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Banker to the Poor

By Muhammad Yunus

Muhammad Yunus: Banker to the Poor, Aurum Press
London 1998, ISBN 1-85410-577-9.

04.05.1999 · Reviewed by Douglas Merrill

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Muhammad Yunus is a friend of the future. He is also a great friend of poor people, particularly the poorest of the poor, which his home country of Bangladesh has in sad abundance. He is a ruthless pragmatist, examining the real effects of human decisions and institutions; choices that don't pass muster, no matter how solid their theoretical grounding, he discards.

His choices make a difference because Yunus is the founder and driving force of the Grameen Bank, a remarkable institution that is changing the way people think about poverty. The story of Grameen starts with changes in Yunus' own thinking, during Bangladesh's 1974 famine. "What began as a trickle became a flood of hungry people moving to Dhaka. They were everywhere. You couldn't be sure who was alive and who was dead. You couldn't guess their age. Old people looked like children, and children looked like old people." At that time, Yunus was a professor of economics at Chittagong University, carried away with the beauty and explanatory power of economic theory, thrilled with teaching. The silent starving people posed questions that his theories could not answer; his economics could say nothing to such terrible poverty. He decided to try to understand poverty and famine pragmatically, by understanding the problems faced in just one village, or perhaps just one person. He started with a young woman who made bamboo stools, buying her raw materials each day and selling the finished product to the same source for a profit of 2 US cents per day. With such a thin dividing line between survival and starvation, she had no chance to improve her situation. With just a little credit, she could sell her stool for a better price and begin to climb out of poverty.

Within a week, Yunus had a list of forty-two people who needed credit in a sum total of $27. No bank was interested in making such small loans. "This credit market, by default of the formal institutions, had been taken over by local money-lenders. It was an efficient vehicle, creating a heavy rush of one-way traffic on the road to poverty." Though he didn't realize it at the time, Yunus had started a bank that by the end of May 1998 had disbursed more than $2 billion in micro-loans, to more than two million people very much like the bamboo stool maker.

The Grameen Bank challenged orthodoxies about poverty, aid, and development first simply by existing and later by succeeding. Yunus offers an extensive list of myths he has been told about the world's poor:

"the poor need to be trained before they can undertake any income-generating activity;
the poor cannot save;
the poor cannot work together;
poor women have no skills, so it is useless to talk about programmes for them;
credit for the poor is anti-revolutionary; it kills the revolutionary spirit in the poor, so they are bribed into accepting the status quo;
credit is a clever way of mobilizing the poor to gang up against the rich and destroy the existing social order;
the poor enjoy serving their masters rather than taking care of themselves;
by extending credit to women, the traditional role of the woman in the family will be adversely affected as will her relations with her husband.
The list can continue endlessly without ever exhausting the supply of myths and half-truths which are so ingrained in society at large that you hear them today all around the globe."

Against these myths, Yunus sets empirical evidence and facts. The most astonishing of these facts is Grameen's repayment rate: more than 98 percent. Here's another: 94 percent of Grameen borrowers are women. This is doubly astonishing considering that women in rural Bangladesh are often treated more like property than people.

As Grameen made its first loans, Yunus found that credit given to women brought improvements faster than credit given to men. He writes, "Relatively speaking, hunger and poverty are more women's issues than male issues. ... If one of the family members has to starve, it is an unwritten law that it has to be the mother. ... A poor woman in our society is totally insecure: she is insecure in her husband's house because he can throw her out any time he wishes. ... She cannot read and write, and generally she has never been allowed out of her house to earn money, even if she has wanted to. She is insecure in her in-laws' house, for the same reason as she was in her parents' house: they are just waiting to get her out so they will have one less mouth to feed." Not surprisingly, poor women seize any opportunity they can find to improve their situation.

Early experience at Grameen also showed that repayment rates soared when persons joined the bank in small groups, each responsible for the other. Someone wanting to borrow from the bank had to find four other people who also wanted to borrow; they agreed that if one of them did not pay, none of them could receive further loans. These groups provide support in overcoming the many barriers that the poorest people face, and they also provide pressure to make payments on time. Grameen also requires borrowers to learn a considerable amount about the bank; this tests their resolve and ensures that only dedicated persons will complete the necessary process.

Borrowing groups do more than just look after the money, though. Yunus writes of meeting the husband of one of Grameen's borrowers; the husband is proud of how hard his wife works and how much food they have to eat. "There is one thing, however. I used to enjoy beating my wife. But the last time I beat her I got into trouble. The women in Farida's borrowing group came to me and argued with me and shouted at me. I did not like that. Who gave them the right to shout at me? I can do whatever I want with my wife. Before, when I used to beat my wife, no one said anything, no one bothered. This is no longer going to be true. Her borrowing group threatened they will get really mean if I beat my wife again."

The story of Grameen continues; the Bank now makes housing loans, its work is being replicated by local people on every continent; new ventures are attempting to make changes through technology, telecommunications and the internet. The hard test of pragmatism will determine whether they continue or not. But Muhammad Yunus knows where he wants to go: a world without poverty. His belief in individuals and his faith in the improvement of institutions makes this dream seem possible; and his example of tough-minded idealism makes it just a little bit more likely.
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