Saturday, September 01, 2007

** Banker to the Poor by Muhammad Yunus

Autobiography by the founder of the Grameen Bank of Bangladesh. Yunus also won the Nobel Peace prize for his work in helping the poor with microcredit. He was the one brave enough to try when everyone else said it could not and should not be done. And he has proven that all people have potential when given enough credit.

Conventional banks usually demand lump sum payments. Parting with a large amount of cash at the end of a loan period is often psychologically trying for borrowers. They try to delay the repayment as long as they can, and in the process they make the loan grow bigger and bigger. In the end, they decide not to pay back the loan at all… To overcome the psychological barrier of parting with large sums, I decided to institute daily payments. P61

Support groups were crucial to the success of our operations, we required that each applicant join a group of like-minded people living in similar conditions… We refrained from managing them, but we did create incentives that encouraged the borrowers to help one another succeed in their businesses. Group membership not only creates support and protection but also smoothes out the erratic behavior patterns of individual members. Subtle and at times not so subtle peer pressure keeps each member in line. A sense of intragroup and intergroup competition also encourages each member to be an achiever… Once the group of 5 is formed, we extend loans to 2 members. If these 2 repay regularly for 6 weeks, 2 more members may request loans. The chairperson of the group is the last borrower… To become a group, all of the members must undergo 7 days of training and pass an oral exam… The pressure provided by the group and the exam helps ensure that only those who are truly needy and serious will actually become members. Those who are better off usually don’t find it worthwhile. P62

We require all borrowers to deposit 5% of each loan in a group fund…as of 1998, the total amount in all of the group funds was over $100M – more than the net worth of all but a handful of Bangladeshi companies. P65

Loans last 1 year, and payments are made weekly- starting immediately. Interest rate is 20%. Payments are 2% of the loan per week for 50 weeks, and interest payments are 20 bps or .2% per week. P68

There are no legal documents between the borrower and the bank… Our experience with bad debt is less than 1%.... Our loans are paid weekly to a frontline bank manager in each village. P70

In rural Bangladesh, it is an unwritten rule that if one of the family members has to starve during a famine, it will be the mother, often this means that a breast feeding infant will also starve… A husband can throw his wife out any time by merely repeating ‘I divorce thee’ 3 times. P72

Grameen means rural in Bangladeshi. P93

People without previous work experience of any kind are often best suited for the job of working in the field at Grameen. Previous work experience distracts new workers from the ideals and unique procedures of Grameen. P100 All good brainwashers will attest to this.

When a new recruits 6 month training is complete, his task will be to create a branch of his own that will be better in every respect than the one in which he spent his first 6 months. P101

The women who are the most desperate, who have nothing to eat, who have been abandoned by their husbands and are trying to feed their children by begging, join Grameen no matter who threatens them (which is often and harsh in this Muslim country). They have no other choice. They must borrow from us or watch their children die. P109

Bangladesh is the size of Florida, but has a population of 120M. [Imagine] if half of the US population decided to move to Florida, and you would begin to understand the population density we have in Bangladesh. P133

UN studies in 40 developing countries show that the birth rate falls as women gain equality… Education delays marriage and procreation; better educated women use contraception more frequently and are more likely to earn a livelihood [to gain independence]… Female Grameen borrowers have a significantly lower birth rate than the national avg. Borrowers show remarkable determination to have fewer children, to educate the ones that they have, and to participate actively in our democracy. P134

I firmly believe that all human beings have an innate skill. I call it the survival skill. The fact that the poor are alive is clear proof of their ability. They don’t need us to teach them how to survive; they already know how to do this. So rather than waste our time and money teaching them new skills, we try to make the maximum use of their existing skills… Credit allows them to explore their own potential. P140

Govt workers, NGOs, and intl consultants usually start the work of poverty alleviation by launching elaborate training programs. They do this because they begin with the assumption that people are poor because they lack skills [not because they lack opportunity – access to credit being one form of opportunity]. Training also perpetuates their own selfish interests by creating more jobs for themselves without the responsibility of concrete results. P141

Of the $30B in foreign aid ‘given’ to Bangladesh, over 75% of it was not spent in the country. It was spent on equipment, commodities, and consultants from the donor country itself. Most rich nations use their foreign aid mainly to employ their own people and to sell their own goods, with poverty reduction as an afterthought. P145

Most foreign aid goes to building roads, bridges, and so forth, which are supposed to help the poor in the long run. However, these mostly benefit those who are already wealthy. Foreign aid becomes a kind of charity for the powerful while the poor get poorer. P146

Recipients of a monthly gov’t handout feel as afraid to start a business as the women in Bengali villages. Many calculate the amount of welfare and insurance coverage they would lose by becoming self employed and conclude the risk is not worth the effort. P190

Gov’t tries to help the needy by letting businesses earn a profit and then taxing those profits to provide services to the poor. But in practice it never works that way. The taxes only pay for a gov’t bureaucracy that collects the tax and provides little or nothing to the poor. And since most gov’t bureaucracies are not profit motivated, they have little incentive to increase their efficiency. P 203

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