Grameen Bank, Bangladesh

Source: voice of america
Narr: whoever heard of a bank that lends money only to the Poorest of the poor? A bank that forces its borrowers To save money for emergencies? A bank that is in the Process of setting up health care and insurance programs For its borrowers? Millions of villagers in bangladesh have heard of such a Bank, and, increasingly today, the world is hearing About it too. The grameen bank in bangladesh is in the Business of extending small loans, primarily for Self-employment purposes, to some of the world's poorest People. Today, two decades after its founding, the Grameen bank is the largest rural lender in bangladesh, With more than one thousand branch offices, serving 35 Thousand villages and more than two million customers. Since its founding, the grameen bank has made close to Two billion dollars in loans. Its repayment rate is Over 97 percent -- as high as, or higher than, the most Successful commercial banks in the world. It is no wonder that the grameen bank's policies are Being copied in countries all over the world.... Including in the united states. I'm linda cashdan. Today on spotlight on business and Finance we're going to take a look at the grameen bank And its international legacy. Narr: the grameen bank was founded by bangladesh economist Muhammad yunus, who returned to his native country in The early 1970s after spending seven years in the united States earning a ph-d at vanderbilt university in Tennessee. Voa's daud majlis interviewed mr. yunus by Telephone. Dm: professor muhammad yunus, you were teaching economics at One of the universities in bangladesh when you came up With this idea of grameen bank. Could you tell us in Brief just how this came about, how you thought about This project? My: teaching economics and kind of dreaming about a better Economic life, you question yourself. What good is the Subject that you teach in the classroom, because you are Teaching your students all the elegant theories of Economics, but you walk out of the classroom you see the Terrible misery of the people, people with skinny bones And about to die, and a whole nation in the grip of such A disastrous situation. So I would go around in the Village next door to the university campus, this is Something like 1975. I met a woman who was making Bamboo stools. I found out that she made hardly two Pennies u-s each day. The reason, I found out later, Was she didn't have the money to buy the bamboo to go Into that stool. So she had to borrow money to buy the Bamboo from a trader, with the condition that she will Sell the product to the trader at the price that he Decides. She cannot sell the product to anybody else. And, as a result, the trader took advantage of the Situation and only offered her a price which barely Covered the cost of the raw materials. Her labor almost Came free. That made me think: is it a peculiar Situation with her or are there more people in the Village like her? So I took a student of mine the next Day and went around in the village to find out and came Up with a list of 42 such people. So I didn't know what To do about it. The most natural thing that I could Think of was to take this money out of my own pocket, And distribute it among the 42 people, telling them this Is a loan I am giving. They can pay me back, but now They can sell their products wherever they get a good Price. They are not bound to sell it to any specific Person. Who decides the price. Dm: i have read and I think I have heard from you also that It was eight or nine dollars that started the whole Thing? My: well, it was a total of 27 dollars, and I saw how happy These people were because they got the money and there Was no condition attached to it, out of 42 people. This Is the first total amount that I gave out. And then I Thought, in order to continue this program, if they had To depend on me, probably it will not go very far, so I Went to the bank and talked to the manager, and the bank Manager almost fell from the sky when I proposed what I Had in mind. He thought this is a very crazy idea to Have, because. He told me, banks don't lend money to the Poor people because they cannot offer collateral and Because they are not credit-worthy. I said, "how do you Know they're not credit worthy? Did you ever try to Lend money to the poor people?" He said "no, we don't Have to because we know they are not credit worthy." Finally I offered myself as a guarantor. I said I'll Become the guarantor and you give the loan and we made a Deal. The funny thing was, although they're insisting That the poor will never pay back, when I began, I was Surprised, very pleasantly surprised that everybody was Paying back. I had no problem getting the money back. So I felt very encouraged. So I took more money from The bank and gave it to more people. And I had the same Result. People were paying back without any hassle, Without any problem. Then it dawned on me that instead Of trying to convince the banks, why don't I try to set Up a bank by myself? It took me another two years, to Get government permission, and finally in 1983, we Became a bank. And today as you know, we have two point One million borrowers. Ninety-four percent of them are Women. And we work in 35 thousand village in Bangladesh. Dm: is there any particular reason you think women are more Credit-worthy than the menfolk? My: when I began I wanted to make sure that not only did we Lend money to the poor. We also lend money to women. I Wanted to make sure half of the borrowers were women, And it was not easy to do that, because women themselves Did not believe they should take money. So we had to Kind of chase them, and once we saw some few women join, It became easier to convince others, because of the Success achieved by the previous ones. It took us an Initial six years to bring to a level where our number Of male borrowers equaled our level of female borrowers. But in the meantime, we started noticing something very Remarkable. We saw that the money that went to the Family though women brought much more benefit to the Families than the money which went through men in the Family. So since then we started giving priorities to Women. Dm: dr. yunus, I have read and again I have heard you saying That the conventional banking process has created a new Caste system, of financial brahmins or non-bankable People etcetera. Can you elaborate a little on this? My: if you are a financial brahmin, or you have the capacity To offer collateral, then you have access to the Financial institutions, so you bring more money in and You invest more money and you use more money and you Make more money. Money begats money. If you don't have Money, you are completely lost. The whole basic Principle of the banking system is, the more you have The more you can get and if you have nothing, you get Nothing. Dm: you have also said something about poverty. You said That poverty is denial of human dignity. Is that right? My: by denying the access to money, we have contributed to The creation and sustenance of poverty in the world. The poverty has not been created by the poor. Poverty Has been created by the institutional design that we Have introduced for ourselves. It is the very system of The world that has contributed to the creation of the Poverty. So poverty is a denial of all human rights. It is not a denial of one single human right. It is a Denial of all the human rights you can think of -- right To food, right to shelter, right to education, right to Health or any number of those rights that we hold so Dear to our hearts. Today there are one point three Billion people in the whole planet who are below the Poverty line. In our case, in grameen bank we challenge That basic principle of banking that the more you have, The more you can get. We said "no. That is not right." We said, "the less you have, the more priority you get. And if you don't have anything, we'll give you the Highest priority." We don't have to depend at grameen Bank, on anybody's certification or anybody's letter of Introduction. We simply say: "If you're a human being, That's a good enough introduction for us." Dm: this concept of grameen bank, it has been replicated in Many parts of the world, including the united states. Do you give advice or counsel before they set up similar Things in countries like malaysia, vietnam, indonesia, Burkina faso, nigeria, ghana, the whole lot of these Countries? My: to our knowledge there are 56 countries around the world Who have introduced grameen methodology, who have Started grameen programs in their own countries. In Some countries there are more than one -- maybe 50 Programs, 100 programs and so on. [beg. Opt] so there Are many of those programs in action, although many of Them are on a small scale, rather than a big bank like We are in bangladesh. What we do is we make ourselves Available. Whoever is interested can look at us, do What we do. We get many invitations from countries to Come and help them set it up, but usually we invite them To come here, to bangladesh, to see what we do, because We think that a specific country should develop its own Way of doing things, so they will build up their own In-house capacity to start the program and run the Program, rather than people from grameen bank going Around and setting it up. So we help to train their Personnel. [end opt] we have an open training program. We train sometimes hundreds and thousands in a year to Get through our training program and get back so they Can start their own programs. Dm: thank you, muhammad yunus. This is daud majlis in Washington. Narr: bangladesh has a long tradition of self-employment. In Contrast, fewer than one out of every ten americans is Self-employed. Despite those and countless other Differences between the two countries, a technology Transfer has begun. In the united states, some 400 Different organizations belong to the association for Enterprise opportunity, a network of groups trying to Translate the grameen bank concept into american Micro-loan programs. American jeffrey ashe worked for the u-s agency for International development for 15 years, studying the Grameen bank and then documenting the success of similar Programs aimed at tiny enterprises in asia, africa and Latin america. Five years ago, mr. ashe set up his own Lending organization -- working capital -- in boston Massachusetts. Working capital assists small-scale Businesses in the united states, particularly in inner City communities and declining rural areas. "The typical self employed entrepreneur here has had an Idea. They're working off their kitchen table or their Basement or in a small store front, so they're pretty Isolated from each other. They, like the others, may be Very skilled at what they're doing, but they don't have Much knowledge about how to do business, and even in This country, with the best developed banking system in The entire world, only one out of every ten of our Customers has even gotten commercial credit for their Business. So the banking sector just isn't attending This income group whatsoever." Narr: if such entrepreneurs lack the money, jeffrey ashe says, They also lack expertise. "Think about a large business. What kinds of advantages Do they have? Well, they have support structure, like a Chamber of commerce. They have referrals, like the old Boy network. They have business education, going to Business school, and credit from the banks. What Working capital does is take the same four elements, Support, networks, business knowledge and credit and Provide it to the smallest businesses in the inner Cities." Narr: thus far, mr. ashe says, working capital has given out Two-thousand-200 loans without a single credit check, Collateral requirement, or loan review process. How? By adopting another procedure from the grameen bank. Working capital loans money not to individuals, but Rather to groups of individuals. Peer pressure is key To the success of the program. "The five or six people together in a group are Responsible for each other's loans. In other words, if One person doesn't pay back their loan, it's up to the Group to resolve the problem, and we freeze credit to All the group members until the group resolves the Problem." Narr: mr. ashe says working capital does not target the Poorest of the poor, but rather the entrepreneurial poor -- people already involved in income-generating Activities who lack access to financial resources. "There's a tremendous range. Let's say a rural taxi Driver will put in a telephone line to a local Supermarket. People will use these small loans for Advertising. A woodworker will buy a new saw, a Seamstress a new sewing machine, or special attachment For the machine. The amount of money for the first loan Is only 500 dollars and this ratchets up in stages to Five thousand dollars. Narr: like the grameen bank, working capital's loan repayment Rate is astoundingly high. "We have only written off two and a half percent of the Loans we've made to date. In other words, even though We do no credit checks and have no collateral and many Of our clientele couldn't get even a credit card -- our Repayment rate is better than bank rates and most low Credit card rates." Narr: jeffrey ashe has started micro-enterprise franchises in Two additional cities in the united states and hopes to Support as many as four thousand micro-enterprise Businesses by the end of 1997. Narr: the micro-enterprise concept based on the grameen bank Appears to be thriving in the united states... but how Are the people on the loan-receiving end doing? Voa's Paul francuch takes a look at the experience of a woman In chicago. Text: for 20 years, arinez gilyard (air-in-ez gil-yard) Worked for an insurance company, gradually winning Promotions to the position of underwriter. Ms. gilyard Had a college degree and was a single mother with three Children who had long given thought to starting a Business of her own. That remained but a dream while She maintained her insurance job. But then things Changed ... and that dream suddenly became an option to Ponder. // 1st gilyard act // "My job was phased-out with the insurance company. Once It was phased-out, I was left without a paycheck and Wondering, 'what am I going to do?' So I worked (as a) Temporary (employee) for maybe two years, trying to get It together (survive). And my twins came along -- Completely unexpected -- and I thought, 'now I really Have to do this.' [opt] that's really what made me Decide to go ahead and do it. And also, it made me Realize with the loss of that job that I needed to know How to make money on my own without having to depend Upon another company, because things aren't as they were 40 or 50 years ago where you would go into a job and Stay there many, many years." [end opt] // end 1st act // Text: part-time jobs were not enough to sustain ms gilyard and Her family, especially when confronted with the fact That she had to leave her infant twins at a supervised Daycare center while she worked. // [opt] 2nd gilyard act // "Once I checked into a day care facility around the Place I was working, I nearly passed-out (fainted) Because they wanted 150 dollars a week, per child -- and I had twins. I would be paying 300 dollars a week. They would allow me a 10 percent discount, which would Not help me a great deal. All of my (pay)check would Have been going to day care. I would not have had money To eat or anything else." // end 2nd act [end opt] // Text: the cost of daycare was so high that ms. Gilyard was Forced to accept welfare assistance. But the daycare Experience made her think this was a business she could Run. However, when she approached the local bank where She was a customer for some 15 years and asked for a Loan ... // 3rd gilyard act // "Nobody wanted to help. It was a risky venture. I had Nothing. I had no business plan -- I just had the idea. I had nothing in writing and absolutely nothing to go On, so nobody wanted to talk to me." //end 3rd gilyard act // Text: ms. Gilyard then turned to a program called the "women's Self-employment project." It loans money to Lower-income chicago women who have the motivation to Run a business, but don't have the experience or credit History to get a loan from a commercial bank. // 4th gillard act // "I thought, I need to give this a try, so I did give Them a call ... // end 4th act // Text: ms. Gilyard enrolled in training programs to learn how To get started. // 5th gilyard act // "We go through marketing, we have a tax segment, we have A basic business segment and we have library research Time. And we have to go out and really check other Businesses throughout the city and in our area to see What the competition is." // end 5th act // Text: she did that, looking for price rates, services offered, Conditions of facilities and other things. // 6th gilyard act // "I just did what most people would do, and that was I Called my competition. I was a mother. I did have Children. And I wanted to know the prices of child Care." Text: the women's self-employment project loaned her a few Hundred dollars to combine with her savings to get the Business started. She took courses and training Programs to meet local licensing and certification Standards to run a child daycare facility. Ms. gilyard Started her first center in part of her sunny apartment Facing a large public park on chicago's south side. She Used the loan money to buy supplies to equip the center, [opt] supplementing that with toys from her children, Toys she'd buy from resale shops, and from donations she Solicited. // [opt] 7th gilyard act // I begged an awful lot. I needed cribs, I needed Strollers, I needed cots. I needed a lot of things. // end 7th gilyard act [end opt] // Text: that was three years ago. The center's business started Slowly. Ms. gilyard distributed advertising fliers to Promote her business in chicago's nearby hyde park Neighborhood, the home of the university of chicago. Gradually the business expanded. Ms. gilyard rented an Apartment across the hall from her own flat and Converted it into a daycare center. She now cares for Between eight and 14 children a day. The business has Been good, and she's hired extra help. // 8th gilyard act // "Right now, I have one full-time employee, one part-time Employee and myself." //end 8th act // Text: arinez gilyard has paid back her initial loan to the Women's self-employment project. Now with a good credit Record established, she can borrow more money from the Project, or go to commercial banks. She doesn't, However, think she'll go back to her old bank -- the one Which said "no" when she applied for a loan. // 9th gilyard act // "But now, I think that I wouldn't even bother to go back To them. I would go elsewhere where the rates would be A lot better ... you have to shop for the best rates." // end 9th act // Text: ms. Gilyard has big plans to expand her child daycare Facility to operate 24-hours-a-day, [opt] providing a Service for single working parents who are called out of Town on business and have no family or friends to watch Their kids. [end opt] and she's looking at moving to an Even larger facility, setting that goal for july of 1997. (Signed) Narr: special thanks to voa's daud majlis and paul francuch For their contributions to our program. Today's story on The grameen bank of bangladesh and the international Changes it has inspired was edited by phil haynes and Produced and directed by kevin raiman. I'm linda cashdan.

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