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Grameen: Bank gives micro credit to the poor

Professor Muhammad Yunus started out with 27 dollars in micro credit, distributed among 42 poor families. Meanwhile (2000), thanks to his initiative, 12 million desperately poor people worldwide have been able to make use of such mini credit and have made themselves independent with simple things as a result. One of Prof. Yunus' mission statements goes: "If the circumstances are such that you cannot realise your ideas, then change the circumstances!" He does that with lasting effect.
I initially interviewed him during his visit to Germany and then, in 2000, I was with a camera team in Bangladesh and visited him personally in his bank. Afterwards, we also drove out to the villages with a translator and interviewed the borrowers on-site. We were fascinated by what we experienced there.

****** Excerpts from an article by Bärbel Mohr, the complete article is available in German on the German website:

Bangladesh is a country with an illiterate quota of 90 percent. 40 percent of all Bangladeshis live below the poverty line. The population density amounts to 830 inhabitants per square kilometre. Such a density could only be attained in Europe if the population of England, France and Ireland were squashed together into an area the size of Bavaria in Germany.

In 1974, Muhammad Yunus, himself a Bangladeshi, was dean of the faculty for business studies at a university in the southeast of the country. In this same year, a very large famine broke out in the country and the stream of starving people seeking refuge in the towns became ever greater. Ultimately, bodies of the dead lay about in the middle of the streets in ever increasing numbers. In the face of such conditions, Muhammad Yunus seriously asked himself the sense of his theoretical lectures on business procedures and making sums of millions and billions of dollars when the real economic state of the country looked such that the people were starving by the thousands. He wanted to do something concrete and devoted himself to this cause in a nearby village, which was also suffering from a very great poverty. He wanted to find out on-site what he could do for these people.
Yunus reports: "There I met a woman who was making a bamboo stool. I asked her how much she would earn with this. Initially I couldn't believe how poor this woman was because she did a really good job. She told me that she only earned a few cents per day because she didn't have any money of her own with which to buy bamboo. She had to borrow money from the bamboo dealer. As a result she was at his mercy and had to accept every price. It was practically slavery. The bamboo material for a stool had only cost 22 cents, but she didn't have it. I was totally shocked. Whilst I spoke about millions and billions in my lectures, this woman didn't even have a couple of cents with which to buy her bamboo material.

I then went through her village and made a list of people, who also needed money. In the end there were 42 names on my list. Together, these 42 people needed just 27 dollars. I lent these people the 27 dollars from my own pocket by way of a loan. The people were very happy about it. Until this moment, I was unaware how you can bring happiness and wealth to so many poor people with such a small sum. After that I asked the bank if these people couldn't receive loans. The bank said "No". The poor were not considered creditworthy. However, I wanted to know if there wasn't a possibility all the same. I borrowed money from the bank myself, offered myself as guarantor and, in turn, lent the money to poor people. And they paid it back on time. That's how it all began back then."

Today the Grameen Bank Bangladesh has 2.3 million customers and 98% pay their rates back more than promptly. Even in times of flooding, the repayment quota still lies at over 80 %. Yunus comments on this: "Most banks work with a 'money apartheid'. They lend to the rich, and the poor have no rights to receive money. But if they have an opportunity, they pay back more honestly than the wealthy."
You can say that again, for the industry bank in Bangladesh has a repayment quota of 10%!!! Yunus characterises his relationship to traditional money institutions as follows: "We have taken a look at how the other banks work and then done the exact opposite of this."

In the meantime he has been celebrated as a man who conquers poverty. The former US president, Bill Clinton, put him forward for the Nobel Prize.

Loans just for poor women
In his various field studies in Bangladesh, Yunus became particularly aware that it is the women, who fight for the lives and survival of their family, who should be given priority to enjoy the financial aid. Women have a far greater repayment moral, and the danger that the loaned money is wasted on mere status symbols is much less. He laughs with pleasure when he reports of the resistance in his own country to this approach. In Bangladesh – at least until now – the woman is quasi a nobody, especially in the countryside, who only follows her husband. She doesn't have an opinion of her own and, in many cases, hasn't once even had money in her hands.

Now, the Grameen Bank employees themselves appear in these villages in the most remote districts and want to speak to the women. Normally it's the men who come towards the strangers, whilst the women make themselves scarce in the background. However, these odd Grameen people don't want to speak to the men at all. They offer money to the women instead. The men are initially offended that a bank could come to offer money to a nobody in their family, and that they – as head of the household – don't get any money offered to them. Naturally, the loudest protest comes from the conventional moneylenders with their excessive interest rates.

But the women's trust must also be achieved bit by bit. To begin with, they are totally perplexed and startled. "What, me? But I don't know anything and can't do anything. I haven't once had money in my hands!" "Fantastic, you're exactly who we're looking for," reply the employees of the Grameen Bank, and the women listen in surprise. They have to get together in groups of five – this is a Grameen requirement, if they ultimately want to make use of a loan. Although each one of them receives the loan, by means of this group solidarity, Muhammad Yunus wants to ensure that no woman squanders money that she can't repay.
For if a woman says to the other four that she wants to buy a goat, for example, the friends first ask to whom she will sell the milk? Are there neighbours with a real need and who are able to pay for the milk? Neither Yunus nor his employees give out clever advice. The women should become creative in accordance with their own ideas. It's only questions that are continually posed. The most difficult questions come from the women from their own group. In this way, no woman is left alone with what is, for her, a completely new situation, and the new business ideas are really examined and thought through in terms of their practicality.
The next step is often to overcome the resistance of their husband, who is not only offended but also worried. In the tradition of the country, he has got to know his wife as a nobody and is now afraid that she will be unable to cope with this task and that the bank could ultimately come to him and demand the money back. And he doesn't have it any more than his wife does. Muhammad Yunus responds to this by saying: "Every individual has an unlimited potential. The beggar in the gutter hasn't yet had any opportunity to demonstrate his potential. He has neither demonstrated it to himself, nor to the world around him." And therefore the men of Bangladesh do not yet know anything about their wives'. Yunus grins again with great pleasure when, in his simple but easily understandable English, reports about one such typical husband: "Every week he is expecting big disaster, but it doesn't come…"

In the end, if the wife punctually repays her rates every week over the period of a whole year then, on the whole, there has also been a great deal of change in both the family and in the entire village. Ultimately, through this loan, the husbands learn to get to know their wives totally anew and discover sides to them about which they never knew before. Out of this nobody, there has grown a somebody who feeds the family. This firstly changes the family, then life in the village, and ultimately influences the politics in the country as a whole. For, Muhammad Yunus advises his customers again and again to vote in national elections. At 53%, the voter turnout was fairly low and also twice as many men as women went to vote. Grameen wanted to change this. However, the women were initially reluctant. The country's politicians were all seen to be devils and going to vote was considered to be totally pointless, they believed.

In this case, they should simply vote for the smallest devils among the devils and not allow the largest devil to govern, was Yunus' reply. At the beginning of the 90's, already a large number of Grameen customers and their families were going to vote – and the first changes could be seen in the election results. In1996, encouraged by this result, the Grameen customers also took their neighbours and all of their relatives with them to vote and, for the first time, the number of seats held by the conservative party shrunk from17 to just 3. The turnout of voters in 1996 suddenly amounted to 73% instead of the usual 53%. The new self-confidence of the poor changes the country's politics
Having once got this far, the Grameen Bank members (in line with the cooperative principle) thought: "Why should we actually continue only to vote for the smallest devil? We are good people and we could also campaign ourselves…. " One year later, namely in 1997, 4000 poor Bangladeshis from the families of Grameen customers (of which 50% were men and 50% were women) campaigned in the regional elections. A sensation for Bangladesh. Ever since the women have had more self-confidence, a greater sense of responsibility and their own income, the birth rate has also been sinking considerably and contraception is being used seriously for the first time. Instead, increasing numbers of children are being sent to school. Meanwhile, 15,000 Grameen children are already attending high school. This is also an enormous development for a hitherto illiteracy rate of 90 percent. And, ultimately, it all began with a 27 dollar loan to 42 families.

Incidentally, the bank belongs entirely to the customers, and when flood catastrophes engulf the land, all of those affected branches (the bank has more than 1000 branches throughout the country) immediately put a halt to the banking business. It is their duty to help the people and e.g. to buy and distribute groceries using the bank's money. Afterwards, new loans are given and completed.

Yunus sees the matter clearly: "If the people can't stand on their own two feet again, then there also won't be a banking operation in the region any more. That would be absurd."
New types of development aid
Public studies show that, through the help of the Grameen Bank, 10 percent of the Bangladeshis have received a tangible, new chance for a new life. A third of these have meanwhile established themselves as independent small business and have emerged from absolute impoverishment. Help for self-help has fully taken hold.
Yunus also goes extensively into the problem of development aid. For, despite Bangladesh already receiving 30 billion dollars of foreign aid since its 1971 independence, these 30 billion have had much less impact than the 2.3 billion micro credit from the Grameen Bank. Put very simply, the problem with international development aid lies in the fact that the money has to withstand two levels of corruption – in the giver – and in the receiver country. This is where the greatest part of the money disappears. Bridges and streets are then built with the pitiful remains and the contracts are given to those companies that pay the most bribery money. Or the rich citizens build houses and vote for the right party by way of a 'trade-off'. For this reason, the international development aid often doesn't reach the poorest of the poor at all.

An example of success:
Monsura Begum was destitute when she received her first loan. Her husband left her when she became pregnant, and therefore she is a single-parent. She used the first loan to deal in oil, soap and groceries. She saved the resulting profits over a period of three years. With the additional help of further loans, she bought a sewing machine at the end of these three years. She had learnt to sew in the mission. Now, she became self-employed and sewed for the whole locality, for the market and for the clothing factories. Sometimes, also free of charge for very poor people in the area. In 1977, she used her seventh loan to acquire her own house. She is now saving for the education for her son, who is now eight years old, and to buy him a plot of land.

By means of a kind of social constitution from the Grameen Bank, which comprises of 16 points, Monsura Begum's whole life has changed in a positive sense. At training sessions for these 16 points, Grameen customers primarily learn things about daily life: how to plant vegetables, and why one should not live from rice alone, how to build a toilet, that water should be boiled before drinking, how to build a fountain etc.

p.p. How to build up a business, how to work together in groups and how to provide mutual support are also learnt there too. Furthermore, every illiterate person also learns how to write at least one thing – namely their name. This thus enables them to sign for themselves in business life. Incidentally, this also gives all of the customers an immense feeling of pride. In response to the question of whether she wouldn't prefer to have the money given to her, Monsura answers: "No, I am not a beggar!" Nancy Wimmer, 97

For more information:

Muhammad Yunus has also written a book.
You can also find it on http://www.grameen-info.org/