Many Bangladeshis, especially mid-level businessmen and entrepreneurs, have recently been investing in informal cooperative financial circles that have allowed many to raise money regularly and easily.
In this system that emerged in recent years, a group of 20 to 50 people deposit a fixed amount of money every day that one member chosen by the group records in a registry. After every 10 to 15 days, the total is given to one member of the group based on a lottery, or their needs, with every person getting their turn eventually.
The purpose of this simple system is to give members access to large amounts of money to invest in their small or medium-sized businesses. The difference between such funds and a traditional bank loan is that beneficiaries do not need to pay interest or fulfill complicated official requirements.
"We have a 25-member cooperative group, and every day, each of us deposits 1,500 (Bangladeshi) taka (about $18), meaning that our daily total collection is 37,500 taka ($438) and it stands at 375,000 Taka ($4,375) after 10 days. We give this whole collection to one member by lottery or based on needs," Md. Salman Rashed, the owner of a medium-sized machinery shop in the remote southern district of Barguna, told Anadolu Agency.
Rashed said that after getting such an amount himself, he purchased all the goods he needed for his shop. "Now my business is running very well, and I'm paying daily installments smoothly."
"If I took such a loan amount from any bank or NGO to furnish my shop, I would have to pay at least 8%-10% interest and deposit some original documents of my land properties as a mortgage guarantee," said the Muslim businessman.
Underlining the prohibition on interest in Islam, he noted: "As a practicing Muslim of a 90% Muslim-majority country, we always try to avoid interest. But very often, we fail to do that due to the overall economic system of the country mostly based on interest."
"Now, I, along with other members of our cooperative group, am happy to have an interest-free loan for our business purposes without any rigid conditions," he added.
- Honesty is a must
Speaking to Anadolu Agency, Mohammad Masudur Rahman, an executive member of one Dhaka-based cooperative society, said that for the success of any cooperative initiative, the honesty of all members was very important.
"We, a total of 11 members, started a cooperative business, and gradually we added 100 new members. In a few years, we were able to raise a good amount of fund and we invested it in the land business," Rahman said, adding that the price of their land had nearly doubled in five years.
He said they formed a company and registered it with the government-affiliated body.
"Everything was going smoothly, but at one stage, the person who we nominated as managing director of the group looted a huge portion of our funds and fled abroad," he said.
Moreover, some of the land properties of the group in various remote areas outside the capital Dhaka were illegally occupied by people who Rahman said were using political connections.
"It's tougher for us now to rescue those lands from the occupiers as the police and other concerned offices are managed by bribes and (political) power by the illegal occupiers."
"So, we also need the rule of law and fair law enforcement agencies for creating a business-friendly environment in the country," Rahman added.
- Difficulty in execution
Speaking to Anadolu Agency, Abu Ahmed, a professor of economics at Dhaka University, said the idea of a cooperative society is very good, but its implementation in Bangladesh is very difficult.
"The main characteristic of a cooperative society is that everyone must be honest and enjoy equal rights. Unfortunately, honesty and awareness of equality are mostly absent in Bangladesh," Ahmed said.
According to the International Cooperative Alliance (ICA), "cooperatives are people-centered enterprises jointly owned and democratically controlled by and for their members to realize their common economic, social, and cultural needs and aspirations."
Ahmed added that in the name of cooperative society, some people in the country have gained a lot, depriving many others.
Referring to some good instances of cooperative society in Bangladesh like the Customs and Vat Co-operative Society (CVCS), he underlined that cooperation among many people had the potential to yield great benefits if the process is handled properly.
"Otherwise, most of the members lose their funds," he said.
According to media reports, more than 150 cooperative societies in just the east-central district of Comilla have embezzled more than 1 billion Taka (around $12 million) from thousands of members over the last few years.
There are dozens of such reports from other parts of the country, including Dhaka, in which thousands of low- and middle-income people have lost huge amounts of their hard-earned money.
"In the name of cooperative society, some fraudulent people are now cheating mass (numbers of) people very often and the real concept of a cooperative has lost its merit here," Ahmed said.
He added that the government must increase vigilance against fraudulent practices and take exemplary actions against them, while at the same time, a fair and peaceful environment for cooperative society should be ensured.