Thursday, January 29, 2009

From Third- to First-World: Building a Lifestyle

In 1976 Mohammad Yunus, who had raised himself out of the impoverished throngs of Bangladesh to obtain a Fulbright Scholarship and earn a doctorate in economics from Vanderbilt University, was teaching economics at the University of Chittagong in Bangladesh when he embarked on a most intriguing experiment. He wanted to break the traditional cycle embodied in the well known line from the song, "the rich get richer and the poor get children." What did it take, he asked himself, to empower someone to break out of the chains of poverty?

The result was the Grameen Bank, a bank that would make microloans--often less than $100--to impoverished individuals who had no credit history and no collateral. But they needed more than the few dollars. They needed a paradigm shift in the ways they viewed themselves, and in the social support networks in which they lived.

So Mohammad Yunus developed a new, comprehensive personal contract and social context for every microloan participant. Each Grameen borrower had to develop a specific business plan for themselves. Usually this grew out of some activity they were already engaged in--growing vegetables, sewing, husbanding a few chickens or a goat or cow, or the like. They defined a specific small investment that would grow their would-be business--a cart or a sewing machine or a chicken coop, for example. And they had to gather in groups of five individuals who would meet with a banker once a week to discuss their problems and progress and provide one another social and emotional support.

Moreover, each borrower had to agree to a set of precepts called the "Sixteen Decisions"--recited together at the meeting each week. These were:

(1) We shall follow and advance the four principles of 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 dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest.

(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 they 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 tubewells. If it is not available, we shall boil water or use alum.

(11) We shall not take any dowry at our sons' weddings, neither shall we give any dowry at our daughters' weddings. We shall keep our centre free from the curse of dowry. We shall not practice child marriage.

(12) We shall not inflict any injustice on anyone, neither shall we allow anyone to do so.

(13) We shall collectively undertake bigger investments for higher incomes.

(14) We shall always be ready to help each other. If anyone is in difficulty, we shall all help him or her.

(15) If we come to know of any breach of discipline in any centre, we shall all go there and help restore discipline.

(16) We shall take part in all social activities collectively.

The Grameen Bank grew--and learned its business of transforming the lives of the poor--and grew some more. It spawned a new field, "microfinance," which included not only microloans to the poor and developing a set of principles and social practices that enabled them to raise themselves out of poverty, but also making available to them a spectrum of financial services--a safe way to store and save up their money, a reliable way to send payments far afield, and insurance mechanisms. In addition, Grameen Bank sponsored schools, health clinics, other aspects of an entire community fabric, no longer of impoverished but of organized, purposeful, motivated individuals.

The techniques the Grameen Bank developed led to a loan-repayment rate over 85%. Gradually the population the bank served shifted as they discovered that women were much more likely than men to use their financial advancements for the benefit of their families; and they were much more likely than men to repay the loans.

By 2006 some 97% of the clients served by the bank were women.

By 2006 the Grameen Bank had several thousand branches in towns and villages throughout Bangladesh and South-East India; it had loaned out several billion dollars; it had helped raise tens of millions of people from the enslaving cycles, generation after generation, of poverty.

By 2006 the Grameen Bank had developed a self-sustaining banking model that was no longer dependent on philanthropic donations. And it had inspired the founding of more than 700 microfinance institutions in Asia, Africa, and South America.

In 2006 Mohammad Yunus and the Grameen Bank were awarded the Nobel Peace Prize--the first time in history that a proprietary corporation had been awarded a Nobel prize.