Something called IRIN, a news service of the U.N. Office for the Coordination of Humanitarian Affairs, ran this headline last week: "Microfinance institutions pushed loans, admits major NGO." The "admission" came from Shameran Abed, head of BRAC's microfinance program in Bangladesh and son of BRAC founder Fazle Abed.

Asked whether BRAC itself had pushed loans onto borrowers who could not afford them, [Abed] told IRIN: “Yes,” citing “excess liquidity” and a lack of communication between lenders.

“In the mid 2000s, the microfinancing industry grew too fast. And yes, we did,” said Abed. “But I’ll tell you why we did---we didn’t have perfect information.”

The article seemed fishy to me. The headline had "pushed" in it, but the quote didn't. It is one thing to say that microlenders got over-extended in Bangladesh starting the mid-2000s, which I guessed as Abed's meaning. It is another to say that BRAC "pushed" loans. "Push" is a vague word, but to me, it suggests that BRAC did something that it knew was against the clients' interests---or at least motivated primarily by narrow institutional self-interest.

Shameran Abed has confirmed to me via e-mail that he believes that IRIN has misrepresented what he said, and that I got it about right. Probably too many loans were made. The loans may have been pulled as well as pushed. Presumably the motives on both sides of the loan transactions were mixes of good intentions, over-optimism, and inertia. For lack of credit information sharing, such as through a credit bureau, no one could see the big picture.

Does IRIN really want to be in the same camp as Prime Minister Sheikh Hasina, seizing excuses to hurl defamatory barbs?

For me, Abed's honesty (however misinterpreted), solidifies the conclusion that microcredit may well have grown too large in Bangladesh in recent years. Leaders of two of the big three see it that way. (ASA's founder worried in 2007 about a "train crash.".) BRAC and ASA have halted or reversed their growth in recent years.

Meanwhile, the Grameen Bank has charged ahead, increasing outstanding credit by 59% since the beginning of 2009. This by itself does not justify ejecting the founder, but it does raise a prudential question, about whether the $1.4 billion in deposits at Grameen are safe.


CGD blog posts reflect the views of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.


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