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.
 Return to the Grameen Bank Page
Hari Srinivas - hsrinivas@gdrc.org
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