Misplacing social capital in women’s economic wellbeing – the experience of microcredit from Bangladesh

Abstract

Microcredit depletes women borrowers’ social capital and ability to enforce payments, significantly improving the rate of recovery but not borrowers’ economic condition. Using in-depth interviews and focus group discussions (FGDs), this study finds that the Grameen Bank both uses and fosters borrowers’ pre-existing social ties in the community to ensure payments. Borrowers who intensively use social capital to repay loans deplete their opportunities to sustain business and daily survival. They utilize both horizontal and vertical social ties to repay loans and mobilize resources to run and grow businesses. While most borrowers lack and fail to use social capital, better-off borrowers can use social capital for businesses. Conflicts between borrowers to assist loan defaulters also prevent them from using social capital for businesses. Although social ties help some borrowers derive an income from loans, they provide the bank with a mechanism to enforce payments. This in turn depletes borrowers’ economic wellbeing.

Keywords:

• Microcredit
• social capital
• economic wellbeing
• the Grameen Bank

Acknowledgements

This study was primarily submitted as ‘The Network and Neighbourhood Aspects of Social Capital and the Economic Wellbeing of the Women Borrowers: A Case Study of the Grameen Bank’s Microcredit Program in Sylhet, Bangladesh’ for the partial fulfilment of the requirements for the degree of Master of Arts in Development Studies under the Faculty of Liberal Arts and Professional Studies at York University, Toronto, Canada. I wish to acknowledge and thank York University for their financial assistance in conducting the necessary field work, as well as Dr. Fahim Quadir, former Professor, Department of Social Science and Development Studies and Interim Dean and Associate Vice-President Graduate, Faculty of Graduate Studies, York University, Canada for his kind and thoughtful assistance and supervision. I am also indebted to the women borrowers of the Grameen Bank Mullargaon Branch, Sylhet, Bangladesh for their invaluable participation in the research.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Using the definition of Bourdieu (1985), Grootaert (1998), Putnam (1996, 2001), and Woolcock and Narayan (2000), this study defines social capital as cooperative and trusted social relationships within and between microcredit borrowers and other people in the locality. Here cooperation and trust mean mutual interaction and confidence to help each other in inconveniences. Bonding capital indicates borrowers’ ties with family members, close friends, relatives, and neighbours; bridging capital indicates borrowers’ ties with their fellows and/or other people out of family and neighbours; and linking capital indicates their ties with distant people in the locality. Borrowers mostly run through their horizontal ties (contacts with family members, close friends, neighbours, and relatives) to seek assistance whereas many borrowers use their hierarchical ties (contact with patrons or better-off people—rich family members, neighbours, relatives, or other persons) for their purposes. Borrowers use their ties to repay their loans and support businesses. The Grameen Bank nurtures borrowers’ pre-existing social ties in the community and creates new social ties within and between borrowers and other people in the community. It initially forms a five-member group to distribute loans and later maintains ties within the group to ensure payments. The Bank, in fact, maintains mutual ties within and between microcredit groups in the whole centre to enforce payments.

2 The periodical measurements of HIES 2016 conducted by the Bangladesh Bureau of Statistics reports a steady decline of poverty from 48.9% in 2000 to 40% in 2005, 31.5% in 2010 and 23.2% in April to June quarter in 2016, whereas absolute poverty falls from 34.3% in 2000 to 25.1% in 2005, 17.6% in 2010 and 12.9% in April to June in 2016.

3 The Branch is situated in Mullargoan Union (the smallest administrative unit in Bangladesh), South Surma Upazila, Sylhet, Bangladesh. It has been operating credit programs since 1987. This study covers several microcredit centres from the three Unions served by this branch: Crorygram Centres from Kamal Bazar Union, South Surma Upazila; Pikargoan, Medinimohan, and Purbodosha Centres from Khandigoan Union, Sylhet Sadar Upazila; and Boroikandi Road 10 and 4 Centres from Boroikandi Union, South Surma Upazila.

4 A small loan, usually ranging from BDT 10,000 to 50,000 ($118 to $588), is offered to rural poor women to start or enlarge a small business. $1= BDT 85 (approximately).

5 It characterizes income generation to maintain livelihood, regular payment of the loan profiting from the business and savings, and accumulation of new assets from microcredit.

6 Here support refers to assistance from fellows, neighbours, relatives, friends, and other people in the locality to repay their loans and run businesses. Borrowers often use their ties to collect money, land (a piece of land for cultivation, living in a house or renting for a shop) and information (where to buy and sell goods, prices of goods, renting land, how to start a business, type of business, the place of business, starting business with someone, borrowing money from whom) for repayment and business purposes.

7 The Bank operates its banking activities in the centres in which the members hold meetings and repay instalments every week. Centres are located in the houses of the centre chief. There are 46 centres under Mullargaon Branch having 2000 borrowers (approximately) from which I conducted my research on six centres: Crorygram, Pikargoan, Purbodosha, Boroikandi Road 4, Boroikandi Road 10, and Medinimohan.

Additional information

Notes on contributors

Mohammed Anwar Hossain

Mohammed Anwar Hossain is a professor of sociology at Shahjalal University of Science and Technology, Sylhet, Bangladesh. He has taught courses on development theories, issues and problems of development and research methodology. His area of interests and research include civil society, microcredit, community resilience, and development. He has completed an MA in Development Studies from York University, Canada.