Navigating Bangladesh's political settlement: microfinance, civil society and possibilities for development

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Bangladesh has been lauded internationally as a development success story: a county with strong economic growth, a source of innovation copied the world around, and human development figures that put its neighbour India to shame. This reputation is all the more significant given that only a few decades ago it was seen as the world's basket case, known for shocking poverty, famines and floods. One major source of this success is seen as the country's vibrant civil society, dominated by large NGOs.Among these NGOs (and banks), much work is focused around a development activity that did not even exist fifty years ago: microfinance. Indeed, the greatest development success stories to come from Bangladesh - and one of the main catalysts for Bangladesh's new international image - is the microfinance revolution, spearheaded by Muhammad Yunus, who later won a Noble Peace Prize along with the Grameen Bank. The microfinance industry makes a simple claim: tiny loans to rural women can enable them to start small businesses through which they can move themselves out of poverty. From the 1990s this narrative began to have enormous traction with donors, who moved away from funding radical NGOs concerned with collective aims such as land redistribution or human rights. Donors offered significant funds to help these MFIs (Microfinance Institutions) as they became known, and more generally NGOs in Bangladesh continue to rely heavily on donor funds to maintain their operations (Bangladesh is the 5th largest recipient of bilateral aid from the UK). My research set out to examine the question, what is the social performance of microfinance institutions in rural Bangladesh? In other words, was this success story true? Did they have the impact on poor rural households that they claimed? At the time of my research most studies had examined microfinance in Bangladesh through quantitative tools. I used mixed methods, with an emphasis on spending time ethnographically in both villages and with MFIs, their staff and in their branches (I have a strong level of Bengali having previously lived in a slum in Chittagong). As my research progressed I began to understand that the realities of microfinance were very different from how they had been portrayed. Accounts from rural families told of malpractices such as abusive loan officers, extreme pressures to repay loans, forced selling of loans and illegal repossession of belongings when borrowers could not repay. I traced these practices to particular institutions (in the villages studies ten MFIs were in operation) and understood that the way they were structured commercially translated into the malpractices observed. The commercialization of these MFIs put pressures on loan officers, which led to abusive practices in the field. The result was often negative and sometimes devastating for these families - over-indebtedness was common, people sold assets and it led to serious psychological problems. The type of development possible through MFIs was far from what was portrayed. My research pointed to the need to understand the nature of MFIs and the change they bring in relation to the socio-political contexts in which they operate. At the village level this can mean the power relationships between poor clients and MFI loan officers, and at an institutional level the place of MFIs in the broader political environment, which determines how they operate. To further understand this, an appreciation of Bangladesh's politics and the role of the state is essential (in current academic terminology the 'political settlement'). Indeed, during and following my field work Bangladesh's political dynamics have changed significantly, with the state showing increasing signs of authoritarianism which further threatens the autonomy of civil society actors such as NGOs, journalists and campaigners. My research therefore opens up a broader question: what type of development is possible in Bangladesh?