Banker To the Poor
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Excerpt


Latifee and I drove back up the hill to my house. We took a stroll around my garden in the late-afternoon heat. I was trying to see Sufiya’s problem from her point of view. She suffered because the cost of the bamboo was five taka. She did not have the cash necessary to buy her raw materials. As a result, she could survive only in a tight cycle—borrowing from the trader and selling back to him. Her life was a form of bonded labor, or slavery. The trader made certain that he paid Sufiya a price that barely covered the cost of the materials and was just enough to keep her alive. She could not break free of her exploitative relationship with him. To survive, she needed to keep working through the trader.

Usurious rates have become so standardized and socially acceptable in Third World countries that the borrower rarely realizes how oppressive a contract is. Exploitation comes in many guises. In rural Bangladesh, one maund (approximately 37 kilograms) of husked rice borrowed at the beginning of the planting season has to be repaid with two maunds at harvest time. When land is used as security, it is placed at the disposal of the creditor, who enjoys ownership rights over it until the total amount is repaid. In many cases, a formal document such as a bawnanama establishes the right of the creditor. According to the bawnanama, the creditor usually refuses to accept any partial payment of the loan. After the expiration of a certain period, it also allows the creditor to “buy” the land at a predetermined “price.” Another form of security is the dadan system, in which traders advance loans against standing crops for purchase of the crops at predetermined prices that are below the market rate. Sufiya Begum was producing her bamboo stools under a dadan arrangement with a paikar.

In Bangladesh, the borrowing is sometimes made for specific and temporary purposes (to marry off a daughter, to bribe an official, to fight a court case), but sometimes it is necessary for physical survival—to purchase food or medication or to meet some emergency situation. In such cases, it is extremely difficult for the borrower to extricate himself or herself from the burden of the loan. Usually the borrower will have to borrow again just to repay the prior loan and will ultimately wind up in a cycle of poverty like Sufiya. It seemed to me that Sufiya’s status as a bonded slave would only change if she could find that five taka for her bamboo. Credit could bring her that money. She could then sell her products in a free market and charge the full retail price to the consumer. She just needed twenty-two cents.

The next day I called in Maimuna Begum, a university student who collected data for me, and asked her to help me make a list of people in Jobra, like Sufiya, who were dependent on traders. Within one week, we had a list prepared. It named forty-two people, who borrowed a total of 856 taka–less than 27 dollars.

“My God, my God. All this misery in all these families all for of the lack of twenty-seven dollars!” I exclaimed.

Maimuna stood there without saying a word. We were both sickened by the reality of it all.

My mind would not let this problem lie. I wanted to help these forty-two able-bodied, hard-working people. I kept going around and around the problem, like a dog worrying a bone. People like Sufiya were poor not because they were stupid or lazy. They worked all day long, doing complex physical tasks. They were poor because the financial institutions in the country did not help them widen their economic base. No formal financial structure was available to cater to the credit needs of the poor. This credit market, by default of the formal institutions, had been taken over by the local moneylenders. It was an efficient vehicle; it created a heavy rush of one-way traffic on the road to poverty. But if I could just lend the Jobra villagers the twenty-seven dollars, they could sell their products to anyone. They would then get the highest possible return for their labor and would not be limited by the usurious practices of the traders and moneylenders.

It was all so easy. I handed Maimuna the twenty-seven dollars and told her, “Here, lend this money to the forty-two villagers on our list. They can repay the traders what they owe them and sell their products at a good price.”

“When should they repay you?” she asked.

“Whenever they can,” I said. “Whenever it is advantageous for them to sell their products. They don’t have to pay any interest. I am not in the money business.”

Maimuna left, puzzled by this turn of events.

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