The Grameen Bank Founder Muhammed Yunus Gets the Nobel Prize

Muhammed Yunus, the Founder Director of the Bangladesh Grameen Bank has been awarded the Nobel Peace Prize in 2006.

From very small beginnings in 1976 in a village in Bangladesh- with an initial loan of pounds fifteen, began this micro credit system of giving credit to the poor- mainly womenfolk. Today there are 6.5 million borrowers, 96% of whom are women. The Peer Lending Programme as it is called has 2,226 branches in 71,371 villages. In addition the Programme has spread to many countries including the USA.

The key method is that in any village community a loan is given to a selected poor person without any collateral security on the condition that the members of the community stand as voluntary unofficial guarantors. Their task is to apply social pressure on the loanee to keep up the repayment installments. If they succeed and if the payments are regular then another member of the community is selected by the Bank officials for another loan and with success in repayment another poor person is selected for a loan. The bank manager is in charge of the total process of interviewing the applicants, judging the best applicant, giving the loan and monitoring the repayments.

In the words of the International Fund for Agricultural Development of the UN Food & Agricultural Organization,

The Grameen Bank now stands as a model of lending to the poor with a very real possibility of being reproduced not only in the poorest countries but also in the heart of the richest as witnessed by a project of a similar scheme targeted at low income women in Chicago.

This Programme has also provided a great impetus to the minimalist microcredit programmes which has been pursued by the World Bank in many countries.

The founder Muhammed Yunus truly hopes to help the world’s poorest out of destitution. While the system of non collateral micro credit that is pursued under the Grameen Bank Model is truly commendable it has to be stated that there are certain limitations in this model which preclude the achievement of such a noble aim.

Muhammed Yunus, the Founder Director of the Bangladesh Grameen Bank has been awarded the Nobel Peace Prize in 2006It is possible to achieve success in terms of loans granted and recovered and money poured into the rural scene,. A sustainable system of lending has been achieved. However there are limitations in terms of what the loanees can attend to in the form of enterprise creation, aimed at income generation. In a research study by Yunus himself,-it is documented that in the case of a loanee, “ with money come anxieties. Her main worry was how to use the money in the best possible way”(Joriman of Beltoil Village & Others in Search of a Future:1984) As far back as 1984 Dharam Ghai said that It is possible that with a large expansion in the size of operations of the Bank, particularly if this expansion is concentrated in limited areas there could develop a surplus of specific goods and hence returns from such activities could decline sharply.

This defect is due to the basic fact that though village folk can attend to their occupations with ease, when they approach the task of investment and the march from subsistence farming to commercial farming they require a technical knowledge. This training is an essential element for success in investment and was understood by certain researchers like Rahaman & Hossain as far back as 1988:” A very careful review of technical institutional and organizational matters must precede loan disbursement.”
 In addition the training and loan disbursement has to be a part of development planning.

When the Grameen Model was introduced in the USA the US Senate Committee on Small Business was sharp to pin point this defect. They decided that “It is important that the Small Business Administration maintain the program’s emphasis on quality business training which must be provided by the intermediaries to all micro-loan borrowers if the program is to fulfill its intended purposes of economic opportunity for people who have little opportunity or access to credit otherwise.”

The decision was for the USA Small Business Administration to provide funds for training for the loanees to emerge from subsistence to commerce. Connie E. Evans in her evidence before the US Senate Committee stated that To insist that people borrow money before they are eligible for Small Business Administration supported technical assistance is actually a counter productive policy in that it is better to put some technical support in first and then make the loan and not vice versa.

The Grammen Bank Programme has truly provided more cash flow to the villages. But it is important to find out what happens when more money is injected into an economy without a matching increase in the commercial activities. What happens can be illustrated from real situations in India when under the IRDP (Integrated Rural Development Programme) when loans were given to poor people to purchase an income generating asset like a cow. The loan was given on the strict condition that a cow was purchased. More money was available but the supply of cows was not increased. This led to a situation where the prices of cows increased. The increased supply of money did not create production of cows- instead the prices of cows were bid upwards- it created inflation. We get down to one of the basic theories of economics: The Quantity of Money Theory of Prices in action; this theory as Galbraith says- holds that prices, the volume of trade being equal, will vary in direct proportion to the supply of money.

Thus it cannot be ruled out that the effort of pouring in money into the rural economy without planning for the proper utilization through training and by enterprise guidance can actually lead to the creation of inflation. Perhaps this is why the rapid expansion of the Grameen Bank lending to the poor has not enabled Bangladesh to emerge out of the quagmire of poverty.

Further major flaws of the Grameen Model which deserve to be corrected if poverty eradication is to be achieved are:
1. The fact that the loanees are not required to keep records, with the result that no one can actually be certain of the achievement. Thus many researchers have had to interview the people who had drawn loans and accept their word as gospel truth. This has meant that no tangible research has ever been done.

2.. Another major problem lies in the tasks performed by the Bank staff- they have to select a village area, attend to publicity, interview and select villages, organize peer pressure for repayment, obtain repayment and continue the loans to the next in the peer group. This is all done in the village and the role of the villagers is simply to apply peer pressure on the loanee to repay. In this we tend to forget that people develop their abilities only when they use them and if the selection of the loanees, the vetting of their business proposals, the disbursement of the loans, their recovery, the supervision of the use of the loan etc had been done by the people themselves through discussion and deliberation in village groups then the people would have been able to develop their abilities. Then the task of the bank manager is taken over by the people. This is the concept of Power to the People and the concept that was successfully tried out by Akhter Hammed Khan in the Comilla Programme of Rural Development which really transformed the Kotwali Thana, a poor destitute area to become a granary for the area- and is today a paradise within an ocean of poverty. Here it was cooperatives managed by the people themselves that did the tasks of the bank manager.

Professor Jeffery Ashe, one of the pioneers in initiating the Grameen Model in the USA has now, after two decades of experimenting, has ridiculed the role played by the bank staff in the Grameen Bank- it requires 625 full time workers to serve 100,000 clients. Ashe compares his Women’s Empowerment Program in Nepal where a staff of only 85 field workers was able to deliver literacy training and lending groups with 130,000 poor women in only sixty days of becoming operational.

It is hoped that these ideas may help the Grameen Bank in achieving its lofty ideal of poverty alleviation. I have worked in Bangladesh for two years as a consultant and have been struck with the fertility of the land and the sincerity, ability and dexterity of the farmers.

The achievement of the lofty ideals of the IRDP of India too is held up due to the same factor that loanees and people who receive grants and loans are not trained and therefore not equipped to make use of the funds they receive. Poverty is endemic in India and the lofty ideals of the IRDP have so far failed to make a dent in society. Perhaps both Programmes can also learn a great deal from the Youth Self Employment Programme of Bangladesh, run by the Ministy of Youth which concentrates on training and guidance in enterprise creation at the very doorstep of the projects, where since its inception in 1982, over a million have succeeded in becoming self employed on a commercially viable basis.

– Asian Tribune –



Filed under Grameen

4 responses to “The Grameen Bank Founder Muhammed Yunus Gets the Nobel Prize

  1. brennanwoods

    The West Bengal Government has decided to accord a civic reception to Bangladesh’s Muhammad Yunus, who has been conferred with the Nobel Peace Prize.

    State Finance Minister Asim Dasgupta said here on Monday that Prof. Yunus has accepted an invitation extended by the Government.

    The invitation follows a decision by Chief Minister Buddhadeb Bhattacharjee.

    The date, time and venue of the reception would be announced later, he said.

    “We were very glad to learn about Prof. Yunus winning the Nobel Prize and himself accepting our invitation,” Mr. Dasgupta said.

    The State Government is trying to contact Amartya Sen, winner of the Nobel Prize for Economics in 1998, to invite him for the reception.

    The Government gave a civic reception to Prof. Sen after he was awarded the Prize.

  2. The egalitarian economist

    Angered by the plight of the rural poor in his native Bangladesh, Muhammad Yunus combined financial acumen with the pursuit of equality, says Mark Tran

    Friday October 13, 2006
    Guardian Unlimited

    Professor Muhammad Yunus, 66, pioneered the idea of micro-finance – lending small amounts of money to the poorest people in Bangladesh without collateral.

    Mr Yunus, the founder and managing director of the Grameen Bank, thought that if financial resources can be made available to the poor people on terms and conditions that were appropriate and reasonable, “millions of small people with their millions of small pursuits can add up to create the biggest development wonder”.

    Article continues
    The Grameen Bank, like any capitalist enterprise, saw a market that had been neglected and went after it. But Mr Yunus was not just a capitalist, he was also interested in development. With Grameen, he created a vehicle that combined capitalism and social responsibility.

    As the bank says on its website: “Credit is a cost-effective weapon to fight poverty and it serves as a catalyst in the overall development of socio-economic conditions of the poor who have been kept outside the banking orbit on the ground that they are poor and hence not bankable.”

    Prof Yunus had developed a strong interest in tackling rural poverty before founding the Grameen Bank in 1983. In 1974, as head of the rural economics programme at the University of Chittagong, Mr Yunus led his students on a field trip to rural Bangladesh where a famine had killed thousands of people.

    The experience affected him deeply and he came to the conclusion that small amounts of credit could have a large impact on poor communities. He started by lending the equivalent of £14 to a group of female basket weavers to expand their businesses.

    Writing on the Grameen Bank website, Mr Yunus explains the difference between Grameen and conventional banks.

    Whereas conventional banks are owned by the rich, generally men, Grameen Bank is owned by poor women. While the overriding objective of the conventional banks is to maximise profit, Grameen Bank’s objective is to bring financial services to the poor, particularly women, to help them fight poverty, stay profitable and financially sound.

    In another difference with normal banks, Grameen Bank branches are located in rural areas, whereas the branches of conventional banks usually locate themselves as close as possible to the business districts and urban centres. In perhaps the biggest difference, the first principle of Grameen banking is that clients should not go to the bank, it is the bank that should go to the people instead.

    “Grameen Bank’s 18,795 staff meet borrowers at their doorstep and deliver the bank’s service. Repayment of Grameen loans is also made easy by splitting the loan amount in tiny weekly installments. Doing business this way means a lot of work for the bank, but it is a lot convenient for the borrowers,” Mr Yunus writes.

    Today, Grameen Bank is owned by the rural poor whom it serves. Borrowers of the Bank own 90% of its shares, while the remaining 10% is owned by the government.

    As of May, the bank had 6.6 million borrowers, 97% of whom are women. With 2,226 branches, the bank claims to provide services to every village in Bangladesh.

    Anyone thinking that Mr Yunus is a woolly-minded do-gooder would soon be disabused of that notion by looking at his academic credentials.

    Mr Yunus was a Fulbright Scholar at Vanderbilt University and has a PhD in economics. In 1969 he became an assistant professor of economics at Middle Tennessee State University, before returning to Bangladesh where he joined the economics department at Chittagong University.

    He is also hard-headed. With his philosophy of helping the poor help themselves, he never responds when a beggar holds out his or her hand for money.

    Over the years, Mr Yunus has received numerous international awards including the Aga Khan award for architecture from Geneva; and the World Food Prize from the US. Within Bangladesh, he has received the Independence Day Award, the country’s highest accolade.

    But the Nobel peace prize is the ultimate recognition of his work. Of course Bangladesh remains a poor country. Micro-finance can only do so much, but it can be an important tool for economic development.

    The Nobel committee said: “Yunus’s long-term vision is to eliminate poverty in the world. That vision cannot be realised by means of micro-credit alone. But Muhammad Yunus and Grameen Bank have shown that, in the continuing efforts to achieve it, micro-credit must play a major part.”

  3. It’s a shame what happened to Bangladesh. I hope the world steps up and helps them.

  4. annilkhan

    Burning question: Has micro credit done a lot?
    found a good article and book on micro credit and grameen
    Contributors of this book are Doug Henwood, Patrick Bond, Bosse Kramsjo, Badruddin Umar, Susan F. Feiner and Durcilla K. Barker, Farooque Chowdhury, Robert Pollin, Gina Neff , Anu Mohammad, Omar Tareq Chowdhury.

    Here of the excellent article of this book:

    The metamorphosis of micro-credit debtor
    Farooque Chowdhury

    Micro-credit, the well-propagated mantra in the fight against poverty, is now expanding crossing the national boundaries as capital has done for centuries. Countries in the centre and in the periphery in the present world system are near-spellbound by this mantra. The actors include kings, queens, statesmen, bankers, charity foundation initiators, economists, development workers and the poor. Only the last one is at the receiving end.
    The metamorphosis of the micro credit debtor exposes the acts the capital plays in the act of micro credit and makes all its pious pronouncements hollow. The metamorphosis takes not only to the debtor, but also to other members of the debtor-household.
    The debtor of the micro credit turns owner of the tools or raw materials necessary for producing commodity as the debtor returns home from market after purchasing these with the credit money. But with the joy of ownership a poor debtor enjoys through this metamorphosis there comes a new burden, the burden an industrial proletariat does not have to bear: the burden and responsibility of maintaining, repairing and replacing the tools, equipments or parts of these and the costs that accompany it as the debtor is going to produce and going to be a producer of commodities. It is an extra burden. Usually the job is done not only by the debtor, but also by the other members of the debtor—household. That means time, necessary or surplus labour, depending upon a situation. The proud ownership carries another intricate calculation. An industry owner provides premise, shade, light, water, storage facilities, transport, etc. for producing a commodity and before hiring a wage slave the owner has to spend money for these ranging from construction, power and water connections, supervision, etc. which are calculated before the surplus value is appropriated. But in case of the micro credit debtor turned independent owner of tools of production all these burdens fall upon the debtor. It is the responsibility of the debtor turned owner to repair/replace/heal and to spend money for these. That means the debtor has to arrange the constant capital, and sometimes, the variable capital. The creditor does not always provide the money required for these purposes or the debtor has to set aside a portion of the credit money for these purposes. If the debtor sets aside a portion then the person has to extend extra time to the portion of labour that produces surplus. Moreover, the debtor turned owner has to construct/raise a shed for carrying on the production activity and spend money and labour power belonging to the debtor and the debtor’s household. Actually, the debtor, most of the time, uses own premise, rent for which is paid by the owner of the production unit, the debtor. Maintenance and repair is paid by the debtor, now turned into an independent producer. An industrialist has to pay rent for the premise, utilities and other facilities while they are within the premises producing commodity. But in case of the micro-credit all these are the debtor’s responsibility. The metamorphosis of the debtor to owner of tools, etc., to independent producer thus does nothing but increase the surplus labour time and squeeze necessary labour time so that the repayment of the loan can be made as per schedule.
    The debtor turned producer has to plan, search and work out comparative advantage, and procure and transport required raw materials for the commodity to be produced. The debtor, now acting as procurement manager of the household-based production unit, procures and carries or transports the raw materials for the commodity to be produced. Sometimes it is the spouse or sibling who performs the task, unpaid and unaccounted labour power put into the process. Is the equation in favour of the fellow who went to the banker for the poor to realise the fundamental right the banker propagates? Reality is that the shortened necessary labour time and the lengthened surplus labour time, obviously provide the answer. What about the level of appropriation? It is, certainly, not at the level Marx ‘calculated’. It is super-appropriation, never imagined by the mine owners of Rome, the colonial plunderers, the plantation owners, the slave owners in pre-slavery America, the multi-nationals operating in the countries on the periphery, not even the plundering-lumpen capitalists in a number of underdeveloped countries, but only by the multi-national micro credit capital. So, Michael Lipton and John Toye said in ‘Does Aid Work in India?’ : Rates of return on credit projects are particularly high in India; and Joe Remenyi said in ‘Where Credit is Due: Income Generating Programmes for the Poor in Developing Countries’: Credit – based income generating projects may be the most profitable way in which society can invest…Diminishing return has not set in this field…;…banking on and with the poor is a very good thing to do…. The typical successful CIGP …required an investment well below $1,000 per sustained wage – paying position created (one – tenth of the ratio in the formal sector)…[W]hen one is living at the margin of survival earning around $1 a day, an increase in earning capacity of 50 cents a day represents a substantial improvement in cash flow. These statements tell the truth.
    The metamorphosis of the debtor moves further as the fellow turns wage labourer. The micro credit finds a new commodity as, borrowing from Engels, the ‘source of new value,’ source of surplus ‘income’ with which the debtor will repay and ‘this commodity is labour-power’. The labour power is stored up in the bodies of the micro credit debtors and other members of the debtor-household who extend respective labour power to extend the surplus labour time so that the repayment could be made on schedule. As an independent producer the debtor has to fix the pace of production and that determines the debtor turned wage labourer’s pace and length of working hour. Even, the debtor wage labourer has to borrow labour power of others in the household, who are actually paid only by bare subsistence. To make the statement complete it is not the debtor only, but other members in the debt ridden household, along with the debtor, also, turn wage labourer, at least, part time. Does it not appear more intense than the conveyor belt or the Taylor system innovated by the industrialists to increase surplus value? Thus, the entire household turns into a household of wage labourers, full time or part time. Actually, the pace of work is determined by the time schedule of the repayment. Within the scheduled time for repayment the independent producer turned wage labourer, along with the co-workers in the household have to produce and sell that quantity or that number of commodity that can bring in at least the amount of money needed to repay the instalment of the debt. If seasonal variations, changes in market, health problems, other unseen troubles, non-availability of raw materials or transport, in short, major and minor forces, i.e. ‘acts of god and acts of reality’, coordination with the marketing day and the instalment day are taken into account then the pace of production of a debtor turned independent producer turned wage labourer can be imagined. The person has to forget 8-hour working day, rest, amusement and attending to family chores. It is only to produce surplus enough for repayment. Does it sound like the sweating system? Does an industrialist having a supervisor or a foreman appear fool? While an industrialist has to devise a mechanism, a supervisory system and keep a physical appearance in the work place the micro credit capital does not require all these. Its mere regimentation, mere providing credit at the doorsteps of the poor and its higher level of ‘consideration’ or attention regarding collection of part of the credit from the debtor’s home so that the poor fellow does not turn a defaulter that determine the pace of production. This is the condition of the micro credit wage labourer, obviously a bit different from an industrial wage labourer. An industrialist ‘purchases the use of one week’s labour of [a] worker’ if the worker is paid on weekly basis, but the micro creditor purchases the labour of the debtor for an entire year, if, assumed that the loan will be repaid within a year, or for the entire period until the loan is repaid. With the payment for necessary labour time, a specific amount of money paid for subsistence of a worker and members of the worker’s family, an industrialist ‘ensures the continuance of labour-power even after his [the worker’s] death’, but the micro-creditor ensures the simultaneous use of labour – power of the household members of the debtor along with that of the debtor. The labour, through persistent struggles, has won, in relative terms, a number of measures to safeguard own body and soul and the capital has to compromise for its own sake. But the micro credit debtor turned wage worker toils without coverage of any such measure. The micro credit capital that finances micro-production units at household level is smart enough to escape, till today, the struggle of the debtor turned wage worker, by pass all rules, even norms attained so far, and stay safe. There is no working hour; no weekly holiday; no law, rule, regulation governing working time, working condition, safety measures, child labour, female working hour, etc.; no inspectorate looking at the working condition. This makes life miserable for the micro credit debtor turned wage worker and for the members of the household including the minors who help create surplus value without any legal coverage.
    Now, only a few numbers quoted from Microfinance Statistics (vol.17, Dec., 2004), a publication of the Credit and Development Forum. These will help comprehend, at least partially, the width and length of the micro credit net and the surplus value it appropriates in a single country. In Bangladesh, in 2004, the number of active members in the 721 micro financing organisations (MFO), reporting to the CDF, was 16,622,047 and in 2000, it was 11,021,663 in 585 MFOs. In 2004 the number cumulative borrowers from 721 MFOs was 16,244,242 in a country of 140 million. It was 7,409,773 from 585 MFOs in 2000. There are many other MFOs that have not reported to the CDF, many others are operating in different guises and many other programmes and projects operating not as MFOs but carrying on micro credit business. From how many souls do a group of industrialists in a poor country appropriate surplus value? Are those always more than the number just cited? There are answers, obviously, to this question. It is expected that a reader will search the answers.
    The metamorphosis of the micro-credit debtor continues further as the person moves to market with the commodity produced. The debtor then turns to an independent trader competing with peer debtors turned independent traders in the market place and at the same time they together fall prey to the vagaries of market governed by the mighty market forces. While carrying the commodity to the market, sometimes, some other members of the household, shares the load. This labour is unpaid in terms of wage. If counted or paid, the amount comes from the surplus value already generated. If it is unpaid then the amount thus saved stays within the surplus value to be paid to the creditor waiting for the next instalment of repayment. As an independent trader the debtor turned independent producer turned wage worker has to bear all the responsibilities of a trader. But an industrial labourer does not have to take all these responsibilities. The wage slave in a factory just completes respective job and gets compelled to be appropriated of the surplus labour time. Market, supply, demand, transportation of commodity to market, storage, taxes and tolls, speculation, price, etc. are not part of a factory worker’s business. But as an independent trader the micro credit debtor has to bear these extra burdens which are not the creditor’s concern at all. The creditor has tactfully, through the modus operandi, has put it upon the poor debtor’s weak shoulder. There are commodities in the market that are produced in larger, mechanised production units, with higher productivity, which means a cheaper commodity, and, commodities that enjoy facilities created by the WTO. This situation puts the debtor into an unfavourable, uneven playing field, cuts down the debtor’s competitive edge and presses down price of the commodity produced in the household by semi-skilled and unskilled workers and produced with artisan method and tools. There is the packaging, marketing and advertising factor. The person has to reconcile with the situation and that means further tightening of belt. The micro-credit thus pushes the debtor to such a situation with extra burdens while it demands regular repayment of the credit.
    The data on the sectors or sub-sectors that use micro credit in Bangladesh show the sources of surplus value appropriated and who ‘offered’ the surplus labour to generate the surplus value. In 2004, according to the data published in the above mentioned CDF publication, of the 379 MFOs reporting to the CDF, 27.94 percent of cumulative disbursement was in the agricultural sector that included crops, livestock and fisheries sub-sectors while only petty trading sub-sector covered 40.61 percent. The percentage of food processing and cottage industries was 6.28 and of transport it was 2.20. In the years 2003, 2002, 2001 and 2000 the petty trading dominated. From where does trading, whatever its size is, produce the profit? A portion of it is surplus value generated by others in other places. What about the transport, the rickshaw van or the boat, and the cow fattening? The same answer. It is also the surplus value generated by and in different segments of the broader society that is appropriated by micro credit capital that gets in through the debtor’s hand. Other sectors and sub-sectors also provide similar explanation found in political economy. The above mentioned CDF publication provides a few more startling facts: ‘utilisation of loan by sector or sub-sector (as percentage of cumulative disbursement)’ in ‘social sectors’ in 2004 was 1.70 (health:0.44, education: 0.06 and housing:1.20); in 2003 it was 1.58 (0.45 for health, 0.04 for education and 1.09 for housing); in 2002 it was 1.41 (0.39, 0.05 and 0.97); in 2001 it was 1.76 (0.42, 0.11 and 1.23); and in 2000 it was 1.69 (0.37, 0.02 and 1.3). The ‘social sector’ meant by the cited publication was health, education and housing which are actually required for ensuring the debtor’s and the debtor household’s survival, keeping the body and soul of the household based producers or of the trader or of the transport operator together, ensuring that production or trading could be carried on or transport could be operated so that surplus value generation or taking share of surplus value generated by some other is ensured, so that the repayment that includes surplus value is ensured. If a debtor does not have a house or a shed the production unit will be inoperative or will face problems in the production activities; the raw materials, the tools, the fuel, the cow or goat or poultry, the commodity produced could not be stored in; the producer and others in the household joining in the production activities could not survive. So, the housing sub-sector was emphasized most while lending out money in the CDF defined ‘social sectors’. Of course, the façade was benevolence by the micro creditor. Then came health with the same arguments. A judicious choice of the appropriator! Material interest tops the list over human consideration. The extent of concern for health of debtor and debtor household is directly related and tied to the extent of concern of continuation of production, etc. activities. It was followed by education. The level of production and the level of transaction determine the extent of education required and the level of emphasis put into education. None can override this rule. The micro-creditor, also, faithfully follows this one and the life of debtor goes through this metamorphosis.
    Thus, the circuit of metamorphosis of micro-credit debtor moves on and ultimately it completes a full path: a poor, an appropriated person turns debtor, the debtor turns owner of tools of production., the owner turns household based independent producer, the independent producer turns wage worker, the worker turns independent trader, the trader stays entrapped into debt with worsened condition and bigger debt turning one to debt slave. In its circuit the micro credit debtor only produces surplus value or takes a portion of surplus value produced by some other debtor or some other person or persons in the society producing surplus value and transfers a portion of it to micro credit capital. The circuit is both, a closed and an open, signifying the contradiction. The closed circuit keeps the debtor in perpetual and worsening poverty; sometimes, borrowing from the micro-credit literature, graduating a percentage of the borrowers, but pushing down or entrapping others in increased number; and often, throwing back the graduated debtor to the den of poverty again; and in these cases, the mainstream economics finds the rationale in ‘shocks’, ‘setbacks’, etc., natural and social, as their terminology defines. But whatever happens in the lives of a certain percentage of the debtor that does not change the basic structure of the circuit in the broader social matrix, in the process of appropriation of surplus value. Ignoring the macro scenario and putting forth the micro, a few individual cases, putting forth the exceptions instead of the general rule does nothing but vulgarises the arguments itself pushed forward by the mainstream. The open circuit intensifies and accelerates the pauperisation process and thus creating pressure on the system that creates poverty, makes a person poor, and appropriates surplus value. The vulgar economics with ‘hollow eye and wrinkled brow’ (Shakespeare, Merchant of Venice) extending support to micro credit capital may construct a façade by resorting, again, to vulgar arguments. It may argue that a certain percent of micro credit debtors have improved their living condition with the aid of the panacea as a few days ago they used to mean the micro credit. But this does not nullify the fact of appropriation of surplus value from others in the broader society. Rather, it puts the evidence that surplus value has been appropriated from some other persons. There are many economists in the bandwagon of micro credit who cite cases of increased consumption by the micro credit debtors. But it should not be missed that consumptions are of two types: productive and individual; while the first one is to create products the other is turned into means of subsistence. So, data of debtors’ increased consumption, claims regularly made by the mainstream economics, carry no meaning other than better and ensured supply of surplus labour power which is expropriated. The fact should not be missed that the entire system rests on the appropriation of surplus value and micro credit is a part and, now is an institution of the system. It is sustained by the system and it helps sustain the system.
    The socialisation of micro-credit, with its profit profile, allures other capitals in banks and financing companies to join in. The capital engaged in micro-credit ties, quoting from Shakespeare, the ‘poor man’s cottages [to] princes palaces,’ organises and regulates debtors including members of the debtor-households, keeps them entrapped in the micro credit web, appropriates surplus labour power of them and others in the broader society. Moreover, it now regulates, based on its global power, the analytical process of a section of economists who overlook the process of appropriation of surplus value upon which the micro credit thrives, and try to ignore definitions of political economy and propagate vulgar ideas.

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