micro loan system: It is pointed out that the most loans go to women. When they take the loan, they must make sure that they will not have too many children (though no number is mentioned), they have to only drink water that has been boiled and they have to grow vegetables. I have not found any information, whether these demands also apply to the men, who get granted loans.
The combination of demanding extremely high interests and dictating very personal parts of a woman’s life seems rather dodgy. Yes, these people are extremely poor. And feeding many children probably will not help. But is it really the bank’s right to influence the number of children? Would we accept this, if it happened to a poor family somewhere else? Or is it absolutely justified in those specific situations?
And something else pops up, when one starts researching the subject of micro loans: a huge increase in farmer suicides ““ especially in India. The micro loan system seems to get out of control in some places. When I read the articles, I just thought to myself that it looked as if the loan sharks, who controlled the poor before had gotten new jobs. And they still control the poor.
I think that the idea of micro loans is great. Because it actually gives people the chance to start a new life. But as all good things, it can be abused. From what I have read in the news, it seems that there is more control needed ““ but who should the controller? What do you think?
(My information about the documentary are from the Danish paper Politiken, the BBC and the German news magazine Der Spiegel. I will watch the film in January, when it is on Danish TV.)