Microfinance Boosts Bangladeshi Business Women but Hinders Global Growth

Rising above cultural stigma, increasingly women in Bangladesh are becoming entrepreneurs, bucking the trend of consumer led small scale rural business, increasingly running developmental businesses requiring professional skills such marketing, sales and product development.

This would have been impossible if not for the massive success of microfinance. 

Women have cut their teeth on small scale business such as handicrafts (making hessian bags, jewelry and home cooking) and are moving into big business.

Jahanara Begum was faced with destitution when her husband became bankrupt and to survive she started a business making simple hand crafted goods. She was so successful she founded the ‘Jahanara Female Adult School & Handicrafts Training Centre in Comilla. Sadly Jahana recently passed away but left a legacy benefitting both men and women who attend the college today.

Following in her footsteps, her daughter Fatima set up her own business in the Cottage Industry but this was not without similar problems faced by many women setting out on the road to owning their own business in Bangladesh. Traditionally women have had fewer opportunities such as the right to education or managing the household expenses.

For some families a woman embarking on business is seen as failure and brings shame to the family. Violence and honor killings are some of the extreme responses that women may have to suffer.

Certainly social customs, religious barriers and the traditional image of a women’s domestic role are barriers that Fatima came across. Awadita Mou from Sylhet also had to overcome these hurdles even thought she had the backing of her father who helped financially. From an early age Mou enjoyed making things and after completing a Higher Secondary Certificate began her career as a business woman in clothes design and now runs a fashion house designing and making garments with her own label.   

National Action Plan

The Bangladesh government has implemented changes in favour of women in business with its National Action Plan which improves trading conditions for women and introduces incentives such as tax breaks as well as new laws that focuses on gender equality. 

Despite these changes, the highly successful business woman Rubina Farouq, General Secretary of the Women Entrepreneurs Association and Director of Hotel Management and Hospitality Ltd says, “in spite of implementing rules and regulations, business women are bounded by their gender and the role model that society expects them to live up to".

But without microfinance the majority of Bengali business women would not be trading at all.

Microfinance model:  a ‘shop keepers’ life

The rise of Grameen bank (GB) some twenty years ago and the Bangladeshi State Krishi Bank adopting the microfinance model are responsible for many women running their own business. 

Over 97% of microfinance is loaned by GB to women.

These are small scale enterprise loans up to around £200 GB pounds (around 300 US dollars), at reasonable interest rates ranging from 6-15% but typically nearer to 11%. These are not low interest loans (which is a loan below 3%) so paying money back to the bank the money leat can be a considerable burden on the viability of small business but women are starting small business in all manner of industries from farming to fashion. November 2011 figures from GB show that they have over 3.5 micro enterprise million loans on their books. The average loan is 4000 Bangladeshi Taka, in the region of £37 GB pounds (57 US dollars).

Areas for greater improvement: interest rates

However much these changes are welcome to prospective women entrepreneurs, there are still areas for greater improvement. Researcher Farah Newaz recommends that interest rates need to be reduced, loans should be easier to obtain, should not be based on existing assets and  that the government needs to improve the link between gender equality and policies that encourage business. 

The social stigma of an independent woman trading under her own name will take time to disappear as society slowly accepts that women can be as successful as anyone else.

When it comes to setting up a business for Bengali women it is not like climbing just a single mountain, reaching the top, reaching success, but is the first of a series of marathon climbs that takes in a series of mountains – a mountain chain has to be scaled to reach the dizzy heights of success.

Poorly managed NGO’s

First is the mountain of unscrupulous and poorly managed NGO’s who run microfinance credit schemes in partnership with the banks. They often insist on conditions that hinder the prospective business woman. Fatima describes a situation where an NGO expected her to set up shop some distance away from her neighborhood where she is known, and understands the conditions that govern the local market for the goods that she is producing. "

The bank and other financial institutions try to force us to join a co-operative society as a way of marketing our products, and setting up our retail areas in different parts of the region that suits them…. We lose our identity as a trader, and it makes it more difficult to operate in and sell to an area and people we know nothing about".

Establishing a business as a woman has its trial and tribulations; working in a male dominated society where government officials such as tax inspectors, and suppliers are mostly men has its own headaches.

Not only do they have to be accepted as ‘hard headed business women’ but, as Mashi-ur Rahman General Manager of Micro Industries Development (MIDAS) points out "we are dealing with women entrepreneurs operating under several social constraints" A Grameen Bank study is point blank about this: “the status of women in business especially in rural areas is one of social dishonor which is a common societal norm". Rural women entrepreneurs constitute a vital segment as recipients of microfinance.  

Need for strategic planning, marketing and greater finance

Microfinance has been hailed as emancipation and the way forward in the march for women empowering women, but Asif Mahfuz Programme Co-coordinator of Winrock International (a global non-profit organization that addresses rural development and sustainable resource management through education and empowerment programs) sees microfinance as a ‘great tool as a survival strategy’ but it doesn’t step up to the greater developmental stages of business that require strategic planning, marketing and greater finance as well as logistics and communication. In his own analysis, Asif writes "the need for micro-credit is linked to inequality issues such as land ownership and the state´s drive for massive capital investment  into building large scale industries that deprive  the poor of resources to escape poverty’".

He goes on to say that what the poor need is the capacity to train and lower interest rates (he sees the current interest rates as far too high) and better communications as the key issues that need addressing to make a greatest impact on the poorest of the poor.

Moving from microfinance to larger sustainable loans is the most difficult mountain to climb, as small businesses endeavor to seek to pay off existing capital loans to the banks.

As Mahsi-ur-Rhaman realises: "rural women depend on traditional ways of doing things, and have little financial resource; depending on their family for support. Banks are not so keen to lend money on a larger scale particularly to women who are largely illiterate and lack the skills needed to write a proper business plan".

A villager from Comilla named ‘Lovely’ expressed her dismay. "We are not able to take any business risks as we have limited financial means, we depend on the support of our family and there is little or no prospect in the way of external support so that we can modernize our practices with new technology or modern machinery" Perhaps this is the highest of the mountains that needs defeating.

The prospect is bleak for the aspirations of the poor if they possess ideas of grandeur. MIDAS’s recent survey shows that many female entrepreneurs are engaged in cottage industries both in rural and urban industries.

The evidence is that instead of liberating and emancipating the Bangladeshi woman, microfinance confines them to a ‘shop keepers’ life, and it seems that organizations such as MIDAS encourage women to entertain the parochial idea of trading on a small scale within the cottage industry.

Farouk has the last word: "The government needs to enforce its legislation and encourage new enterprise initiatives that are pro-business and pro-women. There needs to be auditing, monitoring and control of NGO’s and the banks as well as a change of attitude in society towards women who have the ability to help the country prosper. 

Need is access to real capital to set up really big businesses

Women cannot expand their businesses due to a lack of capital and they need training to cope with problems such as marketing, how to compete with competitors, production costs, pricing and demand".

There needs to be changes in the way the banks lend their capital. There are over 50 million women of working age in Bangladesh (62.5% of the population) with only 10-14% of households that can access microfinance. 

Microfinance leads to a small business mentality. It helps gain experience and provides a basic living, but what women in Bangladesh really need is access to real capital to set up really big businesses and have the opportunity to test their new found business acumen so that they can compete in a global market.

This article was written by Tithe Farhana and David Meagher. Tithe is a freelance Development Journalist and student of Development Studies and Environ-management. David is Co-founder of Facebook cause 'Bangladeshi Women's Voice': helping women from Bangladesh help themselves to reconcile their culture with modern day society and achieve equality, beat poverty, and gain access to insitutions such as education and politics, in Bangladesh and around the world.