Shantanu Menon, Kushagra Merchant | Published: 28 February, 2025

Origins

This case-let introduces Muhammad Yunus, the founder of Grameen Bank. The case-let explores the journey of Yunus-a Nobel Laureate and founder of a pioneering organisation in the field of microcredit-in developing the Grameen Bank model and the challenges faced along the way. The case-let provides an opportunity for learners to reflect on the motivations, personal characteristics, and contextual factors that influenced Yunus on his journey to developing an entirely new way of looking at poverty and the role of credit in poverty alleviation. Learners will be able to develop an understanding of the principles of microcredit and microfinance and the applications of these; and engage with the systemic and cultural shifts enabled by Yunus and Grameen Bank in Bangladesh: a young republic just over a decade into independence around the time Grameen Bank was founded in 1983.

Authors: Shantanu Menon, Kushagra Merchant
Copyright: Attribution-NonCommercial-ShareAlike 4.0 International License
©Author, Indian School of Development Management
Citation: Menon, S., Merchant, K. (2022). Case-let. Muhammad Yunus and Grameen Bank. ISDM Case Centre, Uttar Pradesh.
DOI: http://dx.doi.org/10.58178/2210.1036

*The production of this case-let has been done using secondary data from multiple sources available in the public domain between 2020 and 2021. For updated resources, learners are recommended to supplement the case-let with secondary research. The case-let is part of a series of case studies to support learning pedagogies in Development Management. The production of this case has been financially supported by the Centre for Social Impact and Philanthropy (CSIP) and Ashoka University.

Origins

Muhammad Yunus is the founder of Grameen Bank, a pioneer in the fields of microcredit and microfinance. His work with Grameen Bank in the field of poverty alleviation through microcredit led to him being awarded the Nobel Peace Prize in 2006. Yunus hails from Chittagong, Bangladesh. He studied economics at Dhaka University and went on to the USA to study economics at Vanderbilt University on a Fulbright Scholarship, completing his Ph.D. in 1969. Thereafter, he took up a position as Professor of Economics at Middle Tennessee State University in 1970 (Muhammad Yunus Biographical, 2006). When Bangladesh became independent in 1971, he resigned and returned to his hometown, becoming the Head of Economics at Chittagong University.

In 1974, Bangladesh was struck by a famine, which eventually led to the death of thousands of people. Yunus describes it as a terrible thing to have witnessed, “seeing healthy people slowly degrading from hunger and inching towards death.” At the time (1973-74), poverty in Bangladesh stood as high as 82.9% (Azam and Imai, 2009). The country was reeling from a genocide and a liberation war against West Pakistan (modern day Pakistan), which had led to the formation of the People’s Republic of Bangladesh. This period of conflict in the country resulted in the displacement of millions, numerous massacres throughout the capital city Dhaka as well as air strikes and extensive military operations in rural and urban centres. The famine only exacerbated an already serious situation.

It was against this backdrop that Yunus began visiting villages around Chittagong to see if there was anything he could do to help. As he reflected on his experiences at the start of the journey towards founding Grameen Bank, he kept coming back to a particular incident that took place over the course of his travels around Chittagong during the famine. On one of these visits, he saw a woman with torn clothes making bamboo stools by hand in front of her ramshackle house. According to Yunus, they were exceptionally beautiful, finely crafted stools and it was clear to him that the woman had a huge amount of skill. He went to talk to her about her work, asking her how much she would sell a stool for and what kind of profit she was making. She explained that she was making 5 Taka (2 American cents) a day. Yunus, impressed by the quality of her craft, couldn’t believe it. She explained further that the bamboo raw material she used cost her 25 cents. Since she did not have this, she would borrow it from a trader, who would lend it to her on the condition that she would sell him all the stools she made at a rate that he would decide, and not the market rate. As a result, after a whole day’s work, she would be left with merely 2 cents. Yunus recalls:

I realised that this was not really lending at all. He had actually converted this woman into slave labour for 25 cents. It shocked me, for 25 cents, how easy it had been to recruit this woman as slave labour. I thought I would give her 25 cents, so she doesn’t have to go and borrow from him. But I resisted for a while thinking, let me see what this really means. The next day I went around the village, to make sure I understood if other people were in the same condition or if she was the only one. When my list was complete, I had 42 names on my list of people who had borrowed from the moneylenders. The total money they had borrowed [between all of them] was USD27. I couldn’t believe people had to go through so much humiliation, so much torture, because of this tiny little [amount of] money. (Global X, 2008)

The difficulties people were going through, for sums as small as this, had a strong impact on Yunus. He decided to give the USD27 to the 42 villagers so that they could return it to the moneylender and be free, even if temporarily. Instead of charity, he pitched this as seed money to the 42 villagers, such that they could make their items for sale at market price or their chosen price, without the burden of the high interest rates of the moneylender. The happiness this generated in the village also took him by surprise. The villagers eventually managed to return the whole amount to him.

This experience left him with lasting thoughts and pressing questions. If such small amounts of money could set people free from the clutches of moneylenders, was there a way to do more of this? What led to poverty? What created a situation where people had to face this level of difficulty just to make ends meet? Is it the fault of the people? (Global X, 2008).

Yunus credits his idea and the work that followed, to bring Grameen Bank into existence, to a conclusion he found himself reaching repeatedly. He realised that there was nothing inherently wrong with “poor” people, and there was nothing fundamentally uncreditworthy about a poor person. Poverty was a product of the system and concepts that humankind had chosen to create and live by. Yunus further recognised that the problem of poverty, which went back centuries and was entrenched across all human society, was far too big to be solved by one person.

However, he had seen that small loans to the poor, with reasonable repayment terms, could lead to drastic improvements in their lives and could be repaid without suffering the predatory practices of moneylenders. He decided to take the matter to the banks, trying to convince them to lend money to the poor villagers, arguing that the sums involved were miniscule compared to their usual transactions. His idea was flatly rejected. They simply would not lend to the poor. Prevailing financial wisdom considered them uncreditworthy and unlikely to repay. The poor, generally, were not deemed to have assets that could be used as collateral. The banks’ rules were inflexible in this regard.

An eight-month struggle ensued between Yunus and the banks, leading to a solution in which Yunus said he would personally act as the guarantor for all bank loans to the poor. The banks agreed to this and started lending money while Yunus devised practical repayment plans for these loans, aimed at easing the burden on the villagers. However, the banks eventually became reluctant to carry on with the scheme as more and more people started showing interest in Yunus’ loans. Eventually, this led Yunus to setting up his own bank, which opened in 1983 as Grameen Bank (Global X, 2008).

The poor are creditworthy: Yunus and Grameen Bank’s philosophy

Grameen Bank was consciously set up on principles markedly different to conventional commercial banks. Commercial banks required a series of verification steps prior to the approval of a loan, such as identity documents, introductions, references and business plans. Additionally, the more affluent a client, the easier they found it to gain further access to credit. On the flip side, the poorer an individual, the harder it became for them to access lines of credit. Yunus understood that the processes at commercial banks were not designed to be accessible to the less privileged and decided to try a contrary approach: the less a client had, the higher the priority they became for Grameen Bank. All they required was an idea of how they wanted to use the money, and they would be considered eligible for a loan by the team at Grameen Bank (Arham, 2014). The entrepreneurial potential of the poor was given priority over their ability to repay.

Yunus also structured Grameen Bank to operate such that staff were specifically hired to travel to the villages of Bangladesh, meeting villagers at their doorstep and extending lines of credit where required. This marked a paradigm shift from the traditional way financial services were accessed and allocated (Mainsah et al., 2004). It made access to a formal financial institution a far less formidable prospect for the poor. Professor Yunus reflects:

You (a borrower) know me, because I come to your place, everybody else in the neighbourhood knows me because I come to your village, so it became a more human kind of environment. I think that’s very important. We structured the institution in a way that it can function like this. We said, people should not come to the Bank, the Bank should go to the people. So we built a system where people remain where they are and still deal with a financial institution, which is unheard of.

He continues: Human beings like to take on challenges. This is the essence of being human. So, we should be building structures, building policies where human beings will be encouraged to take on challenges, where their self-employment becomes a very important part of life. Why should human beings wait in line to get hired? Why enter an economy based on someone else’s desires and wishes? Human beings are very creative and they need opportunities to express their creativity. That’s what an enabling environment is all about. The world looks at the poor as the subject of charity. I’m saying this is the wrong thing to do. Create alternate institutional frameworks where people can, by their own right, do things in an entrepreneurial way so their dignity is not compromised.

It is important to note, in studying the journey of Muhammad Yunus, that sustaining and nurturing this spark of self-help is the foundation of Grameen Bank and its founder’s vision (Arham, 2014). Exhibit 2 shows the reasons for which members have taken loans from the Bank.

In the original model of Grameen Bank, a bank unit was set up covering 15 to 22 villages and assigned to a manager and a team of field staff. This team familiarised themselves with the villages covered by the bank, making door-to-door visits to understand requirements for credit as well as to explain the purpose of the bank to the locals. Prospective clients were identified in these visits (Mainsah et al., 2004).

The group lending model

The Grameen Bank model was founded on a group lending philosophy, whereby loans were given out to groups of five people at a time. The group elected a chairperson whose responsibility it was to oversee the repayment of the whole group’s loan. Along with the chairperson, the group was responsible for the repayment of the total loan disbursed. Behind the group lending model lay a simple idea: that being part of a group would generate collective security and collective responsibility which could overcome potential repayment challenges faced by any particular individual. The model encouraged transparency: all group members discussed the details of the loans they were taking out with each other, including the type (repayment plan), amount, and the personal enterprises the loan was going to fund. Decisions were then taken by group consensus, thus keeping all group members comfortable with the credit activities of their peers in the group.

This transparency was a highly unique feature of the Grameen Bank model at the time, and later research on the model pointed out that such open procedures significantly mitigated the entrenchment of vested interests that could grow to become sources of fraud and corruption (Khandker, Khalily and Khan, 1994). Each group was given weekly training on the rules and regulations of the Bank, as well as on maintaining the discipline required to ensure timely repayments. Exhibit 1 gives more details on the group lending mechanism.

Growth of the Bank and challenges (1983-1997)

Following its charter in 1983, Grameen Bank went through a phase of rapid expansion. By 1993, it had 10,531 staff members across 1,031 branches covering members in 32,529 villages (around half of all villages in Bangladesh). Over this first decade, membership of the Bank increased more than ninefold to 16,14,673 people (Khandker, Khalily and Khan, 1994). The rapid growth of the Bank soon led to the need to develop systems to oversee the training and development of its large number of staff and borrowers. Training centres were set up, running six-month apprenticeships and classroom training for each employee.

The Bank was seeing repayment rates consistently exceeding 90% over this entire early phase, as well as high borrower retention and annual membership growth rate. In comparison, the repayment rate of traditional financial institutions in Bangladesh at the time was 75% (Martinez-Miera, 2010). For Yunus and Grameen Bank, the high repayment rate of loans was a powerful statement of the entrepreneurship potential of the poor when given reasonable terms and the proper channels for expression. It represented a validation of the founding philosophy: that the poor were worthy of receiving credit, a philosophy which was at the time completely contrary to prevailing financial thought.

In the decade following the opening of the Bank, a vast majority of members (94%) were women, a trend that has continued to the present day. This was not the result of a specific plan by the founding team. Rather, the priority focus of the Bank on those who owned the least assets inadvertently became a selective mechanism that benefited women, who were economically the least well-off and owned the least assets (such as land) in Bangladesh at the time. Yunus describes this as an unexpected success for the Bank, as women were delivering concrete results (in their personal enterprises) and making successful repayments that warranted ongoing membership of the Bank, contrary to the prevailing view of women as unskilled at enterprise (Arham, 2014).

Yunus then started to look further into increasing the scale of the Bank, seeing that the model was clearly working and that there were millions more in poverty around the country who could benefit from it. The Bank had begun to gain international recognition and national importance. The Norwegian Agency for Development Cooperation (NORAD) and the Canadian International Development Agency (CIDA) expressed interest in funding the next stage of growth of the Bank.

This was where Yunus found that he had to be careful with balancing the need to expand while protecting his original vision. According to him, the international agencies wanted greater oversight and power when it came to the Bank’s operations, demands to which he simply said, “I am not interested” and walked away from negotiations. However, the funding agencies started feeling pressure from the countries they represented to place funds with Grameen Bank due to the significance it was gaining as a symbol and institution. The Bank represented the most innovative and effective way to support development in Bangladesh at the time. NORAD and CIDA yielded to Yunus’ position and signed on as a consortium of donors to fund Grameen’s explosive early growth phase (Hanley, 2003).

The “flood of the century” strikes Bangladesh

In 1998, Bangladesh faced one of the worst floods in its history, affecting over two-thirds of the country, rendering thousands homeless and destitute, damaging around 2.7 million acres of farmland and 9,500 km of roads. The flooding lasted three months, with total damage estimated at USD2.2 billion: 77% of the national development budget at the time. A wave of loan defaults occurred as a result, leading to repayment rates dropping to single digits in some areas, members refusing to pay, as well as not turning up to the required weekly group meetings. (Ninno et al., 2001; Hanley, 2003; Dowla, 2012)

It was a testing time for the Bank and its founder. While having a strong focus on the well-being of its members, Grameen also had a bottom line: it was answerable to shareholders and had a reputation to maintain that had been painstakingly built up, as the first large-scale financial institution successfully sustaining itself by offering no-collateral loans to the poor. Whatever aid package that the Bank designed to respond to the crisis needed to be finely balanced amongst these competing requirements.

To protect its members in the immediate aftermath of the floods, many of whom had lost all their assets, weekly repayment instalments were suspended and repayment schedules were extended. As repayment rates collapsed, the Bank dipped into its “emergency fund,” made up of contributions from group members (for every loan taken out by a member, a small fraction was set aside by the Bank to build up a level of resilience to sudden shocks). This fund was used by the Bank to provide short-term liquidity to keep the Bank open. Despite these measures, Grameen had to apply for a loan of around USD 81.5 million from Bangladesh Bank (the country’s central bank) as well as issue bonds to raise capital from the private sector (Dowla, 2012). This money was also used to issue fresh loans for housing (that had been washed away or damaged) or to set up businesses that had been destroyed in the floods. The increasing burden of debt for the poor members of the Bank eventually led to several old loans being informally written off. It has since been reported by Grameen that all of the post-flood debts have been paid off (Pearl and Staff, 2001).

Grameen II

While the original Grameen Bank model pioneered a lending approach to the ultra-poor using philosophies quite different to traditional financial institutions, the floods and the default crisis that followed led to a long period of soul-searching as the Bank came face-to-face with the realities of the financial system. The Grameen model provided loans free of collateral, but when a widespread disaster struck, it had no leverage over its borrowers to prevent defaults or non-payment. As a private bank, Grameen could not be bailed out by the government, and instead had to borrow money at commercial rates to cover its losses following the floods. This led to the realisation that the model, which had worked well for a decade, was not designed to withstand certain severe circumstances. A rethink was required.

Following an exhaustive spell of internal reflection and inputs from staff members across all levels of the bank, the model underwent radical changes in 2001. The changes were codified into a new model known as Grameen II. It brought the Bank much closer along the spectrum to organisations in the conventional financial system and primarily increased the flexibility of repayment. The various types of loans available were condensed into a single product called the Basic Loan. Instead of the yearly repayment over 52 weekly instalments, this loan could be repaid over a range of 3 months to 3 years, the flexibility allowing for repayment difficulties to be avoided. Each individual was now responsible for their loan instead of a group, and compulsory group savings requirements were abandoned. Loan insurance was also introduced. If a borrower opted for loan insurance, the whole loan amount could be written off in the case of death or a natural disaster. The changes introduced by Grameen II allowed a complete turnaround from the flood crisis to a new phase of expansion and strong financial performance (Dowla, 2012).

It is notable that the perception of Grameen Bank as a revolutionary lender to the ultra-poor remained (especially internationally), and Yunus continued to champion the ideas behind the original model at industry gatherings, such as the Microcredit Summit. However, since the development of Grameen II, the Bank expanded its focus from its traditional very poor members and started lending to slightly higher strata, albeit still poor (Hulme et. al, 2009). Following the floods, the Bank had to consider that as an institution, it had reached a scale and national significance that meant it could no longer ignore the other factors that determine the survivability of a business. The sustainability of the institution itself had to take on a higher importance. The lack of concern for the overall profitability of its financial products in the pursuit of its social mission was no longer an option.

Staying rooted (2001 – 2010)

Yunus reflects that the speed at which Grameen Bank grew took him completely by surprise. When he started his journey, he never intended to open a Bank, become a banker, or, inadvertently, create the field of microcredit. However, a small intervention in the life of a structurally exploited bamboo stool-weaver led to a situation where he became the head of a national institution, which by 2005, was opening two new branches a day (Dowla, 2012). It was a challenging time for Yunus. As the institution grew, internal functions as well as interactions within its ecosystem had to be balanced to keep the original idea and the social mission intact.

Throughout the early phase of the Bank, its social orientation and the level of attention paid to making its structures, processes, environment, and lending model suit the needs of its customer base was largely understated. The focus was on alleviating poverty and less on growth through attracting outside investment. It was performing all the activities of a modern social enterprise long before this became a buzzword in civil society.

While this approach retained the quality of Yunus’ idea, it inevitably led to an increasing influence of outside forces once it was apparent that the once implausible idea of lending to the poor was working and attracting international attention. Yunus’ own role started to expand from the operations and management of Grameen Bank to wider conversations around microcredit and the definition of poverty.

In 2004, Grameen Bank reported that 46.49% of borrowers had crossed above the poverty line and gained sufficient assets such that they were not in immediate danger of slipping back. The microcredit industry, in general, uses the Microcredit Summit definition of the poverty line, similar to the one used all around the world (an income of USD1 a day adjusted for purchasing power parity). However, in making this claim, Yunus applied a very different measure of what it meant to be above the poverty line (Mainsah, 2004). Grameen crafted a ten-point indicator test that each borrower needed to have passed in order to be classified as above the poverty line. This included, among others: having a home worth at least Taka 25,000 (approximately INR 19,000 in 2004); a tin roof and bed space for all family members; all children of school-going age enrolled at schools; access to clean drinking water; use of sanitary latrines; adequate clothing for general use, warm clothing for winters and a mosquito net (Grameen Bank, 2020a).

The success of the Bank-as an unintended consequence-also led to the growth of an entire industry of microfinance and microcredit organisations, of which Yunus had become the de facto symbol and role model. His reputation had spread around the world and terms such as “father of microfinance” and “banker to the world’s poor” had started becoming commonly applied to him-terms that continue to be associated with him even today.

His public presence hit an all-time high in 2006 when he shared the Nobel Peace Prize with Grameen Bank for his contribution to the concept of microcredit. The stage was set for the next big event in Yunus and Grameen’s journey. In 2007, he decided to move into politics by setting up his own political party. It was a decision that would come to have a dramatic effect on the story of Yunus and Grameen Bank.

The end of a saga

This decision to move to politics was taken at a time when a political crisis was unfolding in Bangladesh, with the setting up of a caretaker government following the end of the ruling term of the Bangladesh Nationalist Party (BNP). Questions were raised about the neutrality of the voting process by the main opposition party Awami League, leading to the declaration of a state of emergency and intervention by the military.

Yunus’ announcement of the formation of his own party came just as the military initiated a crackdown on political party leaders, making dozens of arrests amidst violent protests. Sheikh Hasina (Head of the Awami League and the eventual Prime Minister) perceived this (Yunus’ intent to contest elections) as a strong move by Yunus to oust her from politics (Lawson, 2011). The move into politics was eventually abandoned by Yunus, but it had set the stage for a long-standing feud between the Sheikh Hasina government and himself, with Grameen Bank soon finding itself the target of politically charged attacks.

In December 2010, Sheikh Hasina accused him of treating the Bank like it was personal property and claimed that his Bank’s work was “sucking blood from the poor” (BBC News, 2011). In 2011, Muhammad Yunus was asked to leave his post as the Managing Director of Grameen Bank by the government of then Prime Minister Sheikh Hasina. Yunus was eventually forced out by Bangladesh’s central bank, claiming that he was over the age of retirement (60 years). Yunus was 70 years old at the time. They argued that his reappointment in 1999 as Managing Director had been against the country’s retirement laws. The decision was upheld by the courts in response to an appeal by Yunus (BBC News, 2011). Yunus later reflected:

When I was 60, I submitted my resignation. “Why do you want to retire?” the board asked. “Is the work becoming too heavy on you? Do you want to do something else? If you’re enjoying your work and we enjoy having you, why don’t you continue?” So, I said OK. (Beard, 2012)

Government hostility then turned towards Grameen Bank, with Prime Minister Sheikh Hasina approving a proposal in 2012 to overturn the Bank’s laws regarding board-member selection, allowing the government to intervene and select Yunus’ successor following his departure (Bornstein, 2012). Apart from the threat to the Bank’s vision and founding principles, this move also threatened a highly unique feature of Grameen Bank.

At the time of Yunus’ departure, the government owned around 3% of Grameen Bank’s shares, with the remaining 97% owned predominantly by the Bank’s poor, women members. Additionally, nine of the 12 voting members of its board were poor village women duly elected by its shareholders with the remaining three appointed by the government (Bornstein, 2012). This board structure was a far cry from the boards of most traditional finance institutions, usually made up of powerful men. It was a breakthrough feature of the Bank that has been recognised by women’s right’s organisations in the country. Following Yunus’s departure, the Bank moved through multiple leadership changes of acting Managing Directors (Grameen Bank, 2020b), while Khandaker Mozammel Haque, the Head of Research at the Bank during Yunus’ leadership, became chairman of the board until 2019 (FE, 2019).

In February 2015, it was announced that the Bank was set to go under full government oversight for the first time in its history. A government-selected committee would oversee the selection of the Bank’s board members, a move criticised as being politically motivated. Finance Minister Abul Muhith stated that the decision was necessary as having board members loyal to Yunus might interfere with the Bank’s decision-making. There was concern that the ousting of the founder would lead to politicisation of the Bank as well as a deviation from the principles of poverty alleviation which had helped set it apart from its competition in the microfinance industry (Allchin, 2015).

In 2017, finance minister Muhith started looking into how the Bank could increase its relevance to the present day, claiming that it has already met its stated 1983 objectives of extending no-collateral credit to the poor of Bangladesh. One of the plans set in motion was to look into how Grameen could be scaled up to extend credit to entrepreneurs, rather than its original focus on microcredit borrowers (Daily Star, 2017).

Grameen’s influence today

In spite of adverse events and changes, the Bank appears to have continued Yunus’ legacy in the period following his departure. Membership in June 2020 stood at 9.3 million, the highest yet. Branches covered an all-time high of 81,678 villages in the country, and the number of branches have remained constant over the past few years (Grameen Bank, 2020c). Exhibit 3 shows the trend of several parameters of Grameen Bank over the period from 2014 to 2018. Despite the events that ensued in 2011, Yunus continues to remain a highly influential figure in the world of microcredit, appearing regularly at the Microcredit Summit. Internationally, his reputation as the father of modern microfinance remains, and he is highly visible on international panels, universities and conferences, discussing his time at Grameen as well as wider conversations on new visions of capitalism, social business and redesigning world financial and economic systems.

Since the founding of the Grameen Bank, several other microcredit organisations have been set up in Bangladesh and around the world. Imitators cropped up around the country, bringing increased competition for Grameen and reducing the monopoly it had on borrowers from the poorest sections of the country.

During the phase of the birth of a microcredit industry around the world, in a large part inspired by Grameen Bank, it was crucial that the Bank succeeded as an institution and as an idea. The reputation of microcredit as a concept and the viability of institutions offering these services relied greatly on the success of Grameen Bank. Indeed, the rumours of financial weakness at Grameen Bank triggered by the floods of 1998 led the chairman of a Washington-based microcredit agency (Microrate) to say, “If it’s true, it would be a huge blow to the rest of us, because of the symbol that Grameen is” (Pearl et al, 2001).

On the other hand, an article appearing in the Wall Street Journal in 2001, often cited in literature as the first instance of strong criticism of Grameen Bank, cast doubts over the methods used to calculate its very high repayment rate as well as the interest rates it was charging its borrowers (Hall, 2013, Mainsah et al., 2004). Microcredit and microfinance institutions have in recent times come under intense scrutiny and criticism for some of their practices, with critics pointing out that they trap individuals and communities in cycles of inescapable debt, issue fresh loans to cover defaults on older loans, conduct harsh debt collection practices and charge high interest rates, leading to a situation not dissimilar to the very predatory lending practices that Grameen Bank was set up to shift (Melik, 2010).

It has also been suggested that venture capitalism and profit focus have become the motive for the entry of many of the microfinance organisations established since Grameen Bank. The entrance of multiple players into the microcredit space may have had an indirect impact on the perception of Grameen Bank and Muhammad Yunus’ original vision of microcredit. Its competitors do not necessarily share the same social orientation. As for borrowers, the rise of several options has led to situations where loans are taken out from one organisation and used to make repayments in another. The consequences of doing this are poorly understood by borrowers and often results in decades of debt building up without borrowers realising it. Repayment plans at many microcredit organisations often begin in the first week after the loan is granted, which rarely gives the borrower enough time to establish any meaningful income-generating enterprise. Thus, to cover this first repayment, often another loan is taken from a different organisation. The chairperson of the body that monitors microfinance in Bangladesh, Dr. Qazi Ahmad, describes microcredit as a “death trap for the poor,” and that in 2010, over 60% of borrowers were taking loans from multiple sources. The newer organisations also demand repayment in kind when cash repayments are not made, insisting on the sale of assets such as livestock, household items and even agricultural land. Interest rates in some of the current microfinance institutions can start at 15% but can rise to anything between 40% and 100% (Melik, 2010). For reference, the Basic Loan offering at Grameen Bank has an interest rate of 20% (Grameen Bank, 2020d).

Grameen Bank, in many cases, has been grouped into the same category when it comes to criticism of the microcredit industry, a fact that Muhammad Yunus has been at pains to address. Amidst the criticism of practices within the industry, Yunus maintains that his Bank is based on the strict principle of trust in the ability of the poor to repay debts and that the Bank’s policies are geared towards trying to help those who cannot repay. The understanding is that they eventually will repay when they are able to (Hasan, 2017).

Grameen has stayed sustainable for over three decades, a feat which has not yet been replicated by any of its competitors. While the institution remains a national and an international symbol, following the passing of its chairman Mr. Haque in 2019 (a leader who had come through the ranks during Yunus’ time), it has not had a long-term leader. It remains to be seen how the Bank will respond in the longer term to these changes in senior leadership, and the role the government will play in determining its future in the absence of its founder and long-term leaders.

Legacy

Despite the shortcomings that are inevitable with any model, it remains the case that Muhammad Yunus singlehandedly pioneered a way to make credit accessible to the ultra-poor. For Yunus, it was always of utmost importance that the idea itself survive-that the poor need not be assumed to be unworthy of credit. Indeed, in the early days of Grameen Bank, he made it clear to his team that the survival of the organisation was a secondary concern. What they were here to do was to make sure that the idea itself was demonstrated to society, so that it could carry on even if Grameen Bank did not succeed.

It goes to highlight the remarkable leadership and design capacities in Yunus and his founding team, that Grameen Bank has withstood three decades of competition, a natural disaster and political hostility, gaining international acclaim and worldwide replication along the way. What Muhammad Yunus spurred into action can sometimes draw attention from the man, his motives and the principles which informed those motives. It is always difficult to separate the creator from creation, but it is important that each is recognised for what it is. Without Grameen Bank, perhaps the world would not have known the young professor turning inevitably into a “social entrepreneur,” perhaps an unwilling one. In a way, the Nobel Peace Prize acknowledges the magnitude of the contribution of both creator and creation to the field of poverty alleviation: it remains the first and only time that the prestigious award has been given in equal share to both an individual and the organisation they founded.

Exhibits

Exhibit 1: The mechanism of group lending

In the first phase, when a group is formed, only two out of the five members are eligible for a loan. The entire group is placed under observation for a month to monitor for compliance with the Bank’s guidelines and rules. Further, if the first two borrowers are able to meet the weekly repayment schedule for two months, the next two members become eligible. The chairperson is the last to receive the loan. If any of the five members are unable to pay back the loan over 50 weeks, the entire group becomes ineligible for further loans from the Bank.

The intention of the group structure is to generate peer pressure to ensure individual on-time repayment. It also functions as a support structure since several members of the Bank have no business experience. Members of groups are required to move a fixed part of the loan amount into a savings account. At the time of the Bank’s founding, this amount was set at 1 Taka each week deposited at the weekly group meetings. A further 5% of the group’s total loan is set aside as a “group fund,” which is managed by the group themselves. It provides an additional source of funds that can be used by group members according to consensus (for instance: in case of damage to equipment or death of livestock). The final contribution is an amount of 5 Taka per 1000 Taka of loan (above a minimum total of 1000 Taka), set aside as an emergency fund managed by the Bank. The Bank is allowed to withdraw from this fund in the case of members defaulting due to natural disasters or death (Khandker, Khalily and Khan, 1994).

Members are also allowed to purchase the Bank’s shares. At the time of founding a single share was worth 100 Taka. Initially, the Bangladesh government owned a 60% stake in the Bank. This reduced over time as borrower’s purchased more shares. By 2008, state ownership of the Bank was at 3%. This proportion moved again to a 25% government stake in 2015 (Allchin, 2015).

Exhibit 2: Top 25 items in order of loan amounts

Source: Grameen Bank Annual Report, 2018

Exhibit 3: Five-year trends at Grameen Bank

Source: Grameen Bank Annual Report, 2018

Exhibit 4: Comparative consolidated financial statement of Grameen Bank (2017 and 2018)

Source: Grameen Bank Annual Report, 2018.

Reference

1. Allchin, J. (2015). Grameen Bank set to go under full government oversight. Financial Times. Retrieved from https://www.ft.com/content/b237b790-b50f-11e4-b186-00144feab7de
2. Arham, A. (2014). A Banker for the Poor. YouTube. Retrieved from https://www.youtube.com/watch?v=SWdzJXC9lSc&t=1777s&ab_channel=AmirulArham
3. Azam, S., Imai, K.S. (2009) Vulnerability and Poverty in Bangladesh. ASARC Working Paper. Retrieved from https://crawford.anu.edu.au/acde/asarc/pdf/papers/2009/WP2009_02.pdf
4. BBC News (2011). Bangladesh: Muhammad Yunus disputes Grameen Sacking. BBC News. Retrieved from https://www.bbc.co.uk/news/world-middle-east-12619580
5. Beard, A. (2012). Muhammad Yunus. Harvard Business Review. Retrieved from https://hbr.org/2012/12/muhammad-yunus
6. Bornstein, D. (2012). An attack on Grameen Bank and the cause of women. The New York Times. Retrieved from https://opinionator.blogs.nytimes.com/2012/08/22/an-attack-on-grameen-bank-and-the-cause-of-women/?mtrref=www.google.com&gwh=14F0E4136A7CDDDC877F005978B75B37&gwt=pay&assetType=REGIWALL
7. Court upholds sacking of Muhammad Yunus (2011). BBC News. Retrieved from https://www.bbc.co.uk/news/world-south-asia-12673293
8. Daily Star (2017). Government to revive Grameen Bank activities. The Daily Star. Retrieved from https://www.thedailystar.net/backpage/govt-revive-grameen-bank-activities-1338961
9. Dowla, A. (2012) How to Deal with a Default Tsunami in the Microfinance Industry: Lessons from Grameen Bank. Strategic Change 21 (7-8). Retrieved from https://onlinelibrary.wiley.com/doi/pdf/10.1002/jsc.1913
10. FE (2019). Grameen Bank Chairman Mozammel dies. The Financial Express. Retrieved from https://today.thefinancialexpress.com.bd/trade-market/grameen-bank-chairman-mozammel-dies-1565286589
11. Global X (2008). Muhammad Yunus – Grameen Bank. YouTube. Retrieved from https://www.youtube.com/watch?v=TPk2gRuIdj0&ab_channel=socialedge
12. Grameen Bank (2020a) 10 Indicators. Retrieved from http://www.grameen.com/10-indicators/
13. Grameen Bank (2020b). Managing Directors. Retrieved from https://grameenbank.org/governance/former-directors
14. Grameen Bank (2020c). Monthly report June 2020. Retrieved from http://www.grameen.com/monthly-report-2020-06-issue-486-in-usd/
15. Grameen Bank (2020d). Credit Delivery System. Retrieved from http://www.grameen.com/credit-delivery-system/#:~:text=The%20interest%20rate%20on%20all,as%20the%20motivation%20of%20borrowers
16. Grameen Bank Annual Report (2018). Grameen Bank. Retrieved fromhttp://www.grameen.com/wp-content/uploads/bsk-pdf-manager/gb_annual_report_2018.pdf
17. Hanley, D. (2003). Grameen Bank. Case SM-116. Stanford Graduate School of Business. Retrieved from https://www.gsb.stanford.edu/faculty-research/case-studies/grameen-bank
18. Hasan, M. (2017). Grameen Bank: A debt trap for the poor?. Al Jazeera. Retrieved from https://www.aljazeera.com/programmes/upfront/2017/10/grameen-bank-debt-trap-poor-171020082314218.html
19. Hulme, D., Thankom, A. (2009). Chapter 10. Microfinance: A Reader. Routledge Studies in Development Economics. ISBN-13: 978-0415596909
20. Khandker, S., Khalily, B., and Khan., Z. (1994). Is Grameen Bank sustainable?. HRO Working Papers. World Bank. Retrieved from http://documents1.worldbank.org/curated/en/658601468768006874/pdf/multi-page.pdf
21. Kowalik, M. and Martinez-Miera, D. (2010) The Creditworthiness of the Poor: A model of the Grameen Bank. The Federal Reserve Bank of Kansas City Economic Research Department. Retrieved from https://www.kansascityfed.org/publicat/reswkpap/pdf/rwp10-11.pdf
22. Lawson, A. (2011). How Grameen founder Muhammad Yunus fell from grace. BBC News. Retrieved from https://www.bbc.co.uk/news/world-south-asia-12734472
23. Mainsah, E., Heuer, S.R., Kalra, A., et. al, (2004). Grameen Bank: Taking Capitalism to the Poor. Columbia Business School. Chazen Web Journal of International Business. Retrieved from https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfiles/848/Grameen_Bank_v04.pdf
24. Melik, J.(2010). Microcredit death trap for Bangladesh’ poor. BBC. Retrieved fromhttps://www.bbc.co.uk/news/business-11664632
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26. Ninno, C., Dorosh, P., Smith, C.L., et al. (2001). The 1998 floods in Bangladesh disaster impacts, household coping strategies and response. Retrieved form https://ideas.repec.org/p/fpr/resrep/122.html
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Aruna Pandey | Published: 27 February, 2025

Copyright: Attribution-NonCommercial-ShareAlike 4.0 International License
© Author(s), Development Management Foundation
Citation: Pandey, A. (2021). Case-let. Air Pollution: Delhi’s emerging challenges. ISDM Case Centre. Indian School of Development Management. Noida.
DOI: http://dx.doi.org/10.58178/2110.1038

*The production of this case-let has been done using secondary data from multiple sources available in the public domain between 2020 and 2021. For updated resources, learners are recommended to supplement the case-let with secondary research. The case-let is part of a series of case studies to support learning pedagogies in Development Management. The production of this case has been financially supported by the Centre for Social Impact and Philanthropy (CSIP) and Ashoka University.

This case-let presents a brief analytical report on air pollution in India, focussing on the implications for Delhi and its citizenry. It engages with causal linkages between multiple phenomena in the context and captures some regional responses that have attempted to address the problem in other parts of Asia. The case-let illustrates how domain experts interpret the problem at hand, and the nature of experiences of citizens who were interviewed by various news agencies reporting on the subject between 2018 and 2019. The case-let offers insights into the nature of the relationship between different variables that define the context within which the problem of air pollution is located. It presents an opportunity for learners to engage in a system-mapping exercise, using tools of inquiry and analysis introduced as part of the course on Systems Thinking and Intervention Design.

The Landscape of the Issue

Asia is home to 99 of the 100 most polluted cities globally, and in 2019, 21 out of the world’s 30 most polluted cities were in India (IQAirVisual, 2019). Air pollution has been rising at alarming rates in South Asia and South-East Asia, with toxic haze blanketing large parts of India, Bangladesh, Pakistan, Jakarta, Hanoi, Malaysia and Singapore every year. India witnessed widespread improvement in PM2.5 levels in 2019, as compared to 2018. The reason for this improvement was attributed to a host of factors including meteorological conditions, economic slowdown, dedicated efforts of civil society organisations (CSOs) and the government. Despite these efforts, none of the Indian cities—including the National Capital Region of Delhi—met the World Health Organization (WHO)’s target of reducing the annual pollution exposure (placed at 10 μg/m3) in 2019 (IQAirVisual, 2019).

WHO estimates state that over seven million people die each year globally from both ambient (outdoor) and household (indoor) air pollution: India alone accounts for around 1.1 million deaths per year (WHO, 2016). In past years, a notable surge in the number of patients suffering from stroke, cardiac ailments, cardiac arrests, lung cancer and severe allergic bronchitis has been recorded during and after periods of peak pollution. Ninety per cent of these deaths are of people from lower-income groups. Global life expectancy has been shortened by 11 months because of air pollution. A significant contribution to this decrease in life expectancy is from some of the most polluted places in the world, including India. The brown haze that envelops New Delhi and adjoining areas in India every year during winters is severe and thousands of times more hazardous than the air quality index of countries like Canada. This exposes millions of people to health vulnerabilities at a catastrophic scale.

What is causing this public health emergency?

New Delhi is choking every day. The state government is widely accused of failing to curb pollution in the city. Matters turned particularly critical in the winter of 2019 with schools being shut, flights diverted and a declaration of a public health emergency. Doctors reported a five-time increase in the usual number of patients in the winter of 2019 due to the toxic smog that hung over New Delhi and its satellite areas. Multiple dailies compared Delhi’s air quality to a gas chamber, evoking gruesome images of suffering and increasing risk of health hazards for its citizens.

The reasons for such a situation in India’s capital have been attributed to a host of issues ranging from vehicular pollution and construction debris to stubble burning and household emissions. Experts such as Mr. Karthik Ganeshan, Research Fellow, Council on Energy, Environment and Water (Al Jazeera, 2018) point to multiple sources of emissions and cite lack of awareness amongst the common public to safeguard their health and demand citizen rights to clean air.

Stubble burning by farmers from the neighbouring states of Haryana and Punjab has occupied key debates in the mainstream media when it comes to dialogue on Delhi’s air pollution. After harvesting rice, farmers in nearby states need to clear their land for the winter wheat crop. The short window of time between the harvest period and the sowing, and lack of incentives for farmers to incur added costs to remove stubble from the field using clean technology have compelled them to use stubble burning as a means to clear their land. In South-East Asia, fires to clear and ready farmlands is a major problem that often leads to trans-country haze in countries across the region.

Governments of South-East Asian countries have recognised the economic and health impacts of such fires in the region and have tried to address the issue through a three-step process.

The government of Indonesia, for example, has identified critical areas of burning in specific land-use categories and soil content types. For example: peatland areas have been identified as critical regions that should urgently limit farm fires. The government has banned further development in peatland areas. It has created ways of working with farmers (small-holders and large companies) to introduce zero-burning best practices in farm management through financial incentives and technical support. In Punjab and Haryana in India, a large part of the problem emanates from the historical context of the Green Revolution brought to the region in the latter part of the 1960s (see Exhibit 1). Farmers’ collectives and CSOs in the region have been pushing for government intervention to facilitate a shift to other crops and investments in cleaner technologies towards enhancing the market value of the crop stubble as raw material in energy production. However, the lack of convergence between existing technologies available with farmers and piecemeal solutions offered by the government has created a solution gap that fails to recognise the contextualised adaptations of such interventions.

Rapid economic growth without environmental regulations emerges as another key contributing factor to the current pollution crisis. Delhi is surrounded by industrial units and power plants. An exponential increase in oil and coal consumption in India in the past decade is an undisputed reason behind the challenges faced in addressing this problem. While India has made progress in adopting clean technologies in some sectors, this gets offset by the 5%-10% increase in the consumption of “dirty” energy every year (Narain and Krupnick, 2007).

In the last few years, China has successfully brought down pollution by putting a stop to the increasing coal consumption and dramatic improvements in pollution control technologies in coal-fired power plants and factories. While measures taken in capital cities like New Delhi or Beijing catch national attention, one must realise that the problem of air pollution is highly dependent on the nature of pollutants entering the ecosystem from adjoining areas of the city. China could address the air pollution problem because it implemented regulations for power firms and industrial centres located in Beijing-Tianjin-Hebei spanning over 1.4 million square kilometres and affecting a population of over 800 million (World Bank, 2016).

The challenge for the Government of India has been the delay in recognising the severity of the issue and implementing necessary compliances for power plants and industrial units located in the vicinity of urban centres like Delhi, Lucknow and Mumbai. The power plants in these areas continue to flout the new emissions standards without any action being taken against them by the government. This disregard results in further dilution of standards themselves (Chattopadhyay, 2016).

Hence, when it comes to addressing the issue of pollution due to lack of regulation or dilution of emissions standards in the surrounding areas, the challenge is not limited to the boundaries of a particular city or state. A threat like air pollution requires regional action by the government based on scientific understanding of various key areas. These include urban planning, regulation of emission standards and the study of wind patterns that have the potential to carry the pollutants over certain distances or stagnate over certain regions due to the combined effect of unregulated emissions and annual weather patterns. For example, the pollution haze during winters in northern India extends from Punjab to West Bengal, exposing the population of the entire region to health hazards associated with the inhalation of toxic air.

Thus, the extent of damage caused by air pollution is not just determined by the prevalence of poverty in a country but also by its geographical location and the nature of the bio-ecosystem. For example: if a city or a state is located downstream (in the pattern of prevailing winds) from the fire and industrial emissions prone areas, it will directly impact the quality of air at various points in time over the year. Furthermore, household emissions and vehicular emissions add greatly to the challenge. Delhi alone has 10.98 million vehicles registered with the city authorities. Every year, the city witnesses close to a 5% jump in the number of vehicles plying on the roads (Chattopadhyay, 2016). In such a scenario, it is impossible for the government to regulate and ensure high vehicular emission standards. Hence, the response of the government in cities like Delhi is often limited to reducing the overall number of vehicles plying on the roads. The Delhi government’s “odd-even” scheme is one such example where the government mandates car rationing to address the problem of vehicular emissions during peak pollution seasons. The scheme entails that cars with odd and even registration plates are to be driven on different days. Other countries like Mexico and China have also used similar interventions in the past to address the problem.

Delhi was also one of the first cities in the country to espouse Compressed Natural Gas (CNG) for public vehicles in the 1990s, as a result of a change in regulations. This shift to CNG-run public vehicles was unprecedented even by European standards, given the sheer number of vehicles that shifted to the alternate fuel. Household emissions, on the other hand, are a more complex and deep-rooted issue for the country. WHO estimates that over 3 billion people (40% of the world’s population) still do not have access to clean cooking fuels and technologies (WHO, 2016). In India, 30% of all ambient particulate matter pollution emitted is from households burning biomass (WHO, 2016).

The Pradhan Mantri Ujjwala Yojana is an attempt by the Government of India to incentivise households to shift to cleaner technologies for domestic use. The government offers free Liquified Petroleum Gas (LPG) connections to households that are Below Poverty Line (BPL) and applies subsidies to the prices per unit. While the government attempts to incentivise the poor and vulnerable communities to move away from the use of biomass in cooking, it is a long-term strategy. It will require years of behavioural changes before large sections of the population can give up the use of biomass for cooking, as it is a free resource for many. The scheme is not only likely to improve the overall air quality in the vicinity but also likely to improve the experience of women and children in these households. Many, however, are yet to realise the benefits of using LPG despite the comparatively higher cost against the longer-term damage caused to health from the use of biomass.

What could be the possible solution pathways for India?

There is a need to understand and analyse the issue of air pollution in India with a systems perspective. The problem at hand is complex and dynamic. Discreet, sporadic solutions to immediate symptomatic events witnessed by different regions of the country are bound to fail in addressing the issue at hand in a sustainable manner. While there is a need for the government and the polity to engage holistically with the issue and identify broader contours of the contextual nature of the problem with the support of a multi-disciplinary technical support team, there is also a need to ensure accountability of elected representatives in their engagement with the issue. Citizen action and awareness is critical in this regard. While awareness and advocacy on the gravity of the issue will enable the citizens to take precautions and reduce the extent of the public health crisis, the issue also deserves to take centre stage along with active political debates on unemployment, provision for basic services and economic growth of the country.

The pollution crisis in New Delhi has long been plagued by the relentless abdication of responsibility between political parties. Blame is shifted between parties in power to justify inaction. However, governments in power do not waste time in seeking credit for improvements in pollution indicators even when they have been caused by meteorological factors. Multiple causes of air pollution also imply that the responsibility of tackling the issue does not rest with one agency but with multiple bodies. The issue of air pollution urgently requires a designated authority willing to engage and effectively deliver impact outcomes across stakeholders.

India is now equipped with access to modular technology with the potential to measure pollution levels and access data to track the impact of its interventions at various levels. Additionally, citizen action plans to address anticipated issues of air pollution during specific times of the year must enable the preparedness of the city, key stakeholders and the citizens to meet expected civic behaviours. Such plans may include limitations on open waste burning, plying of vehicles on the road only with emission certificates, norms on regulation and disposal of construction waste, and regulation of emissions from industries and power firms as per standards, with the possibility to shut down certain industries and construction activities during certain periods of the year.

Large-scale destruction of rich bioregions such as the Aravallis compounds the problem. Measures to enhance the capacity of bioregions that absorb and nullify the impact of emissions should be taken up on priority. Planned regeneration and conservation of such bio-sinks will enable rapid addressal of the problem of air pollution through a multi-pronged strategy.

Such measures in urban areas must be supported with large-scale integrated agricultural development schemes across the country, giving real incentives to farmers for changing crop types or changing approaches that support mechanisation to reduce this annual large-scale burning of stubble. India needs to expand its horizon of solutions and take a broader innovative approach to include new incentives to address and prevent large-scale burning emissions and appropriate incentives for good land and agricultural management practices.

Exhibits

Exhibit 1: Quint report: Why Punjab and Haryana burn stubble every year

Exhibit 2: Estimated premature mortality due to ambient air pollution in India (PHFI and CEH, 2017)

Table 1: Estimated premature mortality due to ambient air pollution in India

Source: Ministry of Health and Family Welfare, 2015

Reference Links

1. Chattopadhyay et.al. 2016. Enough is Enough. Down to Earth. Accessed from https://www.downtoearth.org.in/coverage/air/enough-is-enough-56356 on 02.06.2020
2. Dandona R, Pandey A, Dandona L. A review of national health surveys in India. Bull World Health Organ [Internet]. 2016;94(4):286–296A. Accessed from: http://www.who.int/bulletin/volumes/94/4/15-158493.pdf on 02.06.2020
3. Harris G. Cities in India Among the Most Polluted, W.H.O. Says. The New York Times [Internet]. 2014 May 8; Accessed from: https://www.nytimes.com/2014/05/09/world/asia/cities-in-india-among-the-most-polluted-who-says.html?_r=4 on 03.06.2020
4. IQAirVisual. 2018. World Air Quality Report – Region & City PM 2.5 Ranking. Accessed from https://www.airvisual.com/world-most-polluted-cities/world-air-quality-report-2018-en.pdf on 02.06.2020
5. IQAirVisual. 2019. World Air Quality Report – Region and City Ranking. Accessed from https://www.iqair.com/world-most-polluted-cities on 02.06.2020
6. Jaiswal A. India Announces National Air Quality Index to Increase Public Awareness [Internet]. NRDC. 2015. Accessed from: https://www.nrdc.org/experts/anjali-jaiswal/india-announces-national-air-quality-index-increase-public-awareness on 02.06.2020
7. Kumar P, Gulia S, Harrison RM, Khare M. The influence of odd–even car trial on fine and coarse particles in Delhi. Environ Pollut [Internet]. 2017 Jun; 225:20–30. Accessed from: http://linkinghub.elsevier.com/retrieve/pii/S0269749116313124 on 02.06.2020
8. Narain U, Krupnick A. The impact of Delhi’s CNG program on air quality [Internet]. 2007. Accessed from: http://www.rff.org/files/sharepoint/WorkImages/Download/RFF-DP-07-06.pdf on 02.06.2020
9. PHFI and CEH, 2017. Air Pollution and Health in India: A review of the current evidence and opportunities for the future
10. Rajarathnam U, Sehgal M, Nairy S, Patnayak RC, Chhabra SK K. 2011. Time-series study on air pollution and mortality in Delhi. Pp. 47-74.
11. Susheel T. IIT-Roorkee study says odd-even didn’t dent Delhi’s air pollution. Times of India [Internet]. 2016 Feb 20. Accessed from: http://timesofindia.indiatimes.com/city/dehradun/IIT-Roorkee-study-says-odd-even-didnt-dent-Delhis-air-pollution/articleshow/51071484.cms?mc_cid=887725d13d&mc_eid=0fb244538a on 02.06.2020
12. World Bank. 2016. Hebei Air Pollution Control Program (P54672) – Environment and Social Systems Assessment. Accessed from: http://documents.worldbank.org/curated/en/809511468243552391/pdf/104763-REVISED-EA-P154672-Box396258B-PUBLIC-Disclosed-5-24-2016.pdf on 02.06.2020
13. World Bank and Institute for Health Metrics and Evaluation. The Cost of Air Pollution: Strengthening the economic case for action. 2016. Accessed from: http://documents.worldbank.org/curated/en/781521473177013155/pdf/108141-REVISED-Cost-of-PollutionWebCORRECTEDfile.pdf on 02.06.2020
14. World Health Organisation. WHO Global Urban Ambient Air Pollution Database (Update 2016). 2016.

Tusharveer Singh and Bushra Ansari | Published: 10 April, 2024

Extreme weather events have had a profound impact on human lives in India. The frequency and intensity of extreme weather events such as floods, tropical cyclones, heatwaves, and storms, has increased in recent years, resulting in many negative social and economic consequences. As a result, India’s rank in the Climate Change Performance Index 2023 is 8 out of 64 countries, dropping from 7 in 2022.

According to the Centre for Science & Environment, India experienced extreme weather events on 86% of days in 2023, resulting in a high number of casualties, as well as crop damage, and destruction of homes. Close to 3,000 people were killed, over 80,000 houses were destroyed, 1.84 million hectares of crop area was destroyed, and more than 92,000 livestock perished. These events have a widespread impact across the country. According to a study published in the Indian Journal of Occupational & Environmental Medicine, the social and economic costs of these extreme weather events, including their impact on household consumption, livelihoods, and migration, are a growing concern. It requires urgent attention and effective mitigation strategies.

1. The Ministry of Earth Sciences reported that 58% of all lives lost in India in 2022 were because of extreme weather events such as lightning and thunderstorms.

Figure 1: Total deaths due to extreme weather events in India in recent years

Source: Ministry of Earth Sciences

2. According to the Internal Displacement Monitoring Centre, climate change has led to significant migration in India. India is the fourth worst-hit country in the world when it comes to climate change-induced migration, with more than three million people forced to leave their homes in 2020-21.

By 2050, India alone will see 45 million people being forced to migrate from their homes due to climate disasters, which is three times the current number. A report published in December 2020 by ActionAid and Climate Action Network South Asia showed that across India, about 37.5 million people will be displaced by 2030, and an estimated 62.9 million by 2050.

These displacements have a pattern, the International Institute for Environment and Development (IIED) has found in their study, Connecting the dots: Climate change, migration and social protection, published in 2021. Their findings show that the majority of migrants are from low-income states like Uttar Pradesh & Madhya Pradesh. This migration is both seasonal and permanent in nature, mainly undertaken by marginalised populations, who depend primarily on agriculture. Climate impacts act as stress multipliers, particularly for those who are already socio-economically vulnerable, driving them towards distress migration.

The Pulitzer Centre study shows how heatwaves, droughts, and excess rainfall are destroying the livelihoods of millions of poor people in India, who suffer the worst consequences of global warming.

Figure 2: Internal displacement due to 176 extreme weather events experienced between 2016-2022 in India

Source: Internal Displacement Monitoring Centre

3. India, with its diverse geography and population density, faces multiple challenges from extreme weather events. To address these challenges, the Indian Government has undertaken certain initiatives.

For instance, the National Disaster Management Authority (NDMA) set up a National Disaster Alert Portal called ”SACHET” in 2023. The portal puts out regular alerts for endangered people in areas that could be affected by extreme weather events. The SACHET portal has disseminated 12.73K alerts in various states of India during times of crisis.

The Council on Energy Environment & Water (CEEW) also published a statewise vulnerability score ranking in 2021. The ranking found that Assam is the Indian state most vulnerable to climate change. Several factors are responsible for Assam’s extreme vulnerability. chief among which is the presence of the expansive Brahmaputra and Barak river basins, and Assam’s fast dwindling green cover.

Figure 3: Statewise Vulnerability

Source: Council on Energy Environment & Water Report

4. One of the ways to address the impacts of climate change, including migration, is through Corporate Social Responsibility (CSR) initiatives. Under the Companies Act, 2013, certain companies are mandated to allocate a portion of their profits towards CSR, and some have done so by directing their efforts towards environmental conservation, climate change adaptation, and helping build resilience to environmental challenges. Some of these initiatives include projects supporting biodiversity conservation, sustainable agriculture, and renewable energy, all of which contribute to environmental sustainability and help mitigate the impacts of climate change.

Further, There is also a growing need to address climate-induced migration within the CSR framework. India, being one of the countries most affected by climate change-induced migration, has seen millions of people being displaced from their homes due to climate-related events. Humanitarian aid for climate refugees is being considered as part of CSR initiatives, aiming to provide support for those displaced by climate change, as reported by India Development Review (IDR).

This shift towards recognising and addressing climate-induced migration within the CSR landscape reflects an awareness of the need to support vulnerable populations impacted by environmental challenges. From 2019-21, however, there was no significant increase in CSR expenditure, due to the impact of Covid-19 from 2020 onwards.

Figure 4:The allocation of CSR expenditure for environmental concerns has been minimal over the years compared to total CSR contributions

Source: Ministry of Corporate Affairs

In conclusion, the impact of climate change on migration in India is a pressing and complex issue that requires urgent attention and comprehensive policy responses. Vulnerable populations, particularly those in low-income states such as Uttar Pradesh and Madhya Pradesh, have been disproportionately affected by this issue, leading to widespread displacement. These populations encounter socio-economic challenges like having to learn new skills to be relevant in the labour market, continuing their education, and overcoming language barriers. Recent research recognises climate change as a major factor in driving migration, and underscores the need for proactive measures to address its vulnerable migrants.

Corporate Social Responsibility (CSR) initiatives in India have started to acknowledge and respond to these challenges by focusing on environmental sustainability and supporting climate-resilient livelihoods. However, there is a need for enhanced collaboration between the government, private sector, and civil society to develop and implement holistic strategies that can effectively address the complex interplay between climate change, extreme weather events, and migration in India.

Tusharveer Singh and Bushra Ansari both work at ISDM DataSights, supported by Capgemini.

Kshitij Sarawgi and Bushra Ansari | Published: 02 April, 2024

Water is indispensable to life on Earth, and its scarcity is a global concern. This scarcity can decrease food security and reduce access to water for industrial and domestic purposes. It also has broader economic, humanitarian, and ecological implications.

According to the Organisation for Economic Co-operation and Development, irrigation in agriculture accounts for 70% of water use worldwide. Intensive groundwater pumping for irrigation depletes groundwater resources and has negative environmental consequences, causing a significant economic impact on the agricultural sector and beyond.

In India, too, the majority of water consumption is for irrigation in agriculture, as per the Central Ground Water Board.

Source: Dynamic Ground Water Resource of India by Central Ground Water Board

1. It is therefore concerning that India is facing an increase in water scarcity. Northern India, particularly, experiences significant groundwater depletion. While the nation's average Groundwater Extraction was 60.08% in 2022, an improvement from 63.33% in 2017, Haryana, Punjab, and Rajasthan bucked the trend, exceeding the groundwater extraction by 100% in 2022.

The Green Revolution of 1960, marked by the adoption of water-intensive high-yield seed varieties, boosted agricultural production from 55 million tons at the time of independence to 260 million tons of food grains today, but strained water resources. In Punjab and Haryana, the epicentre of this revolution, groundwater depletion surpasses natural replenishment rates by 65%, and 34%, respectively. Free/ heavily subsidised electricity to run pumps, and no cost for water initiated to support the Green Revolution, led to excessive irrigation, exacerbating the depletion of groundwater.

Although mandated by Section 55 of The Indian Electricity Act, 2003, nationwide electricity metering remains largely unimplemented due to resistance from farmers' unions, making farmers lackadaisical about their usage. Free water and power are so politically popular in the economies of farm states that leaders do not suggest a change for fear of not being elected to power.

Source: Ministry of Jal Shakti

2. Let's look at water consumption numbers by various crops in India and analyse further why certain states are experiencing groundwater depletion.

Rice, a staple food globally and in India, demands 3000 – 5000 litres of water per kilogram for production. India, the second largest producer and consumer of rice, also emerged as the largest exporter in 2023, accounting for 40% of global rice exports.

Source: Agricultural Statistics at a Glance 2022

The above graph shows that Punjab's per-hectare rice production surpasses West Bengal's by 43.33%, despite Punjab cultivating only around 76% of West Bengal's total rice production. This difference is why West Bengal, despite being the largest producer of this water-intensive crop, hasn't depleted its water resources at the same alarming rate as Punjab has.

While wheat cultivation is less water-intensive compared to rice, it still requires 900 - 1000 litres of water per kilogram of production. However, because of its importance as a staple food in India, it still consumes a significant amount of water during cultivation.

Source: Agricultural Statistics at a Glance 2022

Punjab and Haryana produce around 43% and 30% of the total wheat yield of Uttar Pradesh, the largest producer. However, their per-hectare rates exceed that of Uttar Pradesh by approximately 16% and 25% respectively. This further shows the impact of the Green Revolution, and consequently, the over-exploitation of groundwater resources in the North-Western states of Punjab and Haryana.

Sugarcane, a crucial cash crop, requires 1500 – 3000 litres of water for 1 kg of its produce. Used in diverse industries like sugar, biofuel, paper and pulp, it also contributes substantially to economies worldwide. Globally, India ranks second in both sugarcane and sugar production, but leads as the highest consumer of sugar, consequently dominating the global sugarcane and sugar market.

Source: Agricultural Statistics at a Glance 2022

Tamil Nadu and Karnataka produce only 8.73% & 35% of what Uttar Pradesh produces. However, the per hectare rate of production of Tamil Nadu and Karnataka is much higher than that of Uttar Pradesh, the largest producer by almost 26% and 17% respectively. This explains why both these states have been coloured red (refer figure 2), with a 70% extraction of their groundwater resources.

Uttar Pradesh holds a significant position in the production of all these three crops: it's the second-largest producer of rice, and the largest producer of wheat and sugarcane in India. Despite having lower per-hectare production rates compared to other states, the sheer volume of these water-intensive crops cultivated in Uttar Pradesh might have contributed notably to the depletion of its water tables, resulting in an overall extraction rate of 70%.

3. The World Bank has helped the state government of Punjab pilot an innovative scheme to save electricity and conserve groundwater, namely “Paani Bachao, Paisa Kamao”. The scheme incentivises farmers to reduce groundwater usage. According to the World Bank, around 300 farmers were enrolled and given cash incentives to save electricity used for irrigation, resulting in water savings of between 6 and 25 percent without any adverse effect on the yield.

But to address water-related issues at a large scale, it is imperative to embrace alternative farming methods, particularly organic farming. Techniques such as Saturated Soil Culture (SSC), Alternate Wetting and Drying (AWD), and System of Rice Intensification (SRI) offer viable alternatives to rice cultivation.

In AWD, irrigation is delayed until a certain period after ponded water disappears, unlike in traditional methods, where it is done immediately. Water table in the field is monitored using a simple perforated field water tube. When the water level is 15 cm below the surface of the soil, it is again flooded to a depth of around 5 cm. The water in the rice field needs to be kept at 5 cm depth to avoid any water stress that would result in severe loss in rice grain yield.

The International Rice Research Institute (IRRI) reports that AWD has enabled Bangladeshi farmers to reduce rice water requirements by up to 30%, while also conserving diesel and electricity for water pumps, and increasing Boro rice yields by 500 kg per hectare. Further, practices such as mulching, tilling, and crop rotation can aid in preserving soil nutrients and conserving water, particularly in sugarcane and wheat cultivation.

Kshitij Sarawgi and Bushra Ansari both work at ISDM DataSights, supported by Capgemini.