In 1974 a terrible famine gripped Bangladesh and skeleton like
people began to flood into the capital Dhaka. This caused Professor
Yunus to feel empty inside. He used to get excited about teaching
how economic theories provided answers to economic problems
of all types. But what were the use of theories when all around
him, people were dying of starvation. Where did poverty fit
into the economics equations?
So Professor Yunus decided to take a ‘worms eye view’
of a local village – Jobra, so he could learn about village
life in person. The Poor would become his teachers and the village
his university of the real world.
One day he met an impoverished single mother of three named
Sufia Begum, working to weave bamboo stools, morning to night
whilst living in utter destitution.
“Do you own this bamboo?” he asked her.
“Yes”.
“How do you get it?”
“ I buy it.”
“ How much does the bamboo cost you?”
“5 Taka” (22 cents US).
“Do you have 5 Taka?”
“No, I borrow it from the Paikars.”
“The middlemen?” he asked. “What is your arrangement
with them?”
“I must sell my bamboo stools back to them at the end
of the day so as to repay my loan. That way what is left over
to me is my profit"
“How much do you sell it for?”
“Five Taka and 50 Paisa.”
“So you make 50 Paisa profit?"
She nodded. That came to a profit of just over 2 US cents.
"And could you borrow the cash and buy your own raw material?"
"Yes but the money lender would demand a lot. And people
who start with them only get poorer."
“How much do the money lenders charge?”
“It depends. Sometimes they charge 10 percent per week.
I even have a neighbour who is paying 10 percent per day".
“And that is all you earn from making these beautiful
bamboo stools, 50 Paisa?
“Yes.”
The Professor watched as Sufia set to work again, because she
did not want to lose any time, her small brown hands plaiting
the strands of bamboo as they had every day for months and years
on end.
He had never heard of someone suffering so much for the lack
of 22 US cents. The Professor thought Sufia’s status as
virtually a bonded slave was never going to change if she could
not find that five taka to start with. Credit could bring her
that money. She could then sell her products in a free market
and she could get a much better spread between the cost of her
materials and her sale price.
The next day he had a list made of how many people in Jobra,
like Sufia, were borrowing from traders and missing out on what
they should have been earning from the fruits of their labours.
Forty-two people had in total borrowed 856 taka (a total of
less than $US 27). “My God, my God, all this misery in
all these forty-two families all because of the lack of $27!”
he exclaimed.
The Professor lent them $27 and said they could repay him whenever
they could afford to. Over the next week, it struck him that
what he had done was not sufficient because it was only a personal
and emotional solution. He had simply lent $27 but what he had
to do was to provide an institutional solution.
So
the Professor and his colleagues did just that. Today
Grameen Bank has 2,568 branches. It works in 81,678 villages
and has 9 million borrowers and members who own 94% of
the Bank (the Bangladesh government owns the remaining
6%). It has recently passed the $US 31.8 billion mark
in loans to the poor.
Its borrower repayment rate stands at 94.93% and Grameen
Bank is 100% self-reliant. Meaning that 100% of the funds
it has lent out, come from its own fund and from the savings
of its depositors.
Some of the key features of Grameen Credit are that borrowers
don't need to prove how much wealth they have, they need
to prove how poor they are and how little savings they
have. The whole system works because it is the only opportunity
they have to break out of their poverty; they don’t
have any cushion whatsoever to fall back on. If they fall
foul of this one loan how will they survive? The poorest
people are afraid of everything so they want to work hard
and do a good job because they have to. They don't have
a choice. |
Grameen believes
that charity is not an answer to poverty. It only helps
poverty to continue. It
creates dependency and takes away each
individual's initiative to break through the wall of
poverty. Unleashing of energy and creativity
in each human being is the answer to poverty.
© Grameen Communications
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There is
no legal instrument between the lender and the borrower. Grameen
considers its relationship to be with people, not with papers.
They build up a human relationship based on trust. Grameen succeeds
or fails depending on how strong their personal relationship
is with the borrowers.
Their experience with bad debt is just 5%. Even then Grameen
does not conclude that a defaulting borrower is a bad person.
Rather that their personal circumstances were so hard that they
could not pay back their tiny loan. Bad loans of 5% is seen
by Grameen as the cost of doing business and it also represents
to them a constant reminder that they need to improve in order
to succeed.
Grameen has discovered Micro-Credit (based on their tried and
tested program) is a very effective instrument to empower the
poor, particularly the poor women, in all cultures and economies
of the world. It is cost-effective, sustainable and works in
a business-way. It gives a poor person a chance to take their
own destiny into their own hands and get out of poverty with
their own efforts.
According to past internal surveys, 68% of Grameen borrowers'
families had been found to have crossed the poverty line. To
do this according to Grameen's Bangladesh rural poverty line
criteria, they must have a rainproof house, a sanitary toilet,
clean drinking water and the ability to repay 300 Taka ($8)
a week. Also, all children of school age must be in school and
each household must eat three meals a day and have access to
regular medical checkups.
The life story of Ammajan Amina, one of Grameen's first borrowers,
illustrates what micro-credit can do for a street beggar. Of
her six children, four had died of hunger or disease. Only two
daughters survived. Her husband, who was much older than her,
was ill. For several years he had spent most of the family assets
on trying to find a cure.
After his death all that Amina had left was the house. She was
in her forties, which is old by Bangladesh standards, she was
illiterate and she had never earned an income before. Her in-laws
tried to expel her and her children from the house where she
had lived for the 20 years, but she refused to leave.
She tried selling home made cakes and biscuits door to door,
but one day she returned to find her brother-in-law had sold
her tin roof and the buyer was busy removing it. Now the rainy
season started and she was cold, hungry and too poor to make
food to sell. All she had she used to feed her own children.
Because she was a proud woman, she begged but only in nearby
villages. As she had no roof to protect her house, the monsoon
destroyed her mud walls. One day when she returned, she found
her house had collapsed and she started screaming: "Where
is my daughter? Where is my baby?" She found her older
child, dead under the rubble of her house.
When Professor Yunus's colleague Nurjahan met her in 1976, she
held her only surviving child in her arms. She was hungry, heartbroken
and desperate. There was no question of any money lender much
less a commercial bank giving her credit. But with small loans
she started making bamboo baskets and remained a borrower to
the end of her days. Now her daughter is a member of Grameen.
Today Grameen has nine million such life stories; one for each
of their members.
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Grameen Micro-Credit is based on the premise that
the poor have skills that remain un-utilised or under-utilised.
It is definitely not the lack of skills, which make
poor people poor.