a bank for the down and out

Mohammad Yunus, a 56-year-old banker from Bangladesh, is that rare thing: a bona fide visionary. His dream is the total eradication of poverty from the world. 'One day,' he says confidently, 'our grandchildren will go to museums to see what poverty was like.'

What this man has invented is called micro-credit. It is both terribly simple and, in the field of development and aid, completely revolutionary. Yunus gives loans of as little as $30 to the destitute. A typical borrower from his bank would be a Bangladeshi woman (94 percent of the bank's borrowers are women) who has never touched money before. All her life, her father and husband will have told her she is useless and a burden to the family; finally, widowed or divorced, she will have been forced to beg to feed her children. Yunus lends her money and doesn't regret it. She uses the loan to buy an asset that can immediately start paying income - such as cotton to weave, or raw materials for bangles to sell, or a cow she can milk. She repays the loan in tiny installments until she becomes self-sufficient. Then if she wants, she can take out a new, larger loan. Either way, she is no longer poor.

The Grameen Bank ('rural bank' in Bengali), which Yunus has built over the last 20 years, has more than 2 million borrowers in 35,000 villages throughout Bangladesh. [In 1951 it made loans more than $400 million. The bank actively seeks out the most deprived of Bangladeshi society: beggars, illiterates, widows. Yet, it claims a loan repayment rate of 99 percent. Most Western banks would be delighted with such a small ratio of bad debts.

The man whose vision has made this all possible is a soft-spoken former professor who lives and dresses simply – he earns only $240 a month – and is, in public, shy. His best work is done in a two-bedroom apartment at the bank's quarters in Bangladesh's capital, Dacca, where he lives with his wife and an old daughter. He does not own a car.

Born in Chittagong, the business center of what was then Eastern Bengal, Yunus studied at Vanderbilt University in Nashville, Tennessee, before becoming head of the Economics Department at Chittagong University. The terrible man-made famine of 1974, which by some estimates killed 1.5 million Bangladeshis, changed his life forever. 'While people were dying of hunger on the streets, I was teaching elegant theories of economics. I started hating myself for the arrogance of pretending I had answers. Why did people, who worked 12 hours a day, seven days a week, not have enough food to eat? I decided that the poor themselves would be my teachers. I began to study them and question them on their lives.'

Then he made his big discovery. One day, when he was interviewing a woman who made bamboo stools, he learned that, because she had no capital of her own, she had to borrow the equivalent of 23 cents to buy raw bamboo for each stool made. After repaying the middleman, she kept only 1.5 cents in profit. With the help of graduate students, Yunus discovered that there were 42 other villagers facing the same predicament.

'Their poverty was not a personal problem due to laziness or lack of intelligence, but a structural one: lack of capital. The existing system made it certain that the poor could not save a penny and could not invest in bettering themselves.”

Grameen has no telephones in its branches, no typewriters or carpets – most borrowers are visited by Yunus’s staff in their villages-and no loan agreements. Borrowers who are not destitute are excluded, and so, usually, are men. Yunus soon discovered that lending to women was much more beneficial to whole families and that women were more careful about their debts. To be eligible for a loan, a person must prove she understands how Grameen works. Borrowers pledge [promise] to abide by 'the 16 decisions,' a set of personal commitments. The most important is to join with four fellow borrowers, none of whom can be a family member, to form a 'group.' The group provides a borrower with self-discipline and courage. Peer pressure and peer support effectively replace collateral.

Independent studies by the World Bank and others indicate that within five years, about half of Grameen's two million borrowers manage to pull themselves up over the poverty line. In addition, studies of the Grameen method suggest that after a wife joins the bank, her husband is likely to show her more tenderness and respect. Divorce rates drop among Grameen borrowers, as do birth rates.

Yunus's method is gathering supporters. Grameen is being copied in 52 countries. The methods are adapted to local conditions, but the idea is the same. [It] works well wherever the social life of the poor is tightly knit. But in many urban settings, the lack of community has been the greatest stumbling block. Replicators in Asia and Mrica report that it is difficult to make micro-credit work in urban areas, especially among people who have no fixed address and thus few links to their neighbors.

Yunus does not pretend to have solutions for all problems. What he does say is that by creating wealth in the countryside, Grameen can reduce the pressure on those moving to the urban slums.

“People say I am crazy, but no one can achieve anything without a dream,' he says. 'If one is going to make headway against poverty, one cannot do business as usual. One must be revolutionary and think the unthinkable.”

(From Hartman, P and Blass, L. (1999). Quest : Reading and Writing in the Academic World Book 3. McGraw-Hill College. 178-181 pp.)

Vocabulary Check. Match the words on the left with their meanings on the right. Try to do this
without a dictionary but look back at the reading if necessary. Write the letters on the lines.

____ 1. eradication		a. a difficult situation
____ 2. destitute		b. progress
____ 3. burden		c. a person who can't read or write
____ 4. beg		d. very very poor
____ 5. asset		e. an obstacle; something that prevents action or causes worry
____ 6. instalment		f ask for money from strangers on the street
____ 7. illiterate		g. complete removal
____ 8. capital		h. money to begin a business
____ 9. famine		i. very close (family or community)
____10. predicament		j. a time in which many, many people die of hunger
____11. peer pressure		k. something heavy that must be carried
____12. tightly knit		l. something that has value and can be sold
____13. stumbling block		m.strong influence from people in one's social group
____ 14. headway		n. one in a series of payments on a loan

3. To whom does the bank lend money? What doesn't the bank require of borrowers?