I spent some time yesterday with a group of 20 Bangladeshi small farmers (13 men, 7 women) linked to a sustainable agriculture NGO, Unnayan Dhara (sorry, they don’t yet have a website). Among other things (climate change, access to markets etc) I asked them about microfinance, given my post on Wednesday and the subsequent discussion on the comments. Here’s a summary of what they told me:
7/20 (6 men, 1 woman) had taken out loans from the state agriculture bank, the Bangladesh Krishi Bank
None had gone to local money lenders, who charge 20% interest per month
The state bank charges lower interest rates than the MF providers, but it takes 2-6 months to get the loan, you have to be able to show a land title in your name (a particular problem for those women, sharecroppers, or groups of relatives farming together who can’t provide land titles) and you have to pay an estimated 20-25% of the value of the loan in bribes.
MF providers do not demand bribes, do not require land titles, and are quick, but the women had some criticisms:
They have to start repayments immediately, even though they need to wait til the harvest comes in before the investment (in seeds, fertiliser, fuel etc) bears fruit. They would much prefer to repay in one go at the end of the loan period rather than through the weekly repayments beloved of MF providers.
The women thought men ought to be eligible for MF loans, rather than having to go through their wives.
The MF providers deduct any savings they make from their loan repayments.
Overall, the farmers said the one single change that would improve the impact of MF (apart from lower interest rates, obviously) would be if the providers shifted from their insistence on one year loans to 2-4 month seasonal loans adapted to farmers’ needs (for example allowing them to repay after the harvest and/or hang on to their crops for a few months, and then sell at higher prices, rather than sell straight after harvest, when prices are lowest).
My conclusion? Microfinance is clearly a mainstream provider, at least in this community. These farmers need credit, and microfinance probably qualifies as ‘least worst’ as a source, but the farmers see MF providers as really just another bank, and one which could be much more responsive to farmers needs.