HAVE-NOTS CAN CHANGE THE WORLD
- Micro-credit and Grameen Bank
Presented by Md. Mujibul Alam Khan
Tainan, Taiwan. 21 December, 2004
Usually, the world believes that “have-nots” are nothing but trouble. Once you come to know them, you have to provide charity - lifelong.
But I am here to tell you, it is not true.
Today, I would like to share with you a story, an experience that merged from my country, Bangladesh. One person’s one simple wish from this poorest country became the most effective tool in Poverty Alleviation in this world today.
1972 - The Beginning
December 16, 1971, Bangladesh became independent with the sacrifice of 3 million lives. To crush our independence movement the Pakistani army murdered our teachers, doctors, engineers, writers, poets, politicians, civil servants and scientists in cold blood. There was a serious crisis of intellectuals and talents in the new born country. Citizens full of idealism and dreams started returning to home from USA, Europe and other countries to rebuild their home from the ruin of war. Professor Muhammad Yunus was teaching economics at Middle Tennessee State University in the USA. He quit his job and arrived home in 1972. Upon his arrival he was offered a position with government of Bangladesh in the planning commission. But soon, out of frustration, he resigned and joined as the Head of Economics Department at Chittagong University.
On his way to school and back home, everyday, he watched the barren fields, shanty houses and poverty stricken face of villagers surrounding the university. Life, in rural and urban areas was a bit different but poverty was everywhere. As a professor of economics he thought it is his solemn duty to find a way to fight this poverty. He vowed, he will.
The seed of Micro Credit was, thus, sown in this young economist.
In 1974 Bangladesh was utterly devastated by famine. People started dying in numbers. Every effort from the government failed because there was not sufficient food. As sun came and darkness came Death came in numbers! Hunger numbed senses, hunger numbed sanity – silently, people just died! It was horrible!
Famine is a shame of human civilization.
Yunus was ashamed too! He was ashamed because he couldn’t do anything to stop these deaths. He decided to investigate, study and find a solution to starvation and poverty.
One day during field investigation in the village of Jobra, Yunus and his colleague found one young lady, Sufia Begum, working with bamboo making a stool. Upon enquiry they have gathered the following facts;
- Sufia Begum is too poor to have any cash or asset
- She borrows from money-lender and must sell her produce to him only with a fixed price.
- She used to borrow 5 Taka, equivalent to 22 US Cents. Money-lender paid her Taka 5.50 for stools she makes.
- Sufia makes a profit of 0.50 Taka, equivalent to 2 US Cents only.
- With own capital, even as little as only 5 Taka, Sufia can sell stools to clients negotiating better price, and thus, can earn much higher.
The universal human rights declaration says,
“Everyone has the right to a standard of living adequate for the health and well-being of himself and his family, including food, clothing, housing and medical care, and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age, or other lack of livelihood in circumstances beyond his control”.
But what he witnessed in Jobra village was a fact that Poverty creates a social condition that negates all human rights, not just a select few.
Deeply saddened, Yunus collected data with help from his students. They have learnt that 42 persons had borrowed 856 taka, a total less than US$27 from the money-lender! For US$27 only 42 persons in Jobra village had become lifelong bonded labor to one person!
Yunus couldn’t sleep many nights. He later sent his students to the 42 persons and distributed 856 taka among them. Borrowers invested that money in their business. Sold their produce to buyers with better price than before and paid back the loan to money-lenders. Later, they returned 856 taka to Yunus as per condition. For the first time in their life they didn’t pay any single penny as extra or interest for money they had borrowed! The repayment by the poorest people in Jobra established the truth that “The poor are absolutely credit worthy”.
That was the turning point of the history of Micro-credit.
In the winter of 1975 Yunus launched the THREE-SHARE FARM project under his Chittagong University Rural Development Project (CURDP). In three-share farm project landowners contributed the use of their land in dry season, share-croppers contributed their labor, and Yunus contributed all other cost for farming such as fuel for irrigation, seeds for high-yielding crops, fertilizer, insecticide, and the technical know how: in exchange each of the three parties would receive one third of the harvest.
The program was so successful that in 1978 it received President Award.
During this Three Share Farm project once Yunus witnessed a group of 30 women threshing the paddy with bare feet, facing a wall for support. Wrapping rice straw around their feet they were threshing the paddy in a continuous and twisting motion. Their 10 hours long hard work only earned them 40 Cents each!
Any of these women could earn 4 times higher if one had the financial resources to buy paddy and process it herself. Yunus understood the problem is much graver than it appeared physically. The agony and helplessness of poor widowed, separated, divorced or abandoned women made his conviction much stronger. In 1972 Yunus vowed to fight Poverty, now he made up his mind to fight for the poorest of the poor.
WOMEN came into clear focus.
Personal loans of small amount had been proven fruitful earlier. However, there are so many poor people in Bangladesh, a larger number of people needs a larger amount of money. Big fund can’t come from one single pocket. How to proceed?
Yunus started approaching Banks. Banks turned him down. Some even branded him as “A Crazy Professor”! No one wanted to provide a loan to poorest people because they had nothing to give as collateral. In December 1976, his long struggle achieved success when one bank offered a loan of 10,000 taka equivalent to US$300. However, the bank refused to loan that amount to the poor villagers, so Yunus obtained it as personal loan and gave the money to the poor.
Micro-credit began to rotate the world!
Yunus defied hundreds of obstacles in his struggle for the poorest people. In 1983 Grameen Bank was registered as an Independent entity. The Grameen Bank model is replicated in many countries in Africa, Asia, Europe and Americas, and is running as successfully as that in Bangladesh with a high repayment rate of 98.85%. For your reference, I want to mention that, in traditional banking we hardly see a repayment rate as high as 80%.
This tells us one thing, “Who is credit worthy – Who is not”.
Women and Grameen Bank
In 1979 Grameen Bank had 500 members. In 1982 Grameen Bank members were 28,000 among them 11,000 were women, less than half of the total. In 1998, 93% of Grameen Bank borrowers were women. At the latest, Grameen borrowers are 4 million and 96% of them are women.
One central bank official who disliked Grameen Bank so much asked Yunus to explain why they have so many women members. He answered, “I would be happy to explain the reasons for the high percentage of women borrowers in our Grameen project. But before I do so, I would like to know if the central bank ever sent any letter to any other bank asking for explanations as to why they have such a high percentage of male borrowers.” That banker never contacted Yunus again!
It is proven over and over again that when one woman have more resources, the direct benefits go to her family, i.e. her children’s nutrition, regular schooling, better health care and an improved living quality. GB is a financial institute, not advocating family planning, but it turns out that their women borrowers start to realize that the size of family can affect the quality of living, especially as they gain some control over money matters. Yunus believes that all human beings have the basic intelligence to see what is good for them. If a couple finds having fewer children is better for them than having more, they will act on their own initiative to restrict the number of children they have. Grameen Bank is cited in all population discussions, because it was found that the adoption rate of family planning practices among Grameen families is twice the national rate of Bangladesh.
Destitute women adapted quicker and better to the self-help process than men. Poor women had the vision to see further and are willing to work harder to get out of poverty because they suffered the most. Work experience taught Yunus that credit given to women brought about changes faster than when given to men.
Women experience hunger and poverty in much more intense ways then men. If one of the family members has to starve, it is an unwritten law that it has to be “the mother.” The mother has to go through the traumatic experience of not being able to breastfeed her infant during the days of famine and scarcity.
If a poor woman is given the smallest opportunity, she struggles extra hard to get out of poverty. A poor woman in our society is totally insecure; she is insecure in her husband’s house because he can throw her out any time he wishes. She is insecure in her in-laws’ house, for the same reason as she was in her parents’ house: they are just waiting to get her out so that they will have one less mouth to feed. If she is divorced and returns to her parents’ she becomes a disgrace and is unwanted there. So given the opportunity at all, a poor woman in a society wants to build up her security.
How Grameen Works?
Selection of Members is a unique way of Grameen.
The manager first makes a round to the appointed area to introduce Grameen policies and programs. When one approaches with genuine interests Bank manager asks her to gather 4 more members to form a group. Every group has 5 members, one as its head. Only two members can obtain loan at first. After 6 weeks of successful repayment another two can apply for loan. The leader can only receive loan at last.
8 groups make a Center. And a center elects its leader for one year, after one term the leader resigns and never be elected again.
Once a week, at the early hour, the bank manager meets all members in the center. Discusses daily issues, collects savings deposits, repayment installments, issues new loans, all in public thus making it a most transparent event.
The Repayment Mechanism
Following method is followed by Grameen for loan and repayment.
- one year loan
- equal weekly installments
- repayment starts one week after the loan
- interest rate of 20%
- repayment amounts to 2% per week for fifty weeks
- interest payment amounts to 2 taka per week for a 1000 taka loan
Group Fund is created to protect members in case of emergency. 5% of each loan amount goes directly to the fund while every member requires to making a weekly payment of 2 taka.
Grameen Bank never writes off any loan or bad debts.
Grameen Bank has 1,326 branches all over Bangladesh in 47,836 villages with 12,903 staffs who are meeting 4 million borrowers face to face once a week around the year!
With Micro Credit the poorest can, through their own self-help, their own micro-capital, develop and become independent, active, thinking and creative human beings. Micro Credit may not be a cure-all, but it is a force for change, not only economic and personal, but also social and political.
The Sixteen Decisions
The 16 decisions that Grameen Borrowers follow today didn’t come from a pre-designed agenda, but spontaneously proposed from the borrowers who attended national workshops. Grameen held its first national workshop in 1980. The workshop recommended Four Decisions to practice for every member. These are;
- Hard Work
The second national workshop in 1982 concluded with Ten Decisions and in 1984 Grameen finally adopted The Sixteen Decisions as follows.
1. We shall follow and advance the four principles of the Grameen Bank – discipline, unity, courage and hard work - in all walks of our lives.
2. Prosperity we shall bring to our families.
3. We shall not live in a dilapidated house. We shall repair our houses and work towards constructing new houses at the earliest opportunity.
4. We shall grow vegetables all the year round. We shall eat plenty of them and sell the surplus.
5. During the plantation seasons, we shall plant as many seedlings as possible.
6. We shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health.
7. We shall educate our children and ensure that we can earn to pay for their education.
8. We shall always keep our children and the environment clean.
9. We shall build and use pit-latrines.
10. We shall drink water from tube wells. If it is not available we shall boil water or use alum to purify it.
11. We shall not take any dowry in our son’s weddings, neither shall we give any dowry I our daughter’s wedding. We shall keep the center free from the curse of dowry. We shall not practice child marriage.
12. We shall not commit any injustice, and we will oppose anyone who tries to do so.
13. We shall collectively undertake larger investments for higher incomes.
14. We shall always be ready to help each other. If anyone is in difficulty, we shall all him or her.
15. If we come to know any breach of discipline in any center, we shall all go there and help restore discipline.
16. We shall introduce physical exercises in all our centers. We shall take part in all social activities collectively
When in the beginning of the day Grameen members make a circle, move closely hand in hand citing these sixteen decisions, the air fills with the confidence and self-esteem of poor village women! Decade old tradition of abusing women shatters in the society. Men, not long ago the undisputed lord of family, look at them with respect. Sometime, with hatred perhaps but soon the hatred subsides for the women are united, courageous and powerful with their own Money!
The Housing Loan
Unique feature of Grameen housing loan is that the husband must sign over to his wife the title to the land on which the house will stand. It is too much for a man dominating society but Grameen made it happen! 603,687 houses have been constructed with US$ 136 million housing loan.
Hajeera Begum was born in 1959 in a poor farmer’s family. She was married to a blind man because he didn’t ask any dowry! She and her family survived on her little income from house cleaning job. When Hajeera wanted to join Grameen her husband threatened to divorce her. Hajeera secretly went to another village, joined a group there. Her group supported her to take loan and buy a calf for fattening and rice paddy to husk. When Hajeera’s father brought the calf to her husband – the blind man was so excited that he had forgotten about divorce!
Within one year Hajeera paid back the first loan. With her third loan she bought rice field, goats, ducks and chickens!
She says, “All my life I was told I am no good, that I brought only misery to my parents because I was a woman and my family could not pay for my dowry. Many times I heard my mother say she should have killed me at birth. I did not feel I was worthy of a loan, or that I could ever repay it”.
“We now enjoy three meals a day, and my children no longer go hungry. We can now even afford some meat once a week. I intend to send all my children to school and college, so that they will not suffer as I did. You ask me what I think of Grameen? Grameen is like my mother. No, Grameen is not like my mother, she is my mother. She has given me new life”.
You can find hundreds of Hajeera around the globe since Grameen success is spread all over the world now. Let me tell you a different woman’s story now.
A polish citizen, Rosalind Copisarow was an oxford graduate working as a top class executive at the JP Morgan Investment Bank. She had made never a small loan than US$ 100 million. On her flight from London to Warsaw she read The Financial Time story on Grameen Bank. Immediately she decided that Poland needs it. She discussed the Grameen Bank with Polish Finance Minister and the minister challenged her to quit her job and devote herself to creating a Grameen Program for Poland.
Rosalind quit her job in 1993 and started with Grameen Bank Program. By 1998, Fundusz Mikro, the organization she created had 22 branches lending US$ 10 million to 4,000 clients with a repayment rate of 98.5%. They have crated 2,000 jobs.
Rosalind says, “When I reflect on my previous career, it seems two dimensional. It lacked soul. What I do now has put real meaning in my work – and therefore in my life”.
The Election of 1996 in Bangladesh
During the election of 1996 the country saw for the first time of a huge female voters turn out. In that election the fundamentalist Islamic Party lost 14 seats from their previous 17! The loss was explained as the large turn out of female voters. Many of Grameen borrowers voted for the first time in their life. Women didn’t vote just for the candidate, they voted for their rightful participation in the society.
In 2003 local government election 7442 Grameen borrowers contested in the reserved seat for women, 3059 members got elected.
Besides providing Income Generating Micro-credit loan Grameen provides following loan programs with different interest rates.
Housing Loan : Interest Rate 8%
603,687 houses have been constructed with US$ 136 million housing loan.
Education Loan : Interest Rate 5%
4,852 students received Education Loan. Among them 4,419 students are studying in various universities, 80 in Medical School, 128 in Engineering School and 225 in various Professional Institutes.
Struggling Member Loan (Beggars Loan) : Interest Rate 0%
Struggling members loan are disbursed among beggars without any interest at all. 26438 beggars have joined Garmeen Program. 14.33 million taka loan was disbursed and 4.71 million taka is paid off.
Micro-Enterprise loan is provided to successful borrowers of micro-credit programs. Many members are thriving with their smaller success everyday. At certain point they come forward to move ahead with larger projects that requires larger amount of loan. Micro-finance loan doesn’t restrict its size. Micro-Enterprise loan interest is 20% declining basis as other income generating projects.
Grameen Bank offers Life Insurance and Pension Fund for its members or borrowers. And it offers Scholarship for children of borrowers with priority to girl children. Over 14,538 children at various levels in school received the scholarship every year.
Grameen Bank offers Retirement Benefits to its Staffs. Any staff can retire after 10 years or more services with a retirement benefit which is given in cash within a month of retirement. The average retirement benefit per staff is US$ 9,806.
Crossing the Poverty-Line
According to latest internal survey Grameen claims that 51.09% of Garmeen borrowers family have crossed the Poverty-Line.
Grameen Bank model is replicated in many countries around in the globe. Until 1998 following countries have replicated Grameen model;
Africa (22) - Chad, Egypt, Ethiopia, Ghana, Kenya, Lesotho, Mali, Malawi, Mauritania, Morocco, Nigeria, Sierra Leone, Somalia, South Africa, Sudan, Tanzania, Togo, Uganda, Zanzibar, Zimbabwe.
Asia (16) - Afghanistan, Bhutan, Cambodia, China, Fiji, India, Indonesia, Kyrgyz Republic, Nepal, Pakistan, The Philippines, Lebanon, Malaysia, Sri Lanka, Vietnam.
Australasia – Papua New Guinea.
Americas (15) – Argentina, Bolivia, Brazil, Chile, Colombia, Dominican Republic, Ecuador, El-Salvador, Guatemala, Guyana, Jamaica, Mexico, Peru in central and South America, and US, Canada in North America.
Europe (5) – Albania, France, The Netherlands, Norway, Poland.
I would like to clarify that, Micro Credit is absolutely not running the way small amount of money ready to be given to whoever applies from a bank here in Taiwan. The spirit of micro-credit is give an opportunity to one who has no opportunity at all, by which I mean, one with no job, no savings, no land, no security of any form, and one who is in a desperate condition. The money lending craze in Taiwan is based on more individual consumption while micro-credit for the poorest is creating a possibility, a hope to a better and secured life through collective efforts.
Most distinctive thing is, Grameen Bank as it is expanding day by day, the ownership belongs not to Yunus, not to the government, or to rich investors, but to the grass-root borrowers, most of whom are women. The stakeholders are the clients, the borrowers of the bank.
Micro-credit finds its way from a poorest country like Bangladesh to highly developed countries like US, Canada, France, Norway and Sweden which you may argue that they ever need Micro loans. Micro-credit finds its market in capitalist countries, in communist countries to prove it the most effective tool in poverty elimination.
I am sure in Taiwan there are people on the bottom of the society who can benefit from micro-credit.
Study Materials : Grameen Bank information, Banker to the Poor, the autobiography by Professor Muhammad Yunus.