Wednesday, March 16, 2016

Micro Finance and the Development of BRAC

Microfinance has gotten some flack in recent years.  Randomized Controlled Trials (RCTs) have provided some empirical basis for skepticism regarding its transformative impact on the poor.  The development fad focused on microfinance appears to be waning.

For those who aren’t familiar with BRAC, an organization I have been working with on and off since 2014, it is the world’s largest NGO, has programs serving a large portion of the population of Bangladesh, and is arguably one of the greatest success stories of the international development community.  Its reach is mind boggling, such that I often compare it to an alternate socialist government.  It has programs in health, education, industry, and of course microfinance.  The BRAC family includes a bank, cash transfer company and what will soon become one of the largest universities in South Asia.  It has programs in 12 countries as well.

Some months back, I read “Freedom from Want” by Ian Smilie, which presents a history of BRAC. It’s a very interesting read, and I highly recommend it, particularly given the importance of BRAC in the development world. Even though much of it reads like a ‘great men’ version of history, with some role for particular women involved, it touches on a number of interesting organizational themes. 

One idea, which requires greater scrutiny, is the importance of microfinance in the financial and organization health and evolution of BRAC.  Today, the importance of microfinance to fund BRAC activities is undeniable.  According to its annual report of 2014, BRAC earned over $270 million from service charges for microfinance; expenditure for the program was just over $171 million.  The net earnings create a huge fund that is then used to cross subsidize other programs and costs.  Own source revenue also reduces the vulnerability of the organization to the fickle behavior of international development partners.

Microfinance allowed for direct linkages, both upstream and downstream, with other initiatives.  As the book describes, providing microfinance services was not enough to have an impact; instead, BRAC had to present and develop business opportunities for women.  This led to work in a wide variety of programs.  For example, the book describes the poultry business, where BRAC developed both a chicken feed company as well as a vaccination program and an egg selling business.  Feed, chickens and vaccines were often bought using microfinance funds.

For me, even more interesting is the organization that is fostered by micro finance.  It provides an economic need for BRAC field offices, which can be used for other purposes. Similarly, microfinance requires the creation of women’s groups in communities, which one might refer to as social capital.  BRAC therefore develops both a network of individuals affiliated with the organization, and a familiarity with the community.  I am still unclear just how much of a role these offices, staff and volunteers involved in microfinance played in the history of BRAC, but I suspect it was an important one. In recent history, the book observes that BRAC International has taken this approach, describing that “the health program [piggybacks] on the microfinance program” employing staff in the field offices and pulling health volunteers from among the microfinance groups. 

All in all, I wonder if studies of microfinance take these linkages into account.  So far, I haven’t seen much written about these topics and obviously feel they deserve further inquiry.

The White Man’s Burden: a slippery slope in international development practice

When does an international development practitioner engage in racist condescension?  International development work is chock full of people, especially white people, who enter the field out of a desire to reduce poverty.  Recently, I passed by an advertisement for USAID depicting a white American working with poor children in Africa.  It was well intentioned, but my immediate response was to think of the famous Rudyard Kipling poem, which starts as the following:

Take up the White Man's burden, Send forth the best ye breed
Go bind your sons to exile, to serve your captives' need;
To wait in heavy harness, On fluttered folk and wild—
Your new-caught, sullen peoples, Half-devil and half-child.

(The poem of the White Man’s Burden was used as the title of the famous book of William Easterly, whose book made an important contribution but did not relate the development industry to colonial history.)

Still today, the general public in the West exhibits a kind of racism against much of the world where high poverty rates are found.  This can be found in most characterizations of Africa and South Asia that are presented in the media. 

What is missing in this context is the history of colonialism, a system that was arguably essential in establishing the standard of living found in the West today.  The same system led to countless deaths in the victim countries, as well as slavery and a decimation or warping of local institutions, among other results.  Still today, developing countries generally struggle to make the resulting government, market, and social institutions work (which I call the original sin of development, something for future posts). 

In the international development community, outright racism is rare.  One seldom hears of broad generalizations about the inherent characteristics of a people.  There are elements of the White Man’s Burden that I have encountered in international development work.  I would identify three particular areas. 

1.     White people who brag to their friends that they are helping the poor

The picture of the white person surrounded by African children exemplifies the bragging by development workers that they help the poor.  This bothers me along several dimensions, which requires a basic historical context.  The West decimated local institutions and exploited the poor throughout the world for centuries.  Now, their relatively privileged citizens are showing up in the countries to help the poor, when the pretense for colonialism was similar.  Rather than bragging, the West has a historical obligation to do something genuinely good, in order to begin to make up for centuries of exploitation. 

Other obvious criticisms arise as well, such as the lack of acknowledgement of local partners and national staff who generally do most of the work and get little of the credit.  The white people try to position themselves in the front to get recognition, either from their friends in the case of the photo, or in a professional environment, from their managers who will promote them and from their funding agencies.   For example, I recently became familiar with a U.S.-based civil society association who, when providing financing for local partners who have been working for decades, either claimed that the association itself implemented the project, or stated that they jointly implemented the work - even though the association only provided a small fund recently.  Additionally, the absurdity of the situation increases because most development agencies do not adequately measure the impact of their work, which due to the short time that the white development practitioners stay in the country, is usually a temporary relief at best. Bragging about something so superficial seems ridiculous.

2.     White people who dictate how things should be done in a developing country

I have personally witnessed, and heard of a number of cases, where white development practitioners go into a government office and effectively tell the official how to run their department.  The same occurs occasionally but less frequently in the NGO sector, where the international NGO worker tells local staff how to do things.   I am sometimes astounded at the lack of diplomatic skills present among many staff.

The basis of the problem in this case is effectively the money and the resulting power dynamics.  Government officials and local NGOs desire outside financing.  As a result, they are willing to submit to these demands in order to please the white people so that they will finance projects.  These are obviously the wrong motives for undertaking any initiative, and usually lead to haphazard and temporary implementation of the desired program or policy.

3.     White people who naively intervene –i.e. with little contextual knowledge and using their own biases/ limited knowledge

Of course, it is easy to have opinions on how things should be done.  “Experts” abound in the international development field.  But then you have to wonder what this expertise is built on, and whether it has been contextually adapted.  Without extensive time spent working in a developing country, along with a certain street smarts, white people rarely have the contextual knowledge of what might work. The lack of familiarity not only endangers the activities to be undertaken, but may also make the dictates of the development practitioners damaging if implemented.  The source of knowledge and the way to do things is often steeped in a technocratic vision of the world, based on a bias of how organizations work that often doesn’t even apply to their home countries.  Data, plans, laws, instructions for local staff, regulations, and other recommendations are often ineffective steps in an environment of strong interests and institutional norms that resist them.

I’ve personally come across two common examples.  First, in order to reform a government institution, the government needs to pass a law.  A foreign expert writes the law.  The government is then pressured, or effectively bribed via a loan or grant, to pass that law.  Not surprisingly, the law is never implemented.  Second, too often one hears of the need for an organization to write a plan, which will then be used to bring in funding.  Once again, an outside expert is brought in to develop the plan.  The implementing organization then more or less ignores that plan after receiving funding.

Each of these three present-day concerns has ancient historical roots, with damaging consequences throughout the world.  We hope that international development practitioners would learn.  However, these mistakes still exist in the international development field.  At the very least, development practitioners should study the basic history of colonialism, if only to realize their own relationship to this history.

The next question is, how can we prevent this behavior?  Unfortunately, real accountability only comes from those who finance the organizations.  There is an asymmetry of information in these cases, and only imperfect means of correcting this.  The recipients of project financing are unlikely to push back for fear of losing the money, though an increased number of sources of project financing may help.  The governments and donors that fund these organizations are unlikely to detect these subtle styles, and probably don’t recognize their importance.

As a white person in development, I struggle with these issues.  They give good reason for an extreme position, that white people should just stay out of development altogether.  Or that white people should simply support local efforts from a distance, and stay out of the way.  Both of these approaches have their own risks, such as denying important resources and naively throwing around cash.  As a rule of thumb, three individual approaches seem reasonable: humility, diplomacy, and a deep contextual knowledge.  A deep contextual knowledge will help in tailoring initiatives to the local context.  Humility will prevent practitioners from imposing themselves in a damaging way.  And diplomacy will generate a network that will provide both knowledge and the ability to influence things productively behind the scenes.  Unfortunately, without systematic change in how aid works, the recruitment process for international organizations seems to be the best opportunity for minimizing the White Man’s Burden approach to development.

And an Attempt to Define Governance

Supposedly, I am an expert on governance.  I thought I would share my thoughts on what that vague term means for me.

Governance work is so commonly mis-characterized that its name should be changed.  Too often, the corruption issue dominates governance.  This prompts many international development program managers to avoid the issue completely, because they think that by taking on governance they will offend government, who make the same association.  Also, given the prevalence of corruption in programs, the managers are afraid that by inviting a governance lens, they will expose themselves to scrutiny that at the least represents a headache, if not a potential for the discovery of corruption issues.  While most people agree that corruption – or rather certain types of corruption - are a major impediment to development, this strong association shifts attention away from numerous other organizational issues.

My own definition of governance relates to the health of organizations, particularly their efficiency.  In other words, good governance is simply the organizational ability to fulfill the organization’s mandate.  This includes a variety of basic organizational factors: on the formal side, it is an appropriate structure (decentralized vs. centralized), sufficient financing, good recruitment processes and other human resource concerns, formal internal and external accountability systems, etc.; on the informal side, it is productive institutional norms, esprit de corps, and social pressures for performance.  This relates to all relevant organizations in a society, obviously including the government, but also NGOs and other non-state groups, whose governance is often neglected by international development institutions.

In my view, governance work is defined by its focus on improving these factors in a given organization.  It is primarily distinguished from the central focus of international development work, which is the delivery of stuff mainly to citizens, whether money (scholarships), goods (nutrition supplements), or infrastructure.  The result of the relative disregard by international development practitioners for a variety of organizational weaknesses at least partly translates into the continually poor quality of services.  For example, while there are high praises for the increase in school enrollment found in many developing countries, often due to the provision of scholarships, the quality of education continues to be very poor in most developing countries (as well as the USA).  A similar challenge arises in work on justice, where there are numerous legal aid programs that contribute to a case backlog due to the inefficiency of the courts.  The incentives present in international institutions contribute greatly to this state of affairs, a topic that will be explored in future posts.

An Attempt to Define International Development

Given this site is dedicated to ideas on international development, I thought I would begin with a definition of international development.  Even more than other career areas, it is a field that is not easy to distinguish, whether conceptually or professionally.  There is an international element to it, obviously.  And, while much ink has been spilt theorizing about the meaning of ‘development’, its essence can be divided along two dimensions: big ‘D’ and little ‘d’.  Big ‘D’ refers to ‘the great transformation’ in which economic growth rates are sustained over a long period of time, leading to major socio economic changes in a nation.  This is mainly an intellectual focus of the field.  Generally, training is based on the economic schools of thought, but various disciplines provide a diversity of views on this process.  Little ‘d’, which is the center of most of the practice of international development, is an improvement of the human condition, the areas of improvement being a matter of intense debate. 

It seems that everything under the sun is included in the practice of international development, at least as involves the public.  One need only look at the current UN Sustainable Development Goals to see the numerous topics that populate approaches to international development.  Two of the only exceptions are national defense and culture.  Just about every other ministry in government or type of NGO receives some form of support from international development institutions, ranging from the police to politicians to groups of parents of school children. 

Taking into account the lack of conceptual clarity, I would argue that international development is moreso defined as a field that involves the international intersection of certain institutions, i.e. government, NGOs and international organizations (both bilateral and multilateral), along with foundations and the private sector to some extent. Given that this is the only definition that makes some sense to me, I remain skeptical of efforts to unite the field under an intellectual rubric.  The one unifying topic that may make sense is the thinking behind big ‘D’.  If the hope is for research to be relevant to current development institutions, whose focus on big ‘D’ is at best an afterthought in their work, I would argue that international development scholars should leave behind big ‘D’, and let the various relevant academic disciplines focus on them.   Particular fields that specialize in various sectors should take over little ‘D’, such as schools of education and health, as this number is too great for any single field to absorb.  Instead, the field needs to focus on the practice of development, i.e. what the international development institutions do and how one can be effective in influencing them from the inside and outside.  For this reason, much of this blog will focus on the practice of international development. 

Tuesday, March 1, 2016