Hungry Mind Review
FALL 1999

Where Credit Is Due
Banker to the poor:
Micro- Lending and the Battle against World Poverty By Muhammad with Alan Jolis Bublic Affairs 258 pages. $24.00 ISBN: 1-891620-11-8

The mantras of commerce today – teardow, rebuild restructure, reinvent- have altered our economy dramatically. Constant change is now an undeniabnle fact of commercial life. Few dispute the underlying economic logic whereby corporate restructuring has produced robust captial gains for stock market investors at the expense of downsized workers, The dilemmas of corporate restructuring aside few have considered that practical changes paradigm shifts, and experimentalism when applied to entrenched social structures can actually improve society.

The pioneering work of Huhammad Yunus founder of the Grameen Bank in Bangladesh has invilved the reinvention of one segment of the economy studiously ignored in the excitement over the new economic era: the poor, An outgrowth of Yunu’s discontent over the level of poverty in his homeland the Grameen Bank is a social experiment of sorts , one that has discredited some central assumptions about poverty. In advancing his restructuring plan, Yunus recast conventional characterization of the poor as members of a fixed, permanent nderclass incapable of becoming economically productive, Instead, he came to see them as economically savvy, capable individuals who had simply become mired in poverty and were given ‘ no chance of improving their economic base. "Poverty, he contends, "is not created by the poor…..It is created by the structures of society and the policies pursued by society ….. Change the structures …and you will see that the poor change their won lives. "In Banker to the poor, Yunus iuuustrates how the sclerotic social structures binding the poor- a result of entrenched social, class, gender, religious, and educational divisions can be " restructured " by introducing credit.

The birth of the Grameen Bank occurred after a revealing conversation Yunus had with a poor woman in his villages of Chittagong, Bangladesh. As chair of the Economics Department at Chittagong University, Yunus was an expert in conventional economic the ory. which , by his own admission had little to do with the ordinary lives of the villagers who surrounded the university, One afternoon, Yunus approached a weaver of bamboo chairs who " had the tired eyes of a woman who labored every day from morning to night. "He asked her simply, "Do you own this bamboo?

"Yes, " she responded. "How much does the bamboo cost You" he inquired. " five take." The equivalent of twenty – two cents.

"Do you have five taka. " No, I borrow it from the pakiars. " " The middlemen? What is your arrangement with them?’ "I must sell my bamboo stools back to them at the end of the day as repayment for my loan." "How much do you sell your stools for?" "Five taka and fifty poysha. " In other words, she earned two cents a day. Yunus realized that this system virtually condemned the women and her children to a life of poverty. Her life was, in his estimation, " a form of bnonded labor, or slavery. "Despite holding a doctorate in economics from Vanderbilt University, Yunus writes that he had never understood that people suffered for such small sums.

Out of this one experience microlending was born, the idea is simple. By lending small amounts of money the first loan, Yunus made totaled twenty – seven dollars disbursed among forty- two borrowers- at little or no interest, individuals are able to start small enterprises, The woman who wove chairs was able to buy the raw materials for her prodct at market value and resell finished chairs at marker price thus earning greater profits for herself, Instead of requiring borrowers totrek to a potentially intimidating formal bank, Yunus intimidating formal bank. Yunus insisted qpon visiting borrowers in their homes in rural areas where crdit was least available , by making frequent visits, yuns could identify the neediest, monitor the loans, and ensure gradual repayment, From the first loans made out of Yunu’s won pocket repayment rates on Grameen loans have remained at about 98 percent far better than traditional commercial loans.

Yunu’s approach was revolutionary for another reason. In a society in which women are seen as " no good" and regularly told by their families that they should have been " killed at birth, aborted, Or starved, Yunus in sisted on lending almost exclusively to women, He found that women , when given loans, tended to think about providing for their children and house themselves, With this important gesture, yunus injected credit into a segment of the Bangladesh economy that had never known it. Loans to women as a percentage of all bank loans had been less than one percent prior to Grameen’s establishment.

Over time, Yunu’s model has proved extremely successful, Since his initial loan of twenty- seven dollars made in 1976, the bank has lent over $3 million to more trhan two million people n rural Bangldesh, To date, Grameen – type projects have sprung up in places as diverse as Vietnam, china, the Philippines, and the ‘South side of Chicago. Throughout Grameen’s growth, Yunus has avoided the involvement of international development specialists, decrying them as limousine liberals, and instead has sought out private donors and foundations for support. In this way, he has aligned himself with current nonprofit economic development initiatives that cultivate private- sector, as opposed to government, funding,

As happens to many original thinkers, Critics fom the left and te right have assailed Yunus. Arpagmatist intent on alleviating as much poverty as possible, he stands some where in the middle, Some passages on the extraction of surplus value from the poor by usurious lenders seem drawn from the pages of Karl Marx’s Das Kapital, Other passages on the disincentive to work inherent in social welfare systems could have found a suitable home in the Republican Party platform although he is a proponent of competition as an incentive for businesses , Ynuus envisions an enhanced social mission for the privatae sector, unfortunataely his arguments add little to prevailing social venture socila mission for the private sector, Unfortunately , his arguments add little to prevailing social venture concepts , Overall , Yunu’s embrace of the market system has helped make micro – lending a favorite among policy makers and business leaders – ranging from hillary Clintion to Ted Turner- because it demands minimal resources (the loans get repaid) and supports the reigning ideology of free enterprise and self reliance,

Although Yunus has written a fascinating book organizationl lapses mar its presentation. Between his disarming, self – effacing stories, Yunus throws in first- person assessments of the World Bank, applications of microlending outside Bangladesh and varios policy issues, At other times important facts – for example that Grameen means ‘rural" in Bangladeshi and that Muslim clerics opposition to the bank arose at least in part from the Islamic stricture against charging interest, rather than mere knee- jerk conservatsm- crop up un expectedly ,. Despite such occasional shortcomings the strength and honesty of Yunu’s thought demand


As anyone who has heard Yunus speak can testify, What this book cannot show is his quiet, captivating demeanor, which verges on the spiritual To leam the secret of his man’s goodness, one looks for a sign, a indication of how and why he was called. That secret is his ability to ask ‘ Why not?" Where others have willingly supported the status quo, embraced stagnation and elevataed what is to the level of what must be,. Inherent in this ability, the very basis upon which poverty can be reinvented, is an un derlying message of hope.

Tom McInemey is a lawyer and writer who lives in New York City.