Banker to the Poor
Spectacular story of the rise of a Nobel Peace Prize winner.
Banking the unbanked and untouchable - lending to the poorest women of Bandladesh. Success came from lending groups of 5+ members where accountability and mutual aid were part of the design.
This went against all odds of marketing - the customers did not want loans, and there were tremendous pressures against women (who could not even leave their house unattended) taking charge of their self-determination.
Inspiring and eye-opening.
- P84 - commercial banks have 10% repayment. Grameen boasted 99% repayment.
- I once had the following conversation with a friend of mine who was president of the
government-owned Bangladesh Industrial Development Bank. I asked him: ‘Why do you call yourself a bank?’ ‘What do you mean?’ he said. ‘Well, the repayment rate of your borrowers has been less than 10 per cent over the last twelve years; how can a self-respecting banker go on making millions of dollars of loans to rich clients who never bother paying back?’ ‘Well, these have been hard economic times, a lot of new ventures have gone bankrupt,’ he explained. ‘It is difficult to get new industry going in a country like ours.’ ‘Why don’t you take the sign Bangladesh Industrial Development Bank off the building and put up a new sign that says Charity Organization for the Rich?’ He laughed, but I kept pestering him: ‘How does it feel to dole out bundles of money to the rich, knowing full well they will never repay it?’ ‘Not too comfortable,’ he admitted. I shook my head: ‘Bankers keep telling me how indispensable collateral is, but in fact it does not protect the banks investment. What it really does is push the poor away from the banks.’ I opened a newspaper and showed him the recently published list of the rich who did not repay their loans. All the biggest families were there. He nodded. ‘Would you like to know how I would run the Industrial Development Bank if I were given responsibility for it?’ ‘You would hire more expensive lawyers to engage legal actions that take years and that remain inconclusive for technical reasons?’ he suggested. ‘Not at all,’ I said. ‘I would simplify the whole thing. I would take loads of money, put it in a helicopter and go around the country throwing it out the window. And the next day I would run a big ad in the newspaper and on radio saying that it was the Industrial Development Bank raining money-down on them, and if anyone picked up some of the cash, could they please return the money within such and such a period, adding an interest charge. And I would add, “We’d be grateful if you make good use of it.1" He laughed. But I was being quite serious. ‘I bet you that by using my method of distribution and recovery, repayment rates would far exceed 10 per cent. And you would save the cost of appraising loan requests, all the salaries of staff, engineers, technicians, loan officers, and lawyers, all that would be saved. You’d need no documentation and hardly have any overhead costs whatsoever, just the cost of the helicopter and the ads.’ This tongue-in-cheek proposal illustrates the difference between how institutions view the rich and the poor. Instead of repaying their debts, the rich in Bangladesh plead: ‘Our industries are sick, we want to improve them. Please give .us more credit!’ Because the defaulters are their friends, relatives, political supporters, backers, dignified financiers, in short the backbone of the society’s upper class, the government hesitates to put them all in jail.
- P88 - I told him what I was doing on an experimental basis just around my university, and how
I was using my students on an unsalaried basis: ‘They donate their time, and I use the budget from my field research to pay for expenses. The loans are being repaid and the situation of our borrowers is improving by the day, but I worry for my students. They need to be compensated, even in a small way for doing this work. The entire experiment is holding only by a thread and needs institutional support.’
- I saw a girl sweeping
the street outside. She was extremely thin, barefoot and wore a ring in her nose, exactly like thousands of cleaners one sees in Dhaka streets. This woman could work all day long, seven days a week, and she would never earn more than what was necessary for her bare subsistence. She worked just to feed herself and her children, She was one of the so- ’ called lucky ones, for she had a job. It was for women like her, and for all those women who could not even aspire to a job of cleaner, that I wanted to develop my credit programme.
- ‘Yunus, you really want to open a new branch of our bank, do you?’
‘No, not at all. I just want to lend money to the poor.’
- p. 92 - How unexpectedly and quite randomly our lives proceed. You just happen to drop in on
the right person at the right time, and everything clicks into pkce. A few months earlier, I had no possibility of achieving my plans for the poor, but by chance I happened upon the right man, and it transformed our tiny university research project into a banking experiment that would catch national attention.