Empowering the Poor with Micro-Credits It all began with the establishment of Grameen Bank for microfinance in Bangladesh. It is a bank for the poor, owned by the poor, and it invented the system of micro-credits. Global social entrepreneurship is the next step in the fight against poverty, according to Muhammad Yunus. It was Sufiya Begum who opened my eyes to the realities facing the poor. I met her in the mid-seventies. She was a hard-working woman living in Jobra, a farming village in Bangladesh. She had a remarkable skill for crafting beautiful and practical bamboo chairs. In order to feed her family, she crafted these chairs in the muddy backyard behind her house. Her husband was a day laborer and earned a few cents per day, when he found work at all. Despite all her hard work, the family was dirt poor without any hopeful prospect of their situation improving. Many in Bangladesh shared the fate of Sufiya Begum. The country declared its independence from Pakistan in 1971, following a nine-month civil war. But the effects of war were compounded by a string of natural disasters, famines, and finally the oil crisis in 1973. The liberated nation had turned into a country struggling with bitter poverty. Through my conversations with Sufiya Begum, I began to understand the root causes behind the misery and eventually conceived of a catalyst that could break the cycle of poverty. Like many in the village, Sufiya depended on the local money lender who provided her with a loan on the condition that he could purchase all of her chairs at his set price. Because of this unfair agreement and exorbitant interest rates, her hard work resulted in an absurd income of two pennies a day. I decided to pull together a list of all the victims of money lenders in Jobra and I end-
ed up with 42 names. The total of all loans amounted to 856 taka – less than 27 dollars. It struck me that twenty seven dollars would be enough to release 42 people and their families from the chains of poverty. I realized the poorest of the poor could be empowered to take control over their lives by simply becoming creditworthy. I was apparently the only one to make this connection. Bankers with whom I discussed the idea politely brushed me off, but I could not stop thinking about it. I offered one bank my personal guarantee for small loans to the poor, and suggested the bank lend the money to me and I would then pass it on to the villagers. The bankers agreed to this plan and the result was astonishing: the poor repaid their loans, without exception, on time. Because of the success of this small initiative, a special bank to underwrite loans to the poor suddenly became a realistic and viable vision. In 1983 we established a bank for the poor, the Grameen Bank, which means the village bank. Today, our bank has 7.5 million loan customers with more than 2,500 branches across the country. More than 97 percent of our loans have gone to women, who, in Bangladesh, are often wholly responsible for raising their children and running the household. The loan default rate is less than one percent. The Grameen system of microfinance works without controlling bodies, guarantees, or lawyers. It works because it is based on the original meaning of credit. Granting credit is Responsible Wealth Review – Vol. 2
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