GENTECH archive


About the Grameen Bank

Some brit publicity about Grameen goes with the publication of a new book
by Grameen's founder.

For what it's worth, Grameen made a deal with Monsanto which was cancelled
when Graameen was "informed" about Monsanto's 3rd world intentions.

[The symbol "#" refers to the brit. pound]
[ Apologies to the genetics subscribers, for whom Monsanto is the only
relevant link to this post]
TIMES (london) October 31 1998

Bangladesh's famous financier uses micro-credit to bring wealth to the
underprivileged of many nations, reports Rosemary Righter

Professor Muhammad Yunus in London this week on the publication of his new

Visionary banker sets free powerless poor

If you went to see a Western banker after a natural disaster had wiped out
half his business clients, you would be in for a grim hour. That is
exactly the position that Muhammad Yunus, the founder of Bangladesh's
Grameen Bank, is in. This year's floods, the worst in the country's
history, covered half the land and affected 25 million people. But
Professor Yunus is totally, amazingly, unflapped.

He is a paradox, a personally modest man in traditional dress who lives
simply in a small flat "over the shop", an ambitious businessman and a
visionary convinced that he has picked one of the locks that imprison the
poor. His key is credit - minute sums, borrowed mainly by illiterate
women, to set up the smallest imaginable enterprises.

He calls it micro-credit. And it works. After 24 years spent fighting the
sceptics, Grameen is a $2.5 billion (#1.5 billion) business. Professor
Yunus could easily have prospered as one of the ilite band of
international economists that he has, instead, spent much of his life
puzzling and annoying with heretical ideas about the bankability of the
unbankable. His heart is plainly, movingly, soft, but there is nothing
soft-centred about his economics. They make Margaret Thatcher sound like a
social worker.

I had just finished Banker to the Poor*, the book he has written with Alan
Jolis. Not only does it read as swiftly as a thriller, it turns the dreary
science of development economics inside out. It is solidly in favour of
capitalist free markets, with the novel twist that it identifies capital
as the ally of the poor. It distrusts big government in general and the
welfare state in particular. It excoriates the wastage, incompetence and
corruption of much international aid. And it is charged with the
conviction that all human beings, no matter what their handicap, are able
to help themselves.

"You are the Adam Smith of the poor", I began, slightly wondering what he
would say. A brilliant smile: "Oh, thank you. Thank you." Even so, I felt
I had to qualify what I'd said. After all, this man spends his life
fighting poverty. I added something about the unread bits of The Wealth of
Nations, on social responsibility. I need not have worried.

"We need far less government. It would be wonderful if you didn't need it,
if you could just stick with it for formal occasions, like your Royal
Family. People were once afraid that they couldn't manage without absolute
rulers. Maybe we will find out that, except for justice, the police and
defence, we can do without government too. The public sector is on the way
out. And that is because it has failed." But what about the Bangladesh
disaster? How could people already so poor pick up the pieces?

"This won't destroy us. It gives us an opportunity. Just think of their
enterprise. The flood-water stood there for ten weeks and they survived,
with no income, using whatever capital, assets, they had, and now they are
going back to rebuild. Disasters like this reveal the pride and strength
and creativity of the poorest; and that is what Grameen helps them to
prove. Humans are designed to do a lot more than merely survive."

How can a bank help? "We have standard procedures. We have to; local
cyclones and floods happen all the time." So branches can declare a
disaster area without asking Dhaka - "that would be too slow" - and turn
into humanitarian agencies. Bank staff suspend loan repayments and instead
fan out to provide food, medicines, "whatever people need".

"But they keep a detailed record of what each person has received. And
when the disaster is over, we present the bill. At first people didn't
like this - they said the Government will give it to us free. But we
explain that if it is not free, we can help again next time; and that it
is the people themselves who will have made this possible. They pay back
in tiny slices, about 12p a month; and that re-creates our disaster fund.
Doing it that way is also more efficient, because if relief is free
everyone inflates their demands, and the poorest, who have least clout,
will get nothing. If it is not free, you literally count every match."

Simple, sensible rules, meticulous organisation, imagination and peer
pressure among borrowers; these are Grameen trademarks. Its built-in
capacity to deal with disasters is good business sense. It reinforces
trust; "when your bankers have physically brought you food when you had
none, you don't want to cheat them".

As the floods subside, the first thing people get is their own money, from
their obligatory weekly savings with the bank. The second is a new loan.
The old one is rescheduled, not cancelled. "We never write off a loan;
instead, we build the capacity to pay it back. If we broke that rule,
there would be endless petitions." Still, the money to refinance more than
a million borrowers at once has to come from somewhere.

Grameen now needs a 10-15 year international loan. He will not approach
aid donors; "one of the allegations we have always had to contend with is
that Grameen can survive only with soft loans. That is not true; we are a
solid commercial operation.This is a classic liquidity squeeze. These are
not bad debts; we will get our money back, just not immediately. We always

Brave words. But for Professor Yunus, the point of Grameen is to prove
that banks can make a profit out of lending to the landless poor. "Banks
can and should lend to the disinherited of this Earth, not only out of
altruism but out of self-interest. Treating the poor as outcasts is
immoral and indefensible; but it is also financially stupid."

For Bangladesh, Grameen has been a cultural revolution. Grameen women have
fewer children, are less likely to be divorced and more likely to vote.
Professor Yunus says if micro-credit works in his conservative country it
could work anywhere. Micro-credit has caught on in 58 countries. In the
US, it is a success even with the shifting poor of Chicago's toughest
districts. Pilot projects are starting in Britain.

When he set up Grameen, people first said it could not be done, and then
that it worked only because of his personal charisma. Micro-credit is now
a #4.2 billion industry - too big for anyone to say it depends on one
man's vision.


TIMES (London)October 31 1998

Loan sharks lose as mutual support spells success for villagers

Grameen was born out of starvation and slavery

IN 1974, recently back from a Fulbright scholarship in the US, Professor
Yunus was lecturing on economic theory at Chittagong University (Rosemary
Righter writes). In Jobra, the nearby village, people were starving; the
famine that year killed 1.5 million. "They were everywhere. You couldn't
be sure who was alive and who dead. You couldn't guess their age. What a
terrible way to die. It happens in slow motion. Second by second, the
distance between life and death becomes smaller and smaller."

He decided to become a student all over again - a student of the real-life
economics on his doorstep. He went to talk to Jobra's poorest people, and
he met Sufia Begum. She made bamboo stools, and for each one she had to
borrow the 13p to buy the raw materials from the local money shark - who
made her repay by selling him the stool at a price far below its market
value. Her profit on each stool was 1p. It was bonded labour.

Professor Yunus and his students found 42 people in Jobra in the same
trap. To break free, all they needed between them was #16, which he lent
from his own pocket. He had started banking with the poorest of the poor.
But efforts to persuade banks to lend such sums to people with no
collateral were laughed out of court. Borrowers would never organise
themselves well enough to repay, such loans were too expensive to
administer, lending money to women was pointless as they would just hand
it over to their husbands. He refused to listen. In 1983, Grameen was
finally incorporated as a bank.

Grameen's customers: All borrowers, more than 90 per cent of them women,
must form their own group of five people, all from different families.
They sign no loan agreements, but they must learn the Grameen rules by
heart, decide who will be the first two to apply for loans and what they
should be for. Loans are for a year. Repayments start a week later, at 2
per cent of the capital, plus 20 per cent annual interest, so their tiny
ventures must earn income fast.

Grameen staff go to the villages, collecting weekly payments in public
meetings. If the first two keep up their payments, the next two get loans,
and finally the group's chairman. If one defaults, the others get nothing.
The group is a source of mutual support; and also of peer pressure.

"When she receives that first #10 loan, she is literally trembling,
shaking. The money is burning her fingers. Tears roll down her eyes
because she has never seen so much money in all her life. She carries it
as she would a delicate bird or a rabbit, until someone tells her to put
it away in a safe place. She promises herself that she will never let down
the institution which has trusted her so much. She will struggle to make
sure every penny is paid back. And she does it."


TIMES (London) Editorial October 31 1998


A Bangladeshi lesson for the world

Twenty-four years ago in Chittagong, out of horror at a famine that
claimed 1.5 million lives, a young Bangladeshi economist set out to prove
a simple thesis that had no place in thinking about "development". It is
that "every single human being, even one barefoot and begging in the
street, is a potential entrepreneur". The Grameen bank - the word means
"village" - that Muhammad Yunus went on to found pioneered the concept of
"micro-credit". It lent tiny sums of money to the poorest of the poor,
people without land, education, or even a shelter. More than 90 per cent
of the loans go to women, many of whom had never even been allowed by
their menfolk to handle cash.

Professor Yunus was warned that this was money down the drain, that the
poor would never repay. On the contrary, he argued; unlike the rich, the
poor could not risk not repaying; for these loans were the only chance
they had of escaping from penury. He proved his point; thanks to
meticulous organisation and a repayment system tailored to village needs
and income levels, Grameen's recovery record has been better than 98 per
cent - far better than high street lending to small businesses in this
country. And after years of being treated as a wonderful man with a screw
loose, he is now acknowledged as a brilliantly successful innovator.
Grameen is a #1.43 billion business, lending an average of #21 million a
month, and as we report on page 18, micro-credit banks modelled on Grameen
have spread to 58 countries, including the US and Poland.

This year, however, half of Bangladesh was flooded, in the worst natural
disaster in its history. Half Grameen's 2.4 million clients were wiped
out. To get back on their feet - and honour their existing debts - they
need new loans. Grameen therefore needs an urgent infusion of #60 million.
The Bangladesh central bank only provides short-term loans, rather than
ten to 15 year finance. Since 1995, Grameen, which initially relied on
grants and soft loans for seed capital, has operated on a commercial
basis. Professor Yunus is determined not to turn to donor governments.

The obvious solution is the International Finance Corporation, the wing of
the World Bank which lends to the private sector. For the IFC, this would
be a sound business proposition and good public relations too;
micro-credit for the extremely poor is an idea that deserves the Nobel
Prize for Economics. Grameen is basically sound; and it is one bank that
could be helped without any danger of moral hazard. But the money is
needed now. If the IFC hesitates, Western banks could do a lot to restore
their battered reputations by stepping in with a free market guarantee.

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