Sunday, 18 December 2005
Banker to the Poor
As you may or may not know, Fiona and I are planning on going to Africa in mid-February. I wrote a long post about it here, in case you want to play catch-up.
We'll be working on a microcredit project in conjunction with the Village Enterprise Fund, and in preparation I've been doing a fair amount of research into the field of microfinancing.
Right now, I'm reading a book called Banker to the Poor by Muhammad Yunus. The author is the founder of one of the first microlending projects, and the book is a chronicle of his experiences along the way.
Since it is so difficult (for me, at least) to explain the concept of microcredit, I'll let Mr. Yunus do the talking for me:
Profit is unashamedly biased toward capital. In their powerless state, the poor work for the benefit of someone who controls the productive assets. Why can they not control any capital? Because they do not inherit any capital or credit and nobody gives them access to it because they are not considered credit-worthy.
giving the poor access to credit allows them to immediately put into practice the skills they already know - to weave, husk rice paddy, raise cows, peddle a rickshaw. And the cash they earn is then a tool, a key that unlocks a host of other abilities and allows them to explore their own potential."
In the mid-1970s Mr. Yunus extended a $27 loan to a group of 40 people. From that one act, a series of events transpired which lead to his founding the Grameen Bank, and today Mr. Yunus' little project has become the largest bank in Bangladesh and has provided over 3.8 billion dollars to 2.4 million families. The loan repayment rate hovers at around 98% (American small business loans default somewhere around 30% of the time). It also bears mentioning that the 98% figure includes the effects of the devastating Bangladeshi floods of 1981, 1985, 1987, and 1988. In short, to say the Grameen experiment has been a success would be a rather absurd understatement.
It's fascinating to read about the obstacles that Grameen has overcome during the course of its evolution. Time and time again, Mr. Yunus has found himself up against seemingly immovable barriers, and he's managed to resolve the problems every time with logic, compassion, and a laser-focused vision that he refuses to compromise.
To read more about Muhammad Yunus and the Grameen Bank, click here.
Posted by flow Frazao on December 18, 2005 at 02:05 AM in Kiva/VEF, Microfinancing | Permalink
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