Microcredit, a blessing… or a curse?
– A multi-series essay about microfinance, Part 4 – by Sabriye Tenberken
Last week I had thought that today’s chapter to be the final one in this series, but the more I dive into the topic of microfinance, the louder my alarm bells ring. I cannot help but vent in rage and thus the need to add another chapter. Today I address entrepreneurship and how it is related to dignity.
6. Business in a box
“All human beings are born entrepreneurs. Some get a chance to unleash that capacity. Some never got the chance, never knew that he or she has that capacity.” – Muhammad Yunus, founder of Grameen Bank, 2006 Nobel Peace Prize laureate.
Is that true? Is every human really born an entrepreneur? And do we only need to be given a chance to exploit this potential?
I have a fundamental concern with any of the following “wisdoms”: every human is an artist, a leader, a philosopher and with this one: everyone is an entrepreneur. What does being an entrepreneur really mean?
In addition to all the admirable qualities that many would wish to have, such as being inventive, always solution-oriented, communicative, passionate, and so on, there is also a challenging side to being an entrepreneur. You must also dare to risk something. You must not be afraid to face failure. Entrepreneurs must take great responsibility for themselves and for others, they are forced to make quick decisions, and this can easily result in disrupted and hostile relationships. All negative consequences need to be accounted for. They often work way more than average hours and do not shy away from exploiting themselves and, in many cases, others too.
This can lead to complete exhaustion of their own resources and thus they risk their own health and often enough it negatively impacts their private life. And last but not least, entrepreneurship is always linked to the pursuit of profit. At this point at the latest, I would say that Muhammad Yunus might have overlooked something crucial: people are different!
It seems, however, that the members of the Grameen Bank have recognized this themselves.
Many microcredit-funded enterprises are floundering because conditions are not ideal, or their own ideas are not good enough. And then, for good reasons, most people do not have the slightest interest and thus not the necessary perseverance to “reinvent” themselves again and again. So, does Muhammad Yunus’ dream of saving the world with billions of single individual enterprises fail? Quite the contrary! Before a significant number of potential customers could evade the lure of micro-loans, the masters of the microfinance industry quickly invented something new: the “Business in a box”. It is remarkably simple. You do not need to invent anything yourself; you don’t have to develop a business plan, do cost-price calculations, or even design a brand. Everything you need to implement will be delivered in a ‘plug and play’ manner, just like a franchise.
At this point, it becomes really uncomfortable for the poorest of the poor, who are usually not educated and thus inadequately prepared for the challenges of running a franchise. They become unpaid self-employed persons in the service of the corporations, in short, the ‘solidarity group’ described in the previous chapters is turning into a door-to-door marketing brigade.
As I write these sentences, it strikes me that many years ago I got a quick course on this type of “poverty reduction” method from an Indian street child. When I travel alone in Nepal or India, I often meet street children. I experience them as helpful and eager to provide useful information. Due to their trained observation skills which help them to survive, they quickly realize that I cannot see. And somehow, they seem to feel some form of solidarity. Whenever I want to give them some Rupees for helping me to cross a multi-lane road or finding an address, they usually object with the reply: “No Mam, you are one of us!”. To be blind in such situations becomes an advantage as it lowers the threshold for a more direct and open communication.
I met this first lecturer in micro franchising about ten years ago at the main railway station in Pune. At that time, I was travelling on my own. I remember sitting on a bench with a little backpack and my white cane, waiting for my train to Mumbai, when I suddenly realized that I was no longer alone.
Someone had quietly approached me and now stood right in front of me. After a while, I spoke to him, and he said with a laugh, “You’re not REALLY blind, aren’t you?!”
It was a teenager, about 15, 16 years old. He was homeless, and, as he told me in surprisingly clear English, he felt good about it. No sign of self-pity. He explained that begging served his needs. Sometimes he could even afford a train ticket to a different city. Others were much worse off; they were forced to sell products. At that moment I heard a choir of voices, shouting or singing. As the singers trotted past us in a long row, the boy explained to me that these were blind youths from a nearby hostel. To cover the cost of their accommodation, they had to sell toys and snacks. Such activities, my companion said, often end up in a loss-making business. After all, the toys first had to be bought from the dealer, and then they got stuck with whatever could not be sold.
What I did not realize at the time, this was probably one of the many alternative concepts that Yunus raves about in his public speeches: beggars get a microcredit and the opportunity to buy products from this money. And then, Yunus explains to the astonished audience, they do something naturally, that others first must learn in Harvard Business School: “Market segmentation!” These beggars would know exactly at which house it would be worth selling snacks and where its ok to beg… Leaving his audience in awe.
Through the many YouTube clips which teach me about alternative concepts of financial inclusion, I get more and more suspicious.
Although the whole idea still runs under the label of “Entrepreneurship” or in this case also more precisely “Micro Franchising”, it is obvious that this is about unpaid “sales-personnel”. On behalf of the corporate, they venture out to distribute products in the most remote areas, at their own expense and… at own risk. Thus, unknowingly, and for the corporate conveniently promoting the brand to completely new, potential customers.
The corporations, which include Coca-Cola, Telenor, Danone, BASF, Unilever, Adidas, and many others, are happy to engage in these experiments with poverty. And why not? They don’t have any financial risk as the mostly female “Sales agents” are given a microcredit by the Grameen Bank or by any other MFI and for that they shall buy the products with a little discount. These women, who are supposed to open a new market for the companies in often impenetrable regions, with ‘paternal patronizing condescension’ are called: Capitalism’s frontiers, Grameen Phone Ladies, Danone Ladies or Solar Sisters. And the corporates decorate themselves with the Grameen brand and sell the whole concept as “Social Business”.
The question is, what is “social” about this business? Is it a social act to send women miles through the most remote regions to familiarize those who are even poorer with over-sugared soft drinks? To people who would never be able to afford seeing a dentist! Is it social if they produce sneakers in low-wage countries, under most adverse circumstances, for only $1.50 and thus ruin the business of local cobblers?
Does it encourage solidarity when whole brigades of competing sellers march from house to house in a village to sell phone cards?
Most of the articles and academic papers I have received so far from well-meaning acquaintances, with the remark that these are excellent ideas for poverty alleviation and would certainly provide great teaching material, were consistently positive. But the more they praised Muhammad Yunus’ statement that a business can solve any problem, the more outraged I became.
I wanted to dig deeper and, in my attempt, to imagine in more detail the disturbing implementation of the so-called “responsible capitalism” the book of the German author and journalist Kathrin Hartmann “wir müssen leider draußen bleiben” (“Sorry, we have to remain outside”), was a great help to me. Here she impressively describes how the management of Danone proudly talks about the newly built “yogurt factory for the poor”. The gentleman enthusiastically mentioned how hundreds of dedicated women are walking around the countryside, selling the small, specially branded yoghurt bites to families with children. This Yoghurt, although enriched with important minerals and vitamins, is extremely sweet and thus health-wise a rather questionable treat.
Hartmann became alert and set off to see it for herself. When she arrived in Bangladesh, she found the Yoghurt in all supermarkets, but she didn’t find a single “Danone Lady”. Only after intense research, she was able to meet a former saleswoman who had strong regrets to have ever committed to the scheme.
In an interview with the author, she describes how she had to walk from village to village with heavy cooling bags, walking through swamps, sandy roads and bad weather, only to be shouted at and shamed for the overpriced sweet product. Especially men did not appreciate her “franchise business” because in a Muslim culture, women who try to stand on their own feet are looked at with great skepticism.
Moreover, the profit was sparse. In good times, she earned no more than $1.50 for three days of work, and often she got stuck with the perishable products.
In the same interview, her bitterness was evident. She felt exploited and not taken seriously. And finally, she asked the question that I had asked myself often enough, why couldn’t she, a dedicated hard working woman just be regularly employed with a fair wage.
It is certain that a CEO of a “social business” like Grameen-Danone would argue that the risk of a losing profit would be too high, of course. Therefore, handing over the responsibility of success or failure to the poor would be more convenient for the corporate and more “empowering” for the ladies.
It can also be put in a different way: the poor are used to overcoming crises and do not have much to lose anyway. Well, I would say, they have something crucial to lose: their energy, their will to live, their health and especially their dignity!
Muhammad Yunus, how about changing your quote that was mentioned at the beginning of this post, a little: “All human beings have a right to employment. Some get a chance to unleash that capacity. Some never got the chance, never knew that he or she has that capacity.”