Conference on South Asians in the U.S. – Session 3

Rohit Parikh: Our first speaker is Professor Wali Mondal at the University of Redlands, and you got your degree from Ohio State, [inaudible] some familiarity.

Wali Mondal: Yes.

Rohit Parikh: You spent some time in New Zealand and also in Bangladesh. Are you from Bangladesh.

Wali Mondal : I am from Bangladesh.

Rohit Parikh: Actually I have heard about those programs, and one of my friends works at [inaudible] the government bank and particularly active to [inaudible]

From Poverty to Prosperity: Microcredit and Its Market in Bangladesh

Wali Mondal: Actually I have a few copies of my paper. I don’t think it will be enough for everyone, unfortunately.
By way of introduction, I am an economist, I teach economics at the University of Redlands now. And I was in Arkansas for 16 years after I got my Ph.D. And that is where I taught from 1985 to 2000. And during most of my time in Arkansas there was a governor who is now famous, President Bill Clinton. Somehow he got interested in the Grameen Bank, and he knew I was from Bangladesh so one day he came to a conference. And he told me that he had invited a sociologist, Richard Carr [?]. I don’t know if you know him, at Chicago University, to try to replicate the government project in Arkansas. And he asked me if I would work with him. I was a young man and professor coming from Bangladesh and just got my Ph.D., and the government talked that way and I said “Sure, I’d be excited!” So that’s how I got interested, and I worked on the project for two or three years and published a couple of books that are pertinent and wrote some papers. The experiment was known as Good Will Fund. It didn’t succeed, but I’ll come to that later.

The idea of collateral-free group rate lending has become very popular. As of today, there are sixty-one countries in the world [inaudible] collateral-free group rate lending model called the Grameen Bank (GB) model, which is kind of a misnomer. We’ll come to that. There are approximately 7000 microfinance institutes (MFIs) which are basically banks but not banks that deal with microcredit. And then there are over 30 million borrowers worldwide.

In Bangladesh about 25% of the households because of poverty are members of the microcredit group-based lending program. And more importantly, and what is the focus of my talk today, is that group-based lending is now transforming into corporalized individual lending, which have given rise to what is known as microentrepreneurship.
Now where did this all come from. I just published a book in 2002. I worked on it for a number of years, and among others, there was a big [inaudible] pack of microcredit that was uninvestigated, or that people just kind of ignored it. This program actually started not with Grameen Bank, but way back in the beginning part of this century in 1905. Of all people who introduced the model, it was Rabindranath Tagore.

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Figure 1, 2. Rabindranath Tagore (1861-1941). Nobel Prize, 1913

All the people in this room probably know who Tagore is, he was the great poet, he won the Nobel prize, people know him for that. But he was a great reformer. People who know of Rabindranath Tagore they will know he was a landlord. He inherited the lendlordship from his family, and he had three-level [inaudible] in Bengal, which is now Bangladesh, it was a province of Nepal in British India. In one of those places, named Patishar, he went there and found that the people are desperately poor. They cannot pay the rent from the land. So initially the strategy [inaudible] and at that they offered to him, and when he went to Europe at the age of 18, he had seen cooperative societies. So being a reformer, a thinker, he started thinking and also this will be of significance to this project here, the sociological factors. At the time, in the late 19^th century, there was in [inaudible] tension going in colonial India. There were riots, and all kinds of colonial problems. In part he was doing something about this too. So he introduced a model whereby he would lend money to poor people, and those poor people had to form a group. And the group will be [inaudible] in two, two [inaudible] and one principle. Think about it. He was very particular. Equally divided between members of the group. The principal, the leader of the group, will be the one chosen by the group, so they can be included, they can have their say.
So that was his idea for uniting a community, which was badly divided, fighting among themselves, burning each others’ property, and doing every possible thing you can imagine doing to destroy the civilization and the culture. And then he also thought that these people did not have the means to give anything as collateral, so he told the group that what you need to do is one person will get the loan and the rest of the members will guarantee that. And, if you are from that culture, you know that shame is the biggest factor of life in that part of the world. If you borrow money, you have to return it or you will be ashamed. So the model worked. It worked very well.

Another interesting factor, about the founding of the Grameen Bank and the founding of world collateral-free lending, was the bank that he established in 1904 in the remote of what is now Bangladesh that is called Patishar. He went there and you cannot think of having something in the remote part of Bangladesh that is like a bank in 1904, and for that he didn’t have enough money, so he used a bit of his own money, and the remaining money he borrowed from the sharks, people who lend money at 200% or 300% rates. And when he won the Nobel prize in 1913, he invested a big part of his prize in that bank, Kaligram Krishi Bank. That’s how the bank was for some time.
Now, between 1905 and up until 1918, the Kaligram Krishi Bank in Patishar in the remote part of Bangladesh worked pretty well. But then after getting the Nobel Prize, he started going to various conferences, going to international trades. He sent one of his sons, his first son, came for [inaudible] studies at the University of Illinois at Urbana-Champaign. And his intention was that when he went back he would take charge of the bank and the landlordship. But even after that [inaudible] pay and the membership group in the bank became dormant. So between 1905 an 1974, there were some activities, but not enough.

In 1974, Bangladesh Rural Advancement Council (BRAC) started. It is one of the largest nongovernmental organizations (NGO). In fact, according to BRAC statistics, it is the single largest NGO in the world. So they followed the same model, and made the first loan after Tagore in a place called Sullah in Sunamgani. In 1976, there was an economist from Bangladesh whose name [inaudible] as you he is now very famous. He started a project along the same lines but he did not publicize any of that previous work of Tagore or [inaudible] or any of the loan projects. He started a project of giving money to poor people. The story goes that one day a number of women came to borrow money from him he was wealthy from [inaudible]. He didn’t have enough money so he told the women they had to go to the bank. But the bank told them that we don’t give money without collateral. And the women said we have nothing, not even ornaments that we can give you as collateral. So the professor went to the bank and asked the bank manager can you give some money keeping my property as collateral because I am [inaudible] head of the department of economics at Sudam[?] University, and I am also a wealthy man. And the manager said no. People who borrow money, they have to have their own collateral.

So that got him thinking. And he asked the Ford Foundation for a project money to see if collateral-free lending worked or not. The Ford Foundation gave him some money. He experimented with it. And the project was successful. So in the process he convinced the government that we can have an agricultural bank, or a Grameen Bank, Grameen means rural. So a rural bank where desperately poor people can borrow money, without collateral. And then it could be group based, group of five people start borrowing, one of them repay the loan, the other four start getting the loan, and the [inaudible] a second loan and so on, so this project.

So this project was very successful. The reason for the success was that in a country like Bangladesh, which is one of the poorest countries of the world, the poorer the country is, the higher the rate of return on investment. So the rate of return on any investment in Bangladesh right now is anywhere between 50% and 400%, four times the money you can get. Average rate of return is about 200%. You get twice as much. If you invest one dollar, you get two dollars in return. So it was a huge success.

And after the GB became successful, in 1983 a number of NGOs started their own loan program. Like Tagore and the audience knows [inaudible] at the same time as I am describing. So in 1983, a number of those NGO started their operations and shot up like mushrooms. As of now there are 601 Micro-Finance Institutions (MFIs) in Bangladesh that are lending money. It is basically a system of credit delivery and savings mobilizing scheme especially designed to meet the unique financial requirement of the poor. It allows the recipients to improve the status of their living through access to additional capital without collateral.

[inaudible] Small loans, typically for working capital. The important point is informal appraisal of borrowers’ investment proposal. What this is is that if you go to a big rural countryside, the people there are shy. And Bangladesh is still under the [inaudible] system, which is women cannot come out of their homes without the [inaudible] in the rural areas. In other areas, they can, but in rural areas most of the time you can’t do that. If you move in a group, four or five people, no problem. So what happens is basically with workers who are dedicated people and people work at the institute itself [inaudible] they are dedicated people to. It is a cause more than just working for a business. So you go as a trainer or instituter on this program and you select a number of [inaudible]. Before that of course, all these people have to have a model, have to have a plan, a mission, what is their [inaudible] to invest their money in. And there are two types of MFIs, one I call maximalist, the other is minimalist. The maximalist do more than microfinances, they go into countryside and do many other activities performed there. It is a unique sociological experiment. There are some studies of these and the GB, one of them claims that the literacy rate in Bangladesh today is so high because of the operations of microcredit. Because these these microcredit institutions open night schools for adult education. So it is one of the greatest potentials of microcredit institutions to work.

This is a typical group meeting [fig. 3] when I was working on this project. The

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date is not right, it was in 2001. That is me sitting there. And way back there behind that lady from Ireland, a very dedicated worker, she came to Bangladesh on a contract for three years. The gentleman in the middle with the cap was the director of this program. It was a small group. The groups could be two to three times bigger than that when we’re talking about loan programs and all that. You can see from the group that they are particularly all women, and desperately poor women, and they are the borrowers.
And here is a picture of a loan (fig. 4). This is a cow that was bought for approximately 3000 Bangladeshi drakar, which was at the time approximately $60. And when this cow was fattened, with some kind of oil cakes and Indian fattening products, this cow was worth three times as much.

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Now, this part of the presentation I am doing here is what was my [inaudible] I am working on the next book and hopefully it will be done this summer. And this is From Microcredit to Microentrepreneurship. As I mentioned in the beginning, this microcredit program has created a class of people who are now mciroentrepreneurs. “Entrepreneurship” is a term that was first used in economics way back in the mercantilist era in the 17^th century by Richard Cantillon (1680-1734). And then it was refined and defined basically by two people. [inaudible] created the structure that Schumpeter found, the problematic of a “Distinct sociological class” which was also Schumpeter’s distinction. Schumpeter is the one who defined what entrepreneurship is.

Bangladesh is in the world no more than 13 in the level of poverty. One of the poorest societies of the world. Even in that country, microcredit has given away [inaudible] to group [inaudible] at the point of $50, who are not only supporting themselves, not only lifting themselves out of poverty, but are employing others and showing what you can do with the [inaudible].

Now according to Schumpeter, an entrepreneur is one who is more than a capitalist. Capitalist doesn’t take a risk with his or her money. An entrepreneur takes risks. Assuming risk, always involved is innovation. If you cannot innovate, you cannot [inaudible]. So if you cannot [inaudible] about 25% of entrepreneurs are innovating a product, at least the first time of production, e.g. Microsoft, Apple, and others.
The way Schumpeter gets his model, was that an entrepreneur does significant changes to the production process. The production process is defined as the technological relationship between input and output. According to Schumpeter there are five important interventions in the production process that lead to innovation:

1. Introduction of new good
2. Adoption of new inputs to produce a new good or the previously produced good
3. Introduction of new technology
4. Opening of a new market
5. Creating a new economic organization

And this is the model that is used almost universally by anyone who is working on entrepreneurship. So what I thought of doing, was to extend this model to microentrepreneurship. Microentrepreneurship has been in existence since about 1970, but no one has looked at it this way before, or at microentrepreneurship in a desperately poor country like Bangladesh or a country like [inaudible] for that matter, or countries like Eastern Europe or Hungary. So in doing that what I did I went back three or four times to Bangladesh and gathered information and tried to examine how many of these five factors of innovation are actually there by the entrepreneurs innovating new products.

This is the heart of the model. Innovation is at the center of the model, and the most important characteristic.

Now, what happened to us in Bangladesh, and I have a theory about this, this is what I saw. Once you have an entrepreneur class that is coming up, once you have a market, the nature of the market is, the market becomes an oligopoly. In Bangladesh the same thing happened. Out of 600 MFIs, three became inordinately big. (fig. 5)Those three are BRAC, ASA, and Proshika. These three NGOs control 80% of the microcredit market. Sure enough they become entrepreneurs, sure enough they introduce a number of products. I tell you of some of the new products they produce one of them is called the [name?] toothbrush. It is [inaudible] using a good tree branch for a brush but then they introduced [inaudible] and became a huge success. They used some toilet soap out of mint extract which became a kind of [inaudible] in Bangladesh. Things like that.

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So by doing that, they [inaudible] the amount of profit and [inaudible] of the model. It is no longer a mission-led institute it’s a profit-led institute. So once they did that, this is a model of oligopoly that [inaudible].

Now, 17% interest doesn’t really matter for these poor people for the rate of return is very high, the rate of recovery is very high, but even then they are poor. [inaudible] so the government [inaudible]. The government [inaudible] for tourism.
And this is another novelty, the Grameen Bank, before I turn to the government. This is the Grameen Bank (fig. 6), it is a little different from the other MFIs in the sense that the government is not a [inaudible] it is a regulated monopoly.

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Figure 6. The Case of Grameen Bank – A Regulated Monopoly. Figure adapted from McConnel1 and Brue (1999).

51% of the Board members of the GB are from the government, 49% are not. So what the GB does is peddle into loan programs, and finance [inaudible]. As of October 2003, GB has disbursed 167.68 billion since its inception. GB has government representatives on its Board and the interest rate or “service charge” is set much the same way as rates of regulated monopolies.

Grameen’s operation is independent of the MFI operation in that Grameen no longer borrows from any source. Being the only self-sufficient micro finance institute of the country, it enjoys independence in setting its interest rate. The interest rate charged by Grameen for its conventional loan is the highest in the industry ranging from 20 to 22 percent. Grameen charges full cost price—characteristic of a regulated monopoly.

In Figure 1, the socially optimal interest rate Grameen Bank could charge is Pr where the
downward-sloping demand curve cuts the MC curve. Grameen, however, charges the fair-return rate or the full-cost rate of interest at Pf where the demand curve intersects the average total cost curve. Grameen could charge as high an interest rate as Pm, which is the pure monopoly rate. A monopolist determines the pure monopoly price by selecting the profit maximizing output at MR=MC and then charging the demand price corresponding to the profit maximization point. Note that the fair return or the full-cost rate is higher than the socially optimal rate resulting in under-allocation of resources. If Grameen Bank was successful in lowering its transaction cost (estimated to be 20 cents per dollar lent), its average total cost curve would cut the demand curve at a lower point allowing for additional allocation of resources and lower interest rate.

Donald Jenner: You used the expression mission-directed versus . . .

Wali Mondal : Mission-led, maximalist versus minimalist.
Donald Jenner: Mission-directed oligopoly . . .

Wali Mondal : The original model of microcredit was mission-led that means if MFI [inaudible] it must be approved by the bureau of the NGO. There are 600 MFIs whose missions can be as simple as investing in pig-industry, raising pigs, or poultry, or cows, and so on. This is one of the MFIs; they go into certain parts of the country where they will find that kind of activity. When these three large MFIs became very big, they started buying the smaller institutes. They start lending their own money to the smaller institutes, so that they would borrow their money, and then they will be led not by the mission but by the profits. And that is when the market becomes an oligopoly. Government intervention returned to mission-led and marked a move form oligopoly to monopoly.

[The dominance of the three large MFIs, namely BRAC, Proshika and ASA is similar to an oligopoly structure while competition for differentiated products for about 600 MFIs is similar to the monopolistic competition.

The dominance of the three big MFIs is very similar to the imperfectly competitive oligopoly structure. The oligopoly, sometimes known as the cartel, is defined as an industrial organization where four to six firms control the lion’s share of the market. Examples include the automobile, appliance and aircraft manufacturing industries of US. The oligopoly situation in the micro finance market arose as a result of the three big MFIs controlling key resources.]

Donald Jenner: Thank you.

Wali Mondal : So now we come to government. The government found that, well the government was driven to desperation [inaudible]. The market economy, at the same time they are losing the very essence of the lending program. This is not for profit, this is to help people. So they started putting pressure on the government. We are giving you money at 2%. [inaudible] money at .75% less than 1%. And you tell us that we lend this money at 80%, you cannot do this. The World Bank [inaudible] those things, and the families were content. This is one case in which I support government regulation. Because this is a case for who, the market is good, but it should be regulated.

The government looked at the whole structure. The government bureau for [inaudible] affairs, they looked at the whole structure, and they found the biggest problem was sub-contracting, or re-lending money by [inaudible]. So the government created an agency known as Palli Karma-Sahayak Foundation (PKSF), and they said they are the only ones who can lend money. Thus they assumed the role of the only wholesaler of microcredit. And that was a mission-led model; delivering microcredit was a part of fulfilling its mission.

And once that happened, the economic structure of the whole organization of the microcredit lending institute changed. From oligopolistic it became monopolistically-structured. Which means that a combination of a few little organizations which have their own little market share. So they have competition among themselves, there is also [inaudible] but then the big [inaudible] cannot [inaudible]
Now, this is the last part of the presentation. This is where I experimented with the idea of microentrepreneurship.

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In 2001, when I was in Bangladesh, I met with Women Entrepreneurs Association and selected five women entrepreneurs from their work on microentrepreneurs. These were published in August in Bangladesh. [inaudible] it is pretty well know, so I borrowed the five cases. I went to each of the five women, and with the idea of seeing which of the five characteristics of Schumpeter’s entrepreneurship model applied to them.
A typical case in a country like Bangladesh, a male-dominated society, where males can leave women anytime they please. In the countryside, there is no record of marriage or divorce. Minu Begum was deserted, not even divorce, at the age of 19 or 20. She did not know how to survive, and she was left with nothing. All that she got from this husband was a drive, an entrepreneur drive, her husband was a little business man, but one day he found another woman and left. So she borrowed her money from the government, the Grameen Bank, she joined a group and she told that group that I am going to do something which is going to be very [inaudible]. I am going to have a tea stall, I am going to run the tea stall. She was an attractive woman, a young woman. And she said I am going to design in a pretty design, so that it will be attractive. And then most importantly, instead of serving tea and [] a sort of cookie that goes with tea, she said I am going to serve some bhapa pitha which is a rice product and very filling. And somehow that attracted the conventional trainers. So they started doing that and there was a lot of support for her, even though in the countryside she could have been [] she could have been under pressure to do nothing. So what we have here is a drive for marketing, we have changing of the production process in a nutshell. In three years time she had started with 3000 drakar, she had three other tea stalls, run by her nieces and nephews and what have you, she had 25 cows, she had three [inaudible] and some acres of land, so her net worth was almost 700, 000 drakars. [inaudible]

Now this is Majeda Khatun [insert slide 17 here]

If you look at the very right-hand side, the variety store is almost like Schumpeter’s definition of capitalism. No risk. But then if you look below you’ll see that she used inexpensive labor to assist in the sales of a variety of highly demanded goods. She created a market for it. She created her own product. That is innovation. That is introduction of new goods, of new raw materials, adding to it, and creating a new product.

So basically, the idea is what will sell here? What will I do?

Next one. [insert slide 18 here]

This is Dr. Sandhya Roy. She is a medical doctor. She was working for one of the NGOs and that is where she learned of a new treatment of nutritional supplement, and created a new nutritional supplement. She started doing that in the least expensive possible way. She combined nutrition training, nutritional supplements, and skills education to create a new type of NGO and more effectively combat malnutrition. So once again, this is a case of an entrepreneur who left a conventional life of being a doctor started caring for the rural population. And she came up with a product mostly for pregnant and nursing women.

Now this is Dil Rowshan Akthery [insert slide 19 here].

She introduced a new type of dry flowers and floral arrangements. When I talked to her why dried flowers in a country like Bangladesh where flowers are so inexpensive and labor is so inexpensive, you should have made tons of money with fresh flowers. And she smiled and smiled and said well just look at the flowers right next to you, they are dumped, the streets are polluted, nobody comes to clean them. So literally there are a few hundred thousand pounds of the stuff just sitting there and nobody cleans it and the rains come and it becomes a mess so I thought I would come and do that and also I would get to the [inaudible] for the wealthy ones and not for the [inaudible]. So introduction of a new product and a new way of doing things.

Okay, next one. [Insert slide 20 here]

Syeda Ruby Ghuznavy. This is another story of innovation, of thirty colorfast shades which are non-pollutant and eco-friendly. The last two women are concerned with the environment, but invent new means of production.

And then here is one, Rahima Mahmud, who did the same for created facility and distributorship for farm-grown poultry products. These were the earliest poultry products in Bangladesh. Right now, poultry is big in Bangladesh, but she is the [inaudible] and this is how she got the problem solved. [?]

Next one. [insert slide 21 here]

Conclusion.

• Microcredit Program started in 1905 in Bangladesh
• Grameen Bank popularized the operation in 1983
• All microcredit programs are targeted for the poor, mostly for women. By the way, I guess most of you know, that the recovery rate for microcredit loans is 98%, whereas in Bangladesh the average recovery rate of conventional loans is 63%.
• Microcredit programs have created a class of microentrepreneurs
• Innovation is a part of microcredit operation thus promoting economic development
• There are over 1200 NGOs in Bangladesh, about 50% of them engage in mission-led microcredit operations.
• Recently the government started to control the microcredit operations.

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Policy implications:

• Microcredit is a tool of poverty alleviation
• Microcredit generates significant positive externalities such as empowerment of women
• Microcredit programs help develop infrastructure and rural development.

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Recommendations.

• Increase the scope of Microcredit to reach all families below the poverty line. Right now it is about 55%. It can be done
• Develop microenterprises and microentrepreneurs
• Ensure the success of smaller MFIs
• Continue empowerment of the poor and particularly women

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What’s next for Bangladesh?

• An in-depth analysis of socio-economic aspects of microcredit and poverty alleviation
• An analysis of the microcredit models adopted by other countries

Thank you very much.

Q&A

Rohit Parikh: Will you take a few questions?

Wali Mondal: Yes, of course.

Donald Jenner: I assume from your last slide that an assessment has yet to be made of the point at which this kind of microcredit becomes sufficiently important to the overall economy as opposed to [inaudible] that you don’t know quite where it will tip over and become something which can’t possibly be done away with.

Wali Mondal : First of all, I didn’t tell you one thing, that economists usually don’t agree. But there is one agreement among economists about the impact and the importance of microcredit in a country like Bangladesh. Last year alone, there were three Nobel laureates in economics that we did a Bangladesh interview with –Professor Mistigli, and [inaudible???]. All three of them were very impressed, and all three of them suggested that the government needs to increase its total [inaudible] for microcredit and to propagate it. Unfortunately, if you’re familiar with politics, especially Bangladesh and Pakistan, what is happening right now, and I’m not crazy about it, we have a government that is a little bit non-market. So there are some minor problems with microcredit operations, and there are one of two MFIs that were promoting Christianity, side by side, in [inaudible]. And the government took that very hard on them, and they are punishing all the microcredit operations for that.
So to answer your question, the microcredit operation can be a significant tool for propagating [inaudible]. It has already proved to be a significant tool for improving something that is learning, something that [inaudible], and many other things.

Thank you again.

Betty Lee Sung: I wanted to comment. I found it so interesting. In the earlier session, we were talking about remedies. When you have a problem, like you have in Bangladesh, like unempowered women, and poverty, and you developed this system of microcredit that sounds great. I wanted to say that when the early Chinese came to the U.S., they couldn’t go to the banks, they didn’t have money, they were poor. So people developed a system of cooperation which is called “petit systems” [?] where a group of people would pool there money and let one borrow the money, and the next month—of course you had to pay it back—but then the next month, the next person would borrow the money. And again, it wasn’t based on any rules of banking of systems, but on the honesty and integrity of the members involved. And shame was also a big part of it, because if you didn’t pay back, your standing among your own people would be ruined. So this is what we mean by remedies. I’m a great one for saying “you have a problem, you have to come up with a remedy.”

Rohit Parikh: Our next speaker is Vinit Parmar from Queens College. He is a professor of film, but he also says he is a lawyer. He got his degree seven years ago. He is going to show a short film, and then I assume you will answer questions.

Vinit Parmar: Certainly. It’s about 19 minutes long, and this film is a sort of documentary that was prepared by me, when I went to India from December 20, 2003 to January 16, 2004. This film was shown at a conference at which I was invited to speak and it was in response to the purpose of my calling there which was to talk about the role of media in the tannery and textile business.

How many of you by the way are wearing some kind of leather shoes? Leather belt? Leather wallet? Guess where it’s coming from? It is coming from one part of the world. It is Asia. They are supplying the world with everything. We are talking about globalization and all of the jobs getting sucked out, well the jobs began to get sucked out from the U.S. and Europe back in the 50s. It is not a new phenomenon. And the reason is that we have environmental laws that are enforced. There, there are no environmental laws being enforced. They in fact have more environmental laws in that part of the world than we do here, but the problem is a lack of implementation.

So that is why this video was made. It is in response to certain issues you will see. And of course there is a stigma, and so many terrible things wrong with, let’s call it, the “backward society” of a developing country. While we do recognize that the developing countries are providing such valuable resources to the western countries, we must also recognize that certain things need to change to make life better.

Why did I make this thing?

Two reasons. People are dying, and there is a case of international environmental dumping. And this piece is a work in progress. I’ll be going back to that region, to Pakistan, India, Bangladesh, and hopefully I can get into China, though not very likely for 2004, to continue making this documentary.

One quick thing by the way, since I’ve mad ethis particular film for people inside the industry, who know the industry so well because they’ve been living it for so many years, that I need to tell you a little bit what’s happening. Leather companies and textile companies and dye companies create chemical effluents then get leaked into the oceans, river, local water, get released into the air and because of recent legislation in India and other areas like Pakistan and Bangladesh, these materials have to go through a pipeline., what’s called Common Effluent Treatment Plants, where companies are required by law to remanufacture or recycle some of these chemicals. We’re talking cadmium, chromium, lead, all sorts of harmful elements that cause us cancer, stomach ulcers, skin disease, and all sorts of terrible things. Genetic defects, birth defects, all sorts of nasty things. These chemical treatment plants are supposed to extract these chemicals and find places to dump them. Life is not perfect, this is always good in theory. Of course what happens is, you’ll see in the video, and then we can talk about that. But I wanted to tell you what Common Effluent Treatment Plants are all about.

[Documentary Video in Play]

Vinit Parmar: As I said, this is a work in progress. Does anyone have questions?

Q&A

Leonard Gordon: I wondered about the workers. First of all, they are exposed to all the toxicity. Some of the workers, do they have anyone apart from the NGOs who work on their behalf? Any parts of the government that are looking into the risk these workers are exposed to?

Vinit Parmar: That’s a great question. Part of the conference that I attended there, addressed one whole day was addressed to professors talking about worker conditions and health issues. We have what is called OSHA here, there they have no such government body, either in India, Pakistan, Bangladesh, nor in China. They don’t have a place or a forum in which to address their own [inaudible]. I’ll give you an example. The dye factory owner took my aside after I’d gone to his factory, and he said he would not be willing to be recorded to admit the fact that he said, “Look, I’m hiring you to work in my factory at 10 rupees a day. The moment you get sick, as long as you can’t work because you’ve been injured in my factory, fine, I’ll fire you. Then I’ll hire your brother for the same amount of money.” It is that degree of viciousness that has pervaded the entire industry in the textile and dying factories. There is no consideration whatsoever for the relationship between the factory worker and the owner, it is just not conducive to have a union.

One of the images I didn’t show was a discussion by a union representative that I was lucky to catch on the street. And we talked about this very issue. The collusion between government officers and the owners themselves in building safer factories doesn’t take into account worker health issues. For example, first aid kits. Simple things like having a washroom, wearing gloves, having the appropriate gear to walk into the factory, and to know that there are things you can use to protect yourself. The awareness isn’t there. [inaudible] The NGOs, of course, are working to remedy that. There are laws in place, of course, as I’ve said, to promote, but nothing compels, because the laws aren’t enforced to compel the owners. I hope I answered that question.

Donald Jenner: Did you encounter the sort of jargon that one frequently hears from this part of the world, from countries like that, “yes but you western devils, western Europe and American industrials went through polluting your own land for years. And we know this is true. The Hudson River is much cleaner now than it ever was in the nineteenth and most of the twentieth century. The [inaudible] count became so polluted that the rain and all that jazz by the time of the Revolution. The argument one hears, of course, is that this is part of the process of industrialization. One hears that from the Chinese, one hears that from various [inaudible]. Did you hear this argument in your research on site, as it were?

Vinit Parmar: Yes. There are two strains of thought. There’s the one thought, within the English-speaking cell, in the government bodies, that are trying to promote a handful and gaining confidence in the relationship trying to be built between the government who implement the law. The “I’ll take care of you, the industrialist, if you take care of me.”

The government is saying if you showed this kind of documentary to the people within our country, you’ll cause a stir up because you are showing something that is not good for our people. We need to build our businesses, we need to do what we can first to aggrandize, to build an infrastructure, to become rich, and then maybe we can attend to the issues that have come about as a result of being industrialized.

The workers themselves say hey, wait a minute, by the time you guys get rich on our health and destroying our environment, it will be too late. Because basically, the kind of damage being done now to the water, to the ground, to the air will be so great that their grandchildren will have birth defects and genetic mutations as a result of chromium 6. For example, a thing that happened that I have yet to document . . . chromium 6, by the way, is used in the leather tanning process in the chemical factories. It is not used in the vegetable tanning process. How many people saw “Erin Brokovich”? What happened as a result of that film, through arbitration with the company that Erin Brokovich was trying to sue, they settled for 333 million dollars and there was still no determination as to whether or not chromium 6 was contributing to health problems for that community. Here you have chromium 6 all over the place, as you saw in the footage. [inaudible] A lot of the women who go out in the community and want to buy cheap wood to cook, what they will do is take pieces of scrap leather they find and use it to make fire to heat up their food. There is chromium in the leather. Usually it is trivalent chromium. When you heat trivalent chromium it becomes chromium 6, and then when you heat chromium 6 and the leather ashes get inhaled, that causes lung cancer. And that happens all throughout the community. And this is the predominant means of cooking in Bangladesh. And of course there is no education to let them know this is dangerous.
So in answer to your question, it raises so many issues.

Donald Jenner: What is the cost to convert a larger percentage of dying or leather tanning. You said the vegetable tanning doesn’t produce this problem, it does the job with fewer pollutants. What is the cost to convert? What is the cost per unit of leather either way? Are they comparably priced?

Vinit Parmar: No. It’s feasible to go through a chemical process which is a 16-step process where you can take leather once it is cut and process it in a week. So you can produce literally a ton of leather in a week. Vegetable tanning has a lot smaller profit. It has a 45 day process. The manufacturing produces a fraction of what chemical tanning can do. So in terms of cost effectiveness, it is a lot easier to manufacture in bulk using the chemical process. But then of course, the environmental and health impact has no way to really contain that cost.

Pyong Gap Min: What kind of coalition do you have there in terms of say [inaudible] issue?

Vinit Parmar: Well, one would think it is a democratic process at work. The gentleman who was talking about releasing chemical effluents into the water [in the film] was instrumental and has written a book on public hearings, where public institutes are called upon by locals. The problem is that locals don’t speak the language. And the democratic process then fails. I am just telling you about the problems. [inaudible] What happens is, if I don’t know the language, and I don’t know what my rights are, then I can’t reach out to the people like the NGOs. The NGOs come otu to the community to me and say “aha” I see what you’re suffering from, this is what you can do to help out. The NGOs have been instrumental in that, bridging the gap and helping to make for a more democratic process.

The judges, for example, who administer and hold the hearings don’t know what is going on. One of the stories was that they have actually said, “you, tribal person, now that you have called a public hearing to talk about the flouride in your water that is causing your gall stones, I don’t know that the flouride is causing your problem, so what I want you to do is, I’m giving you a week and you organize a committee of experts, five or six scientific experts, and then report back about the impact of flouride in the water, because I do not know whether or not your ailment is due to this chemical being produced by this industry next door to you.

And so even the judges are not aware of the the fact that [inaudible] doesn’t know about the pollution, doesn’t even know what flouride is, doesn’t even know what NGO is in charge to get them to voice these issues. It is a whole mess of issues.

So the only coalition that is sort of in charge is the Central Pollution Control Board. And they are there to monitor these issues. The way the structure runs, at least in India, which is different from many of the other countries where there is no infrastructure, there is no pollution control board. At least in India you have four zones: the north, south, east and west zones. The interview you saw was with the north zone chief, lucky, you know how hard it is to get interviews at all in India, especially the government, wtih all the bureaucracy. But they administer, they have all the rights to administer this stuff, but the problem is you have the state control board that has to implement all the water that the central control board designs. The state control board doesn’t necessarily implement it because we’re dealing with sovereignty issues. The state doesn’t want to get federal or central government intervention. So a whole mess of political issues that come into play. When the state control board has friends or family in the industry. So corruption of course comes into play.

Betty Lee Sung: Can you tell me why the tannery industry became such a dominant industry in India, especially when the cow is so sacred they do not slaughter it? How can that work out?

Vinit Parmar: Actually 50% of all the leather that is produced is from China. 30 to 45%, I’m not really sure of the numbers, so don’t quote me on it, up to 40 or 45% that is coming out of the world is coming out of South Asian countries. 30% I think is coming out of India. Even the tannery leather people workign in this industry are saying, and this is a business proposition, leather is gotten from cows or pigs that are slaughtered for meat. So leather is not necessarily sought for, and the animal is not necessarily killed for the leather itself. It is a byproduct, and therefore it is okay for us to be involved in this business because we are not necessarily trying to kill the cow we’re just trying to make a business but of whatever else is there.

Minhaj Qidwai: There must be countries [inaudible] so what level of occupation activist in teh case of accidents. Are they the same or are they different?

Vinit Parmar: In what industry?

Minhaj Qidwai: [inaudible] complaining in the United States. Do you see the same [inaudible] in the textile industry. What are your observations?

Vinit Parmar: I’m not sure I’m qualified to answer that question, but I do want to touch upon something I do know about. Because of currency issues, it is a lot easier for corporations from here to pay out, because of the way the currency runs and the money that is distributed it is easy here to pay out and for money to get out and reached out to the community. The problem is the money never got to the community. The ones holding on to a lot of the money are the politicians. So this is a mess, it doesn’t really work out as a solution unless you have an independent body that distributes it. Otherwise it is too difficult to oversee.

To get back to Professor Qidwai’s question, and one of the reasons I made this documentary is that initially Europe and America had tanning industries here. The reason they moved is that American environmental laws that prevented this type of industry from being economically feasible. Companies did not know what to do with the chromium solid sludge. It is called TDS, total dissolved solid. The end product of this is a brick of chemical waste, and these bricks are stored out in the community somewhere in these big vats and blocks that are created specifically to hold these chemicals that are no longer good for society, like uranium blocks that no longer do any good for society. Because the U.S., Canada, and Europe couldn’t build any of these ourselves, we farmed it out to places in India, China, places where implementation would be possible.
So essentially over a period of 50 years we have seen a shift where industries that used to be here are now there, for the cheap labor, [inaudible] bypassing governmental laws certainly the case for international dumping.

Rohit Parikh: Thank you.