February 10, 2007

A Quibble about Microfinance and the "Productive" Sector

ASA's M Enamul Hoque has an interesting op-ed on microfinance in the Daily Star. He starts off:

Often there raised an allegation from among those who tend to think over utility
and effectiveness of microcredit that microcredit providers extend more of it
towards non productive i.e. non-farm activities than to productive schemes. This
is half wrong or half right.

The rest of the article is an informative description of ASA's own activities in the agricultural sector. Mr. Hoque is right to of course point these activities out. But it's problematic how he cedes the ground over the description of non-agricultural activity as "non-productive" so easily as "half wrong or half right". Actually it's all wrong. And ceding the ground so easily is a bit of a disservice to the work that ASA's own borrowers are doing, and ASA's own positive contribution.

There's no reason to think that the borrower making embroidery isn't doing something productive. There's no reason to think that the borrower stocking soap, biscuit and thread in her small village morer dokan thereby saving her customers the time and effort of running to the nearest haat isn't doing something productive. Or the borrower raising poultry and cattle.

The rationale for greater investment in agriculture, Mr. Hoque notes is that "[t]he basis and driving force of its economy still is agriculture." But given the absolute dependence of rural Bangladesh on the ebbs and flows of agriculture, it would seem that the very diversification of risk of exposure to agricultural risk is a valuable service that the microfinance sector provides. Besides, one has not even gone into the rates of returns from agriculture as opposed to other types of activity...

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