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Re: Grameen Bank Query

Please help make the Manifesto better, or accept it, and propagate it!

An 'excerpt' from the Grameen Bank website, by it conceiver and founder
Muhammed Yunus. I thought others too might find it interesting. I am curious
to know if any such organisation (ie. based on the notion of microcredit) is
functioning in India.

--------Start of Excerpt---------

by Muhammad Yunus
Reprinted from the Noetic Sciences Review, Spring, 1997

 A Bangladesh "bank of the poor" challenges conventional thinking
aboutlending --- showing how little money on loan it takes to give hope,
possibility,and a new way of life for thousands

After teaching economics in Middle Tennessee State University, U.S.A., for
several years, Bangladesh native Muhammad Yunus decided, in 1972, the time
bad come to return to his homeland. There he was appalled by the scale of
the misery he encountered in the wake of a famine that had devastated the
already tenuous social life of the struggling nation he had left in 1965,
when he became a Fulbright Fellow in the United States. He wanted to do
something to make a positive difference in the lives of Bangladeshis most in
need --- but what ?

In a speech to the State of the World Forum held in San Francisco in 1996,
excerpted here, Yunus gave a moving account of a small-scale experiment he
conducted to test a simple hypothesis : The poorest people of his nation, if
given small, low-interest economic loans, could be expected to repay in
full. "From the start, I knew this idea posed a challenge to an entrenched
modes of thinking," Yunus recalls. "I felt there was no way for the majority
of Bangladeshis to significantly change their standard of living, unless the
program of reform could effect a fundamental change in beliefs about what
was possible in order for simple people to solve simple problems."

Setting out on foot in the village of Dhaka, one of the first people Yunus
met was a widow with two daughters. Sufia Khatun, one of Bangladesh's 55
million landless peasants, had borrowed money to make bamboo stools which
she then sold. But the exorbitant interest rate on the loan ensured that her
daily profit was only two cents. "I couldn't accept why anybody should make
so little for such a beautiful skill," Yunus says. All Sufia needed to
vastly improve her economic condition was the equivalent of four dollars.
Yunus lent her the money and her profits soared to one and a quarter dollars
per day.

That was just the beginning. He proceeded to set up a bank that would cater
only to those rejected by traditional lending institutions --- the poor, the
illiterate, and women. Against widespread predictions that his experiment
was doomed to failure, Yunus achieved a level of success that exceeded his
grandest hopes. The institution he created, the Grameen Bank, today is
widely hailed not simply as a new model for economic development in the
Third World, but as an object lesson in the power of the human spirit
unleashed for the greater good.

"Muhammaded has created the first institution with soul from the ground up,"
said IONS board member Robert Schwartz when introducing Yunus at the State
of the World Forum. "It wasn't added --- it's in the whole thing."

I would like to tell my personal story, going back twenty-five years to the
independence movement in Bangladesh. All of a sudden we were confronted with
a war, a vast amount of bloodshed, horrendous misery. During that period I
was teaching here in one of the American universities, and as soon as
Bangladesh became independent I went back, thinking I'd join everybody else
to rebuild the nation, creating the nation of our dreams.

But after the national crisis, the situation in Bangladesh didn't improve. A
dreadful famine took place the end of 1974, and I felt helpless to do
anything. There I was, with my brand-new Ph.D., teaching elegant economic
theories, feeling certain that I had all the theoretical solutions. And yet,
you walk out of the classroom, seeing skeletons all around you, people
waiting to die. There are many ways to die, but there's no more cruel death
than dying of hunger. The death comes inching toward you, and you see it,
and you feel such despair because you can't find one handful to put inside
your mouth, and the world moves on as if nothing has changed except for your

I couldn't cope with that. Everything I had learned, everything I was
teaching, seemed make-believe stories with no meaning for people's life. So
I set out to learn how people live in the village next door to the
university campus. How they inch toward the death that is coming their way.
I wanted to find out whether there was anything I could do as a human being
to delay it, even for one single person.

I went around and sat with people in the village, talking. I found that all
my arrogance, my academic arrogance, didn't exist anymore. I was not trying
to solve global problems; I wasn't even trying to solve national problems. I
abandoned the bird's-eye view that lets you have knowledge of everything
that you see from above, from the sky. I assumed a worm's-eye view, trying
to find whatever comes right in front of you, smell it, touch it; trying to
do something about it.

One day I met a woman who was making bamboo stools. I wanted to understand
how she carried out her life, because, after all, she had something to do,
something to make. After long discussions I found out that she was making
the equivalent of two U.S. pennies every day by making stools. I couldn't
believe anybody could work so hard and make such a beautiful bamboo stool,
and make only such a tiny profit. She explained to me that she didn't have
the money to buy the bamboo which goes into that bamboo stool, so she had to
borrow from the trader who, in turn, imposed a condition that she had to
sell the product to him alone, at the price that he decides.

That explained the two-penny profit. She was virtually a bonded laborer. And
how much did the bamboo cost ? About twenty cents. I was astonished, and
began debating with myself whether to give her twenty cents. I came up with
an idea to make a list of people who needed that kind of money. I took a
student of mine and went around the village several days, and came out with
a list of forty-two people. When I added up the total amount needed, I got
the biggest shock of my life. It added up to twenty-seven dollars !

I felt ashamed of myself, being part of a society which could not provide
twenty-seven dollars to forty-two hard-working skilled human beings. To
escape that shame I took the money out of my pocket and handed it to my
assistant, saying : You take this money and give it to those forty-two
people that we met, and tell them that this is a loan, that they can pay me
back whenever they are able to. In the meantime they can sell their product
at whatever price they can get.

After receiving the money, naturally the people got very excited. Such a
thing had never happened before! And seeing that excitement, it made me
think more: what do I do now ? Should I go on giving this money, or make
some arrangements so they can find this money whenever they need it ? I
thought of the bank branch located right on the campus of the university. I
went to the manager and suggested that he lend money to the poor people in
the village that I met. He nearly fell out of his chair. "You are crazy.
It's impossible. How can you lend money to the poor people ? They are not

I pleaded with him. "At least give it a try, find out, it's only a small
amount of money." He said, no, our rules don't permit it. "They cannot
provide collateral, and such a tiny amount, it's not worth giving." He
suggested that I see the higher officials in the banking hierarchy in
Bangladesh, maybe they could find a way to give the loan, but he could not.
I took his advice and went to the people who mattered in the banking sector,
everybody told me the same thing.

Finally, after several days of running around, I offered myself as a
guarantor. I'll guarantee their loan, I'll sign whatever they wanted me to
sign, they give me the money and I take the money and give it to the people
I want to give to, and that would be the beginning. Not so fast, the bankers
said. They warned me repeatedly that the poor people who receive the money
will never pay you back. I said, I'll take a chance.

And the surprising thing was, the people who got the loans were paying every
penny. There wasn't a single penny missing. I got very excited, and came to
the manager, and said, look they pay back, there's no problem. Why shouldn't
you give ? They said, no, they're just fooling you. "Soon they will take
more money and never give it back." So I gave them more money, but they
always repaid. I told the story to the banker and he said, "Sure, maybe you
can do it in one village, but if you do it in two villages it won't work."
So I hurriedly did it in two villages. Guess what ? It worked.

Ever since, it's become a kind of a struggle between me and the bank manager
and his colleagues in the higher positions. They kept saying that this
larger number, five villages, probably will prove their point. So I did
extended the program over five villages, and all it showed was that
everybody was paying back. But the bankers didn't give up. They said, "Ten
villages." So I did it over ten villages -- then twenty villages, fifty
villages, a hundred villages. It became a kind of a race between me and the
banking experts. I came up with results they couldn't deny, because it was
their money I was giving, but they wouldn't accept it because they are
trained to believe that poor people are not credit-worthy. How can they be
wrong ?

Luckily, I was not trained that way, so I could believe what I was seeing,
as it revealed itself. But their mind, their eyes were blinded by the
knowledge they had. So finally I thought, why am I trying to convince them ?
I'm totally convinced poor people can take money and pay it back, why don't
I set up a separate bank ? That excited me. I wrote down the proposal and
went to the government to get the permission of the government to set up a
bank. It took me two years to convince the government, because they said,
why should you have a bank for the poor people ? There are a lot of banks
already and we're having enough troubles already. Why do you want to create
more problems for us ?

I told them I didn't want any money from them -- all I wanted was the
permission to set up a bank. In 1983, the second of October, we became a
bank, a formal bank, independent, and what an excitement for all of us, we
with our own bank that we can continue to expand as we wish. That's what we
did. Today we work in 36,000 villages in Bangladesh. We loan to 2.1 million
borrowers. Of those who borrow, 94% are women. We have over 12,000 staff.

Along the way, I made two observations about the banking system: one it is
designed to be biased against the poor, two, it is made to be against women.
The bankers got mad at me for saying that. "How come you blame us for being
anti-women?" I responded, you just give me the list of all your borrowers,
in all the banks. I said I bet you you can not come up with one percent of
the borrowers as women. They admitted this was so, but they declined to name
it prejudice. What else do you call it ?

I wanted to make sure half of our borrowers were women. But when we would go
and try to persuade the women to join Grameen Bank, it wasn't easy. In
Bangladesh men are not allowed to go out and address a woman in the village.
We did many round-about ways to communicate, and finally began to get
through. The usual response is : No, I don't need money, why should I take
it? "Give it to my husband." We kept saying, yes, we understand, we can give
it to your husband, but we want to give it to you, if you need it.

This was our beginning, repeated village after village, person after person.
It takes a long time for a Bangladeshi woman to believe she can receive
money and use it and earn income. And after she does, then she finds four
other friends who will join her in a group of five, to borrow from Grameen
Bank. Finally she prepares herself, going over all these hurdles, finding
four other friends, eventually taking the money. Still, the day she receives
her money is seldom a day of excitement. Usually she spends a sleepless
night debating with herself whether she should go through with it or stop
right then, because she has created a lot of problems for the family
already, being a girl, a woman. She doesn't want to bring any more problems
to the family by borrowing and not being able to pay back.

In the morning her four friends usually come over and encourage her to go
ahead with it -- because their participation depends on hers. So she agrees
to receive that first loan, which is about twelve dollars or fifteen dollars
worth of money. What a treasure ! She can't believe somebody could trust her
with such an enormous amount of money. She will tremble. Tears roll down her
cheeks. Then she promises to herself never to disappoint those who trusted
her with such an enormous amount of money.

She proceeds to work very hard to make sure she pays every penny of it ---
and she does. She has to make weekly repayments in tiny amounts. When she
makes her first installment payment, what excitement. It really came true,
her dream; she can do it. Even she didn't believe that she could do it, but
now she sees otherwise. When she pays her second installment, that's another
revelation. By the time she finishes her loan, she's a completely different
person. She explored herself, she found herself. Everybody said she's no
good, she's nobody. Today she feels she is somebody. She can do things, she
can take care of herself and family.

We noticed many good things happen in the family when the woman is the
borrower in the family instead of the man. So we focused more and more on
women, not just fifty percent, so today our borrowers are ninety-four
percent women. We reach our first billion dollars of loans three years back.
The bank that started its journey with twenty-seven dollars giving loans to
forty-two people, coming all the way to a billion dollars, that's cause for
celebration !

Nobody believed in us or what we said. The bankers said, "Well, you can give
tiny amounts to tiny people. You can't expand, you cannot reach out to all
the poor people." So coming over with a billion dollar loan to so many
borrowers was quite a revelation. The next year we gave three hundred
million dollars in one year. Last year we gave over four hundred million
dollars. This year it will be over a half a billion dollars. Remember, we
had no experience running any organization. I was a teacher in the
university. Nor did my colleagues have experience, we just carved our way
out as we went along. Many were my students.

The four hundred million dollars that we loaned last year, I should mention,
is larger than the combined total of all the rural loans of all banks in
Bangladesh. I returned to my banking colleagues with this : "You say poor
people are not credit-worthy, but for twenty years they have been showing
everyday who is credit worthy and who is not." We give housing loans of
three hundred dollars, adequate to build a house with tin roof, concrete
columns and a sanitary latrine. This appears to loan recipients as a royal
palace -- never in their lives did they think would enter into a house with
a tin roof, let alone live in one. We have given more than three hundred
fifty thousand housing loans. We had no problem in getting our money back.
Our recovery rate has remained over ninety-eight percent all along.

If you can run a bank, lend money, and get your money back, cover all your
costs and make profit, and people get out of poverty level, what else can
you ask ? It seems the legitimate question to ask is: Are the banks
people-worthy ?

Some have said, "There must be some trick in it, this fellow is not
reporting it right, he's hiding things." So we have welcomed independent
research on the Grameen Bank. Many who study the project come with a lot of
hostility, but when they finish their work they become great admirers of
Grameen. And all reports say the same thing; that the income of all
borrowers is steadily increasing. World Bank reports says that one-third of
the borrowers have clearly crossed away from the poverty line, way above the
poverty line. One-third just about to cross the poverty line. The remaining
one-third are making progress toward this important goal.

At a population conference in Cairo, evidence was presented that the
adoption of family planning practices within Grameen families is twice as
high as the national average. Why? We're not a family planning organization,
we're simply a bank. There must be something else. When people start making
their own decisions about life, they also start making decisions about the
size of their families. Sanitation, housing and nutrition are all better in
Grameen families than non-Grameen families, as well.

Poverty is not created by the poor people. Poverty is created by the
institutions that we have built around us. We have to go back to the drawing
board, to redesign those institutions, so that they do not discriminate the
poor, because the present ones do. We hear about apartheid, we feel terrible
about it. But apartheid practiced by the financial institutions, we don't
feel anything about it. I think it's a responsibility of all societies to
insure human dignity to every member or that society. And I don't think we
have done very well on that part. We talk about human rights, but we don't
link human rights with poverty. If you look at it in a different way,
poverty is a denial of all human rights.

Grameen-type programs are emerging in many countries. To our knowledge,
fifty-six countries are now involved in Grameen type programs, including the
United States. But it's not yet getting the momentum that it needs. On this
planet 1.3 billion suffer extreme poverty. If we could create an
institutional facilities to extend credit to them, they would have the same
experience that we have in Bangladesh through Grameen Bank. There's no
reason why anybody should be poor in the whole world. We're trying to
organize a micro-credit summit next year in Washington, D.C. The goal of the
summit is to reach the hundred million poorest families on this planet with
credit self-employment, preferably through the women in those families, by
the year 2005.

If we can do that, we'll be laying the foundations for a poverty-free world.
Working together, we can achieve that goal. I wait for the day when our
children and grandchildren will go to museums to see what poverty was like.
We can make that happen, Let's do it.

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