Mobilizing Religion as Value Storage: Islamic Microfinance in Bangladesh as a Model for Poverty Alleviation (Part II)

By IMTFI Researcher Bridget Kustin

PART TWO: Financial Vocabularies, Accounting and Calculation 

In my first post, I introduced my IMTFI-funded research into the Islami Bank Bangladesh Limited (IBBL) and its Islamic microfinance program for the rural poor, the Rural Development Scheme (RDS). I explored the slippages between institutional (here the IBBL) versus client understandings of the ‘Islam’ of Islamic microfinance. In this posting, I continue the discussion by addressing how a financial institution might not know its client because it does not fully grasp the assumptions and possibilities contained in clients’ financial vocabularies and their accounting and calculation practices in space and time. 

Children's clothes purchased for Eid ul Fitr are displayed;
social pressures make Ramadan and Eid periods of financial insecurity (2014).

Financial Vocabularies

Money was an omnipresent topic of discussion in the small town/rural slum community of Zinukpara, although conventional economic definitions for money categories and instruments (e.g. assets, investments, debt, and income) were not necessarily applicable. Material objects, relationships, or affects usually indexed by such definitions can be mobilized differently. For example, labh means ‘profit’ as well as ‘benefit.’ Clients might discuss the labh of an investment, debt, loan, or purchase in numerical or in social, religious, or emotional terms; certain transactions could never fit neatly onto a household profit-loss statement, if such a ledger were to exist. In another basic expression of money-usage in the context of debts and expenditures, taka (money) and shudh (interest) can be ‘eaten’ (khaowa, to eat), indicating irreversible, definitive usage, for instance:

• Ex. 1, Client to RDS field officer: If you give us less money [than what we ask for], what do you expect? .... I will eat the money [khai felayun].

• Ex. 2, RDS field officer to client: So you took the money, kept it at your house, and ate it? [khi feladay].

• Ex. 3, Client to Bridget, explaining how RDS works: “We take [their] money for a year. We don’t eat their money. Of course we all make payments. It’s not good to create hardship [for the bank], that’s what everyone says.”

• Ex. 4, Client asking the RDS field officer to accept a late repayment: You have to understand. If you do business, every day cannot be the same. But we have to give the [RDS] installment from the [business] labh [profit]. You are also a human being…you have to understand: if you have a stomach, you have to give to the stomach, and we also have to give to the stomach [pet’e to diaya foribo, onera o diya foribo]. And you have to give to someone else as well. 

Here, implicating the body frames money and interest not as ‘things’ to be taken (naowa), held (rakha, haowa), or used (babohar kora, kora), but a part of more intimate, embodied and irreversible actions entwined with the basics of sustaining life. This gestures toward the condition of poverty in which money is not necessarily a neutral medium of exchange with fungible choice in its applications, but is the medium of enabling sustenance and survival. In the third example, the counterposition of ‘taking’ versus ‘eating’ RDS funds distinguishes money that once used is gone forever and cannot be recouped or repaid from money that can be repaid. In the first example, the client explains to the field officer the difficulty in receiving RDS microfinancing that is less than the desired amount: the lower sum will be eaten and not repaid, as the amount was never enough to execute the desired income-generating venture in the first place. For this client, eating the money is part pragmatism and part punitive, as the bank should not expect to receive its money back if it is unresponsive to client needs.

This is not a question of reconfiguring ‘eaten’ money into outstanding debt or write-off-as-gift. Rather, “eaten money” exists as its own category — both as a kind of necessity, and a kind of wastage. Not all money is meant to be repaid, although this determination is made by the recipient and so is pointedly asymmetrical. Eaten money can carry its own costs, such as reputation, trustworthiness, or the ability to secure funds again from the eaten funds source. A household ledger bifurcated into incomes and expenses cannot contain this third, mutable category. 

Accounting and calculation 

Women are not necessarily the primary managers of their household accounts and RDS repayment obligations. Ameena, the leader of her RDS collective, keeps track of everyone’s debts through memory, and negotiates late payments with the field officer. As a result, managing very small amounts of weekly repayment and contributions into mandatory savings accounts — from about 0.60 USD to 4 USD — requires significant labor on the part of Ameena and the field officer. 

Part of what adds time to client-field officer encounters is the inaccessibility of calculative mathematics for clients, often compounded by the scarcity of written financial records. This is despite the fact that increasingly complex financial inclusion-oriented products require calculative mathematical ability on the part of the client, in order for the client to have a clearer picture of her obligations, assets, and financial status in time. Clients rarely use the calculators available on mobile phones as they use Arabic numerals rather than Bengali numbers. During the daytime repayment meetings, children who might otherwise be able to help with sums are typically at school or working. 

Sums and counting are performed verbally and often collectively, and the cardinal and ordinal numbering of time frames (whether weeks, months, or years) are situated against other measurements of the passage of time. These include the six Bengali seasons; events on the Islamic calendar, namely, Eid ul Fitr, Eid ul Adha, Shab-e-Barat, and Ramadan; and events such as a hospital stay, marriage, or child’s birth. 

A client passbook and bank ledger, detailing RDS accounts (2013)

Positioning myself within the community in the register of ‘participant observer’ meant engaging in a broad spectrum of relations, including the informal money-lending ubiquitous between relatives and neighbors. My own monthly financial inflows and outflows were likewise subject to daily discussion. This served to insert me into a household’s financial management processes. Thus, rather than recording a singular ‘true’ quantitative weekly or monthly accounting that existed in static form, our interviews captured the dynamic work of financial management as it took place within performative and technical acts of negotiations, diversions, bundling, and forestalling.  

The RDS passbook (2013)

In addition, when the women discussed their debts, three figures were usually cited with regard to the money owed: first, the original, principal amount owed. Second, the lender’s labh (profit), typically the interest amount. Finally, the lowest possible total amount that could be paid while still achieving closure of the debt. One rhetorical formulation I often heard encapsulates this latter notion: “if I owe 1,000 and pay 900, I still won’t get it” – with ‘it’ referring to the settlement or closure of a debt. 

Financial services offered by formal institutions are not set up to account for these processes. Similarly, conventional notions of household financial accounting that set debts/expenses against regular inflows are not applicable. Rather, these processes gesture toward a household ‘account’ as a shifting, multi-plane ledger where debt amounts (subdivided into principal and interest) are set against the lowest possible amount one can anticipate, strategize, or hope to pay, by leveraging time, external shocks (for either the borrower or lender), religious compassion, or other social or familial factors. The marginal gains from such reductions (and, on a related note, a consistent preference for round numbers and strategic rounding up or down to benefit the individual most in need) become part of broader financial management strategies in time. Loans exist as imminently repackageable into different sets of obligations — an enticement to a gold seller to bring one’s relatives to the shop, assurance to a shopkeeper that your business will stay with his store, appeals to an RDS field officer’s sense of Islamic piety and compassion for the poor.

Ultimately, my field research asks what it might look for an Islamic microfinance institution to take seriously the idea of people participating in microfinance, rather than just being subjects of it. This question then can be understood on multiple registers, from the socio-linguistics of financial vocabularies to technical aspects of calculation and record-keeping. And to ways in which Islamic notions about poverty, compassion, and social justice in economic affairs frame client relationships to the institution. 

Further readings:
-Part I of the blog, "Mobilizing Religion as Value Storage: Islamic Microfinance in Bangladesh as a Model for Poverty Alleviation". 

-Bridget Kustin's full Final Report 

-Islamic (Micro)finance: Culture, Context, Promise, Challenges, a report by Bridget Kustin for Financial Services for the Poor, Bill and Melinda Gates Foundation. The report offers an introduction to the theological tenets of Islamic (micro)finance, a description of the most common products and services, and a global overview of the industry and its major institutions. 

Mobilizing Religion as Value Storage: Islamic Microfinance in Bangladesh as a Model for Poverty Alleviation (Part I)

By IMTFI Researcher Bridget Kustin

PART ONE: Research Questions and the ‘Islam’ of Islamic Microfinance 

Main Questions

The Islami Bank Bangladesh Limited (IBBL) is one of Bangladesh’s largest banks, offering commercial and consumer financing, tremendously popular remittances services for migrant workers, and an Islamic microfinance program for the rural poor, the Rural Development Scheme (RDS). Since its inception in 1983, the Islami Bank has described itself as a religious and financial institution dedicated to poverty alleviation -- an identification frequently invoked by employees during our conversations. The regulatory, staffing and monitoring structures of the IBBL are geared towards ensuring Shari’a compliance. In addition, IBBL's expansion strategy, corporate culture, and the semiotics of its branding and marketing reinforce it's status in Bangladesh as an Islamic institution. My research is an ethnography of finance, Islam, and poverty that explores the theoretical registers of Islamic (micro)finance client experience and institutional management threaded through the money, policy, and influence connecting Saudi Arabia to the Bangladeshi capital of Dhaka to a small-town slum tucked along the Bay of Bengal.

IBBL headquarters, Dilkusha, Dhaka, Bangladesh (2010)

Building on previous research conducted during 2010 and 2011 at IBBL’s Dhaka headquarters and a slum community in the southeastern Cox’s Bazaar zila (district), this project takes as its starting point the idea that RDS mobilizes preexisting social and religious networks to render the ‘Islam’ in Islamic microfinance as a form of value storage. But what to make of ‘value’ as an economic category especially with attendant quantitative calculations regarding Islamic micro finance that has emerged as a new chapter in contentious debates over the efficacy and empowerment/self-fashioning potential of microfinance? 

For much of the ‘financial inclusion’-- oriented community of donors, NGOs, corporations, and start-ups, interest in Islamic microfinance is located in the question of whether clients can derive economic value from Islamic micro finance that exceeds the modest gains of conventional microfinance. And yet, the institutional leveraging of Islam to encourage or facilitate entry into formal banking suggests the importance of a more expansive field of ‘value’ or ‘values’ located within Islam, and registers of Islamic devotion or practice. What might these be? And how might Islamic microfinance encourage and enable poor clients to develop both their religious and economic subject positions? How do these political and ethical resonances filter into households, communities, and configurations of the state, financial institutions, and transnational development agencies? 

Research Procedures

Over 18 total months, from 2010 to 2014 I engaged in unstructured repeat interviews, casual conversations, and participant observation in office procedures and meetings, daily life, religious events, political unrest, and holidays. I was based in Dhaka for six months where I divided my time between the RDS and Sharia Secretariat divisions in IBBL headquarters, Islamic economic institutions, and the company of senior Islamic finance scholars and bankers. I spent 12 months in the slum community of Zinukpara (a pseudonym; all identifying details have been changed) in Cox’s Bazar district, where I conducted full-time participant observation among RDS clients to understand the place of Islamic microfinance alongside other financial obligations and liquidity sources. 

Zinukpara, a mixed Muslim, Hindu, and ethnic Burmese Buddhist Rakhine community, is adjacent to both a small town and vast expanses of rural, riverine lands used for agriculture and pisciculture. The broader district is home to the majority of Bangladesh’s 30,000 registered Rohingya refugeesIt and is close to land and river borders with Myanmar. An estimated 300,000 to 500,000 additional unregistered refugees live in makeshift camps or have been assimilated into the local population. As a result, poverty indicators in this district persist as among the lowest in the country, despite admirable gains in health, education, and child welfare elsewhere.

Socially responsible investment, social business, impact investment, corporate social responsibility, and ‘philanthrocapitalism’ leverage ethical orientations for market value while extolling opportunities for profit in poor, untapped markets. As such capitalist logics embrace market solutions to poverty alleviation and increasingly inform the structure and operations of socioeconomic ‘development.’ My research considers presumptions and categories regarding the financial life-worlds of poor clients that frame the goals and ‘outcomes’ of such programs. These considerations often contain implicit arguments about the efficacy and utility of RDS. I am forgoing a discussion of the ‘success’ of RDS in favor of an arguably prerequisite inquiry: the ways in which the institution might not know its client. Such ‘knowing’ includes the assumptions and possibilities contained in clients’ financial vocabularies, accounting practices in space and time, and the gendered structure of the household-as-economic-unit. Slippages also exist between institutional versus client understandings of the ‘Islam’ of Islamic micro finance. 

A Rakhine puja for improved job opportunities and financial success (2014)

The ‘Islam’ of Islamic microfinance 

For the IBBL, its paramount duty as an Islamic financial institution is Sharia compliance -- even as the terms of Sharia compliance for specific products, services, and ways of conducting business continue to evolve in the global Islamic (micro)finance industry. Clients in Zinukpara generally knew that shudh (interest, more accurately referred to in Arabic as riba) was haram (forbidden in Islam), and that the absence of shudh is a cornerstone of Islamic finance. But this was easily outweighed by the more urgent need for access to liquidity, from all possible sources. Clients explained that choosing between shudh or non-shudh options was a luxury, and not a true choice for the poor. Islam, clients explained, requires that the comparatively wealthy should treat the poor with respect and compassion, and to spare them confrontation with shame embedded in their poverty. As one woman in Zinukpara explained regarding her usual inability to repay debts: “I feel shame. I myself feel shame. What will I do? If I want to get some money from someone else, and they don’t lend to me, what can I do? If you want to call someone…and they say ‘no sister, no sister’…I will take my daughter and leave this house [instead of being kicked out].”

In this respect, IBBL occupies a top position among institutions with which clients interact. They are not made to feel poor or like beggars -- as opposed to their interactions with other sources of liquidity, whether competing microfinance institutions, friends, family, or shopkeepers. Respect and honor are understood as Islam manifest. This represents a critical difference in institutional versus client priorities and understanding of the enterprise of Islamic microfinance more broadly.Compassion and respect are embodied most clearly through RDS field officers’ willingness to accept khelafee (late weekly repayments), and clients will frequently appeal to the field officer or IBBL’s Islamic duty toward the poor. 

As a matter of course during repayment meetings, clients disobey, assert their claim to dignity despite their poverty, or object to bank policies they view as too uncompromising, via the bank’s proxy, the field officer. The particular forms that these interactions take should not be mistaken for client intransigence. They are instead demonstrations of labors that shift RDS and the IBBL down from a perch of ‘institution’ haloed by an affect of inaccessibility,  into the domain of the local village relationships. Scenes of negotiation during the repayment meetings show that women are neither lost under their debt nor ‘empowered’ (a classic, albeit broad goal of conventional microfinance since its inception). Rather, through these negotiations, the women understand themselves as participants in, rather than just subjects of Islamic microfinance.

Read Bridget Kustin's Final Report. 

Read Islamic (Micro)finance: Culture, Context, Promise, Challenges, a report by Bridget Kustin for Financial Services for the Poor, Bill and Melinda Gates Foundation. The report offers an introduction to the theological tenets of Islamic (micro)finance, a description of the most common products and services, and a global overview of the industry and its major institutions. 

Trickling Down and Spilling Over: Social Organization, Power & Hierarchy

When I was in India this summer, the fact that I wore no jewelry save for a plain gold wedding band was perhaps the single most commented upon aspect of my appearance during my travels there. In "Silk Societies, Gold Stories: Using Gold-Based Life Stories to Study Gender, Financial Inclusion and Work Vulnerability in South Indian Sericulture," Nithya Joseph explained that -- in the case of gold -- "objects that don't appear to be necessary" may serve critical semiotic functions, particularly as a marker of class and caste.  In her study of political economy and worker vulnerability that used oral history as a method, gold objects served as significant markers of memory.  After twenty or thirty years, it was often difficult for informants to remember precise details of their financial histories, but aspects of everyday life were embedded in narratives about gold that allowed those interviewed to describe where they were in social hierarchies and how their positionality impacted their well-being. Oral histories were structured by a recounting of life cycle events, a learning/earning history, and narratives about gold-based possessions. 

In choosing to focus on the role of gold for those involved in the production cycle of silk fabric, Joseph noted the common phrase that a sari goes "through a hundred and fifty hands."  She also observed that her field site provided a rich mix of participants from Hindu agricultures, Muslim workers involved in silk reeling and twisting, and caste-specific labor for weavers.  In situating the history of the silk industry, she reminded that it was already global when it was under the control of British colonial authorities, who were interested in capitalizing on sari production, as well as managing the relocation of workers in the silk industry.  Although Gandhian values of handwork and swaraj were still in evidence, the surplus generated by liberalization that could be highly disruptive with Chinese raw silk coming into the market and import tariffs being cut for mid-level entrepreneurs was generally invested in gold.  Based on surveys and participant-observation, Joseph collected many stories.  One informant described not eating for eight days and selling the gold owned by herself and her daughter to save themselves from debt so that her "ears are empty." Others moved from the labor back to the capital sector and doubled their gold holdings in the process.  She also found women using microfinance loans to buy gold that was then pawned to send money back to her village so that she could serve as a lender.  In short, Joseph gound capitalists able to hold gold ended up in a better place, while the gold economy could keep workers in debt.

"Banking with the Patron: the Case of Patron-Client in Makassar, Indonesia" by Tiar Mutiara Shantiuli and Salmah Said describes hierarchical financial arrangements in a range of occupations, including cowhide crackers, proprietors of rental game centers, food hawkers, sea cucumber divers, and fried shallot producers.  Shantiuli focused on how patron-client reciprocity was introduced and how working arrangements were structured as well as initiated.  She noted that recruitment through kinship, neighborhood, or faculty mentorship shaped the hierarchy of patron-client relationships that generally began with borrowing in exchange for help.

Global finance, political Islam, and traditional cultural norms all played a role in "Mobilizing Religion as Value Storage: Islamic Microfinance in Bangladesh as a Model for Poverty Alleviation?" by Bridget Kustin.  Kustin presented a framework that focused on how Islam was being developed as a store of value in which particular forms of religious and economic subjectivity were inculcated, often through specific pedagogical interventions.  Her work focused on the Islami Bank Bangladesh Limited and its relationship to a complex ethics around financial participation in which Islamic microfinance existed in relationship to zakat (mandatory charitable giving), sadaqat (voluntary charity), and waqf, which was established by an individual owner of immovable property to fulfill in perpetuity any function deemed legitimate in Islamic law.  By focusing on the question "of how people self-identify as poor" and potential conflicts with how institutions make such distinctions, Kustin hoped to offer a richer picture of how people viewed their economic realities.  She also situated her work in existing scholarship about prohibitions against riba (usury/interest), especially Bill Maurer's book on Mutual Life, Limited: Islamic Banking, Alternative Currencies, Lateral Reason that noted that the term did not technically designate interest but rather "increase."  At the same time banks that promoted Islamic ideologies also had to consider the potential harms of non-engagement and the opportunity costs to investment, even as they tried to be scrupulous about avoiding gambling or trade associated with taboo behaviors designated as  haram.  She described how global Islamic finance was supposed to promote social justice, grow assets rather than money, and foster equity and the sharing risks.  She also was interested in the escatological implications of how people thought about money in relationship to time and to the future.  Among those with resources, they declared that "God will demand accounting of me," while clients without means might refer to how "God knows my suffering," and that all experiences could somehow be reconciled in a holy account book

According to her interlocutors, questions of intent were critical.  Making intentionality explicit might also play a role in the global rhetoric of Islamic finance represented by documents such as the IBBL Mission statement.  All of these factors were complicated by conflict over political Islam in the country, including contestation about war crimes tribunals dating to offenses committed during the war between Pakistan and Bangladesh in the 1970s.  To provide more nuanced analysis Kustin chose Cox's Bazaar as a diverse field site that was multireligious and also showed how a stronghold of stronghold of Jamaat-e-Islami might include many supporters who were not radicalized and may pursue low-interest Islamic financing mechanisms purely for pragmatic reasons.   She also emphasized possible conflicts between the female empowerment favored by the Grameen Bank and the family uplift paradigm favored by Islamic microfinance.

"How does Mobile Money Affect Adopters' Social Networks?" by Alfredo Burlando, Cynthia Kinnan and Silvia Prina planned to study so-called "spillover" effects with a specific mobile money product, EZY-Pesa, which was developed through a partnership with carrier Zantel.  Researchers planned to focus on consumption smoothing, investing in health and education to reduce the shocks described by earlier presenters, and starting or improving income-generation activities.  Kinnan acknowledged a significant body of literature showing the mixed results of microcredit (Cerpon 2011, Augsburg 2012, Angelucci 2013, Attanasio 2011, and Banerjee 2013).  Furthermore, she said that she would not assume that if spillovers of savings existed that they would necessarily be positive, given the fact that people might avoid kin taxes (Townsend 1994) or shield cash from members of their social networks (Ligon 2002), much as earlier presenters depicted how Somali migrants used banks outside their own migrant communities.  The researchers also noted that these effects could be magnified by mobile savings.

With EZY-Pesa, they found that 50 households sign up per area on average and were able to create an experiment with 1700 recruited individuals.  The informed consent process also explained to those enrolled that they had a 50% chance of receiving help.  Thus, as Burlando elaborated the experimental conditions, half of the customers would receive marketing visit with Tsh 200 (about $1.25) placed in an initial deposit, while the other half would receive Tsh 2000 in cash with no assistance or advice.  As they progressed with the study, questions about trust were emphasized in the data collected via PDAs.  Researchers looked for four names and tried to identify altruistic and obligatory ties.  Then they asked interviewees to speculate about what they would do if they received a surprise payment.  Subjects ranked who they would want to keep this secret windfall from, from most to least urgent.  In their initial findings, they noted that obligatory ties tend to be rated at the same level of wealth and that altruistic ties tended to be close relatives likely to be in lending relationships.

 Discussant: David Pederson, UC San Diego focused his initial questions on the assumption that "value" and "wealth" were really interchangeable and pointed out that the papers showed that this relationship was not necessarily as stable as it appeared to be in vernacular speech.