Empowering Women through Micro-credit

B y S i n g u la r N e w m a n

Articles reviewed:

How empowering is Microcredit: A look at Grameen Bank, by Sabrina Quaraishi, Sixth Congress of the U.S. Basic Income Guarantee Network, February 2007 www.usbig.net/papers/173-Quaraishi-GrameenBank.doc

Women's Empowerment, Microcredit, IT and Poverty, The Brown Journal of World Affairs, Winter 2002 Vlll, Issue2, sourced from sourced from http://grameen-info.org

Social Business Entrepreneurs Are the Solution, by Mohammad Yunus, http://www.grameen.com

The three articles I researched are predominantly preoccupied with closely related subject matter: mainly the dilemma faced by the world’s poorest citizens in obtaining financing. Reflected in these articles is the ideology of one man, Dr. Muhammad Yunus. One of the articles was actually written by this Nobel peace prize winning professor of economics. The first two articles simply give an overview of the work that was accomplished by the project started by Dr. Muhammad Yunus in the early 70s, and will be addressed in the later part of this paper. They have to do with the historical perspective and as well the societal impact accomplished by leveraging the present existing social capital, favoring and selecting women as the primary beneficiaries of said loaned capital. The third article is actually written by the good doctor himself and espouses his in-depth philosophy on the subject. It is quite revolutionary in terms of how it addresses social and economic issues given the present centuries-old banking practices.

The article titled, Social Business Entrepreneurs1) Are the Solution, written by Professor Muhammad does a great job of conveying his thoughts on the subject in a quick and effective manner. This new model of thinking, conceptualized by Professor Yunus, places a greater value on things that have no material essence. By placing people first, he manages to go beyond standard economic theory based on materialistic ideology, accomplishing a more balanced equation by stimulating a sustainable equilibrium, made possible by capital supported by goodwill funding sources.

The people themselves rather than monetized capital are seen as the foundation for economic change and prosperity. Therefore social capital becomes a weapon of mass development, fostered by a grass-roots approach, leading towards a sustained global prosperity movement, all made possible by collectively working goodwill change-agents.

Powerful words such as love, hate, dream or despair are no-were to be found in a standard economic model. As if it is not economically or scientifically provable, the definition of social capital is not addressed in standard economics having their foundations in 1800’s ideologies and not at all grounded in today’s realities. Rather today people are still asked and rather forced to make the sacrificial and detrimental effort, to squeeze themselves into numbers and boxes made of abstract mathematical formulas. This is as if to say that man was made for economics and not the other way around. Being born in an impoverished 3rd world nation, Dr. Muhammad has experienced first-hand the impossibility of such a dysfunctional system. A strong believer in capitalism at heart, the professor makes the case that modern economics has interpreted capitalism too narrowly, therefore creating an overly simplified “one-dimensional” human being, as he terms it. The system becomes focused on creating beings dedicated to maximum profit and not much else. As such, he labels it a “conceptualization failure”2). Failing to capture the essence of what it is to be human incapacitates the system and makes it severely limited and as well dysfunctional.

Starting with an assumption of Biblical proportions, that man is greater than a number, means that the science of economics should be dealing first and foremost with humans, which themselves are the end result of infinite, intricate systems composed of countless sub-systems and as well other beings, billions of them to be exact. What I believe he is driving at, is the badly needed replacement of dollar bills with human wills. What id badly needed is a systemized ideological replacement of monetized capital, with social capital. Things such as love and laughter, self-determination and the power of will need to be taken into the equation of economic development.

Creating a sustainable business enterprise requires a multi-dimensional approach deeply rooted in humanity. This way, social entrepreneurs can be created in parallel, working towards a sustainable and prosperous wealth building system, both in terms of new growth and development generation, sustained by human factors as well as profit generating mechanisms.

In the article Yunnus talks about the role of the Social Business Entrepreneur(https://en.wikipedia.org/wiki/Social_business()), a new category of Social Entrepreneurs being cultivated as we speak. These players can become world changers by exploiting well-constructed leverage points, taking advantage of societal structures already in place for thousands of years, such as family, village councils, rural and regional governing bodies and naturally the newer system of free market enterprise already in place on a global level.

The question is, what are the right steps in encouraging SBE’s to create a more significant change in our world? A first step would include synchronizing current economic theory in order to include these change agents. Students and academicians should learn that there are two paths to a successful sustainable economic model. That of businesses that function to make money and businesses that function to do good to others. Young people should learn that there are choices to make and a strong possibility arises that more will make the choice to pursue a career in good-will rather than the pursuit of maximum monetary profit. SBE’s should also be visible players on a specialized market of their own, for example a market exchange that imitates a publicly traded board such as NASDAQ. It becomes therefore necessary to develop a Social Stock Market for example, complete with terms, standards, and performance measurements. As long as a company’s stated mission objective is that of social achievement, it would qualify to be traded on this exchange. Social and personal goals will be merged succinctly.

By creating this social market exchange, we will come ever closer to achieving a long lasting social change, fighting poverty by uniting our common efforts. Functioning from a perspective of wanting to create better relationships while prospering together, working towards the common good of all the worlds people. These are the ideas reflected throughout the following two articles I reviewed titled, How empowering is Microcredit: A look at Grameen Bank and Women's Empowerment, Microcredit, IT and Poverty3). In the following pages I will give a brief overview of what this model has accomplished. In closing I have included the 16 pledges written by Grameen that every debtor has to sign in order to receive a loan. In my opinion these social contracts constitute a major change in the practice of lending, by empowering people to become part of the change, helping the poor to become self-sustainable by progressing financially as well as socially.

Mohammad Yunus is the ideological and entrepreneurial, genial spirit behind Grameen Bank. The word Grameen literally means ‘of the village’ in the local dialect. The project started out in Bangladesh. The state of Bangladesh was formed in 1972, separating itself from Pakistan amid violence and tensions that contributed to the suffering and impoverishment of the population.

Professor Yunus holds a degree in economics from the University of Colorado and Vanderbilt University as well. He was also a Fulbright scholarship winner, a very important distinction to be paid close attention here. Had Professor Yunus not been awarded this scholarship at the time, offered by a charitable philanthropic organization, the world would have suffered a great loss. It is a thought worth contemplating for we shall see, in the following pages, the world wide scale change, a man’s dream backed up by 27 dollars can accomplish. I find it revolutionary, fascinating and unbelievable. However, this world is way overdue a few unbelievably good things and fortunately this is one of them.

In 1971 Professor Mohammad Yunus decides to move back to the newly formed state of Bangladesh and starts work, as an economics professor at Chittagog University. While there he is exposed to the complex dilemma, faced by the large country’s numerous and extremely poor population. The soul crushing cycle of endless generational poverty seemingly self-perpetuating, creating a vicious cycle that feeds itself with the lives and souls of all those caught by its generational claws of despair. Yes, being poor is a burden upon humanity in my opinion and it effects all of us. When one man is a slave none are free it is said, and I say the same can be applied to these people. When millions are poor, no man can be truly rich.

I believe Professor Yunus saw that these people were too weak to help themselves, and too broken to be of any worth to, well to pretty much anyone, especially to the global banking elites and Wall Street investment bankers. As well the problem of poverty is a rather large problem, affecting billions of people on this planet. It is a problem as old as the world, as Jesus Christ remarked once in John 12:8, “For the poor always ye have with you; but me ye have not always”. At the most basic level, the problem of poverty is easily explained. Most people that are very poor, have arrived at this state by outside intervention, for example being born in a slum city, being orphaned young, abandoned, illness or injury, basically all outside factors. Since the problem was caused by outside factors a majority of the time, the solution and help line will need to come from the outside as well.

Here I go with clichés again, “give a man a fish, feed him for one day, teach a man to fish, (and give him a loan for a fishing rod) and you have helped him to help himself, in the process feeding himself a whole lifetime and most often not only himself but his wife, children and hopefully even the neighbors. The extremely poor need sustained help. By that, I am saying that the poorest of all need to be helped systematically. The solution to solving sustained poverty is a systemized, sustained helping kinetic type apparatus. Help that multiplies becoming catalytic is needed. Just as poverty multiplies affecting all of the people around, help for the poor should function the same way, except in the opposite direction, gain, acquire, build, add, grow and multiply. In turn, those that are being helped can and will most likely help and build up those around them, the people who need it most, fostering the creation of a mutually positive enterprise.

I give professor Yunus the credit for being a great psychologist as well as a good judge of human character. His ideas are rather revolutionary in terms of the current business lending practices. As a matter of fact, I believe this very system of loans, interest and credit, is what determined the stellar economics Professor to lead a trail blazing path in a new direction.

The most important factor in all this is theory, followed by perfect practice of course. The underlying principle behind Grameen bank’s philosophy can be described by the idea that the most important aspect of business is relational, not numerical. Working with people, not just numbers and percentages, first help the man than help his bank account. Obviously you are helping both when investing in human capital, genuinely and strategically.

Delving deeper into the root cause of this systemic problem, it was discovered that the cycle of poverty was perpetuated mostly by the policies of the banks and their corrupt middle man. When lending to the extremely poor, the banks charged outrageous interest rates, defending themselves by pointing to the lack of collateral, which was obviously non-existent. Sometimes the rates were as high as 10% a week!

Struggling to make a return of investment on the loan, of barely 2 cents per day, the group identified and studied in the pilot project by Professor Yunus and his students were caught up in an endless loan, interest, debt cycle. It was and still is a completely useless, erroneous, biased and mostly unfruitful system, seemingly designed to keep poor people poor forever.

A group of 42 villagers were identified. These people only needed a combined 27 dollars in order to pay off their debts and together go into business for themselves. Various traditional baking institutions were asked to participate. In the end, Janata Bank reluctantly agreed and only after the Professor cosigned for the loan as a guarantor. The Grameen Project was started in January of 1977.

This 27 dollar seed gave life to a money tree, that today, 34 years later, literally stretches its branches around the world, budding with good will and helping to reshape our vision, while creating better relationships, more understanding and finally less poverty, destruction, pain and misery.

What I liked most about the Yunus plan is the strategy of accountability he came up with. The idea was to cluster the loans into groups of five, having the five members become collectively responsible for each individual loan. On top of that, 5% of each loan would be accumulated into a group fund that served as insurance for the loan. The loans were termed at one year and the repayment schedule was daily, making large lump sum monthly repayments, easier to cope with since the villagers would repay minute amounts daily. This was soon changed to a weekly schedule as the accounting load presented multiple challenges, (this was as well before the age of the computer).

The system functioned well and it produced marvelous results. Currently the rate of repayment stands at an unheard of 97%! The group strategy as well helped Grameen enter the world of women, most often taboo in the Islamic society. The Sharia and Purdah Islamic laws banned women from conducting business alone and outside the home but as a group it was perceived as mostly acceptable. Women were encouraged to start home based businesses. This in turn proved to become an advantage for Grameen as it was established statistically than women as a group, were far better at managing investment loans than their male counterparts, who research suggests are notoriously prone to selfish expenditures.

The Grameen project functioned through the Janata Bank for another year and became very successful. In 1978 it signed an agreement with the Bangladesh Agricultural Investment Bank. The program had less than five hundred clients at this time. A short year later, the program was expanded by the Central Bank of Bangladesh throughout 25 branches. By 1981 Grameen had loaned in excess of 13 million dollars. In 1982 Grameen loaned close to double that amount, 23.9 million dollars and expanded to over 28000 members.

Using my excellent math skills, I can deduct that Professor Mohammad Yunus invested 27$ in January of 1977. By 1982 his investment had turned into 24 million dollars in cash. That is a rate of return of eight hundred and eighty eight thousand eight hundred and eighty eight percent. Divide that by 5 years and the money invested rose at an unbelievable, (here is that word again) one hundred and seventy seven thousand, seven hundred and seventy seven percent yearly! For those slightly dyslexic like me, that’s 177,777%! That’s what investing in human capital yields these days. World Bank and IMF, pay attention or your days are numbered short!

The program was up-scaled nationally, to five regional districts, financed through the Central Bank of Bangladesh as well as a generous loan of 3.4 million dollars from the International Fund for Agricultural Development. Grameen was able to borrow money at 2% and return a profit of 10 to 12% annually while charging borrowers 20% a year. Following its immense success, by 1983 Grameen Bank becomes independent, maintaining Yunus as the managing director. Initially the government of Bangladesh owned a 60% share of the assets. This number was gradually reduced to 25% and by 1993, over 88% of Grameen bank was actually owned by its clients, a most unbelievable fact!

The list goes on and on and many volumes can, and will be written about this case. As of last year Grameen Bank had 7.4 million borrowers, of which 98% were women. This man has done more for women than any other man in history seemingly, and this while in an Islamic society that treats women as second class humans and in some areas as subhuman! Grameen would go on to extend credit for house and shelter construction, business, farming and agriculture, cell phones (my favorite program) and higher education, providing over 50,000 scholarships. Students would simply sign a promissory note saying that once they entered professional careers they would repay back the loans. That fact alone in my opinion makes this a successful project. Imagine if just 1% of these students follow the path set forth by professor Yunus and become world changers of their own.

In 1997 women outnumbered the men voters in Bangladeshi elections, a historic fact. Not only in voting numbers, but actually running for political positions, something unheard of before. As a matter of fact, Grameen Bank makes sure that all members of the family vote in all national elections. This is a direct measurable result the availability of micro credit loans, has had on the society as a whole. There are many other factors that can be measured but basically, at the core the idea is to build trust, communication and partnerships between people, creating accountability between peers, forming bonds of respect and friendship between neighbors and communities. It is about investing in people capital, by allowing the unhindered flow of information technology and microcredit, to empower people to help themselves, to lift each other out of poverty and slowly but surely, to build a better future.

Building on its successes, of which there are cubic miles of, the space for which is not to be fond here, The MacArthur Foundation graciously seeded the Grameen Trust in 1984, which was entrusted with the replication of the model in other impoverished countries such as Brazil, Malaysia and the Philippines. In 1999, the Soros Economic Development Fund gave Grameen Telecom a 10 million dollar loan with the goal to equip 50,000 rural towns with phones. This is what catalytic philanthropy is all about, people and ideas from all over the world, joining together with one goal. The world is finally taking notice.

This is phenomenal and I am awed, silenced and amazed by what this type of philanthropy can accomplish and as well by what a single man with a dream has accomplished. One transformed millions with fives, and today the book of economics is quickly and decisively being re-written, autographed in a great part by the Nobel Prize winning, Professor Mohammad Yunus.


٠Started in 1972 by Professor Muhammad Yunus with a $27 loan he cosigned for himself. Originally a group of 42 villagers were selected due to their common hardships with obtaining financing, while struggling to survive economically as well as materially.

Goals ٠Helping the poorest of the poor, people which were caught up in an endless cycle of impoverishment due to a systemic problem. The problem was a systemic because there were no institutions or entities at the time that provided such a service to this overly impoverished community. The belief that access to credit is a right that belongs to everyone, rich and poor alike. The establishment of the idea that all profit should be recycled. The pursuit of the idea that Western Capitalist corporations should change their business models and pursue a good will agenda, coupled at the same time with a profit making and generating mechanism. The merging of Charity and Economy making both more profitable in the long-term and in turn all of us better humans. The creation of a Goodwill Stock Market where Foundations and Charities could compete and evaluate resources and share knowledge, marketing themselves better and encouraging increased communications, forming a new network that vastly extends the possibilities currently available.

Original Loan Structure ٠One year loans at 20% yearly interest to be paid for in weekly terms. Grameen Bank was borrowing the money at 2% from the Central Bank and returning between 10 to 12% yearly on its investment. The loan was given out to a group of five people, which all held a stake collectively in each individual loan, so that if one member failed to meet expectations, the remaining four people would bring him to questioning and as well help him with the problems he or she was facing. ٠This five-fold structure worked very well and helped the Micro Loan program expand and flourish in the women’s community, due to the strict segregation laws imposed by the Islamic law. ٠Now women could partner up and work together. They worked together so well that in fact; they make up the vast majority of Grameen’s customers today, numbering in the billions of invested capital.

Accomplishments: Did it work? (1998 Figures)

٠Scholarships: 69,869

٠Group Savings Funds assets: $186 million

٠Yearly Lending Budget: $500 million of which 95% of clients are women

٠Bank Branches: 2490

٠Value of cumulative loans: $2 billion

٠Phones per person (1998): 540,000 or 2.7%

٠Phones per person (2011): 74,190,000 or 48.6%

As of 1998, Grameen Bank is working with:

٠1,191,217 Groups of five or more borrowers

٠139,371 Centers

٠82,072 Villages are reached every year

٠2,515 Total Branches (of which)

٠2,490 Branches have Computerized Accounting

٠7,504,180 Active Members (of which)

٠7,269,331 are women

٠Company type: 88% Private, 12% State-Owned

٠Incorporated: 1983

٠Employees: 11,800

Micro Loans have had the following direct societal impact:

٠69,869 Scholarships awarded

٠24,259 Education Loans

٠655,802 Houses built exclusively with Grameen Microloans

٠297,633 Village Phones made possible by Grameen financing

Final points:

٠98.03% Rate of Loan Recovery (1998)

٠2006, Nobel Prize won By Grameen Bank and Professor Mohammad Yunus

٠Succeeded in more ways than even imagined

٠The IMF and World Bank are studying the Grameen model in depth and copying it

The Social Contract: The Sixteen Rules adopted by Grameen Bank((http://www.grameen-info.org/))

  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 tube-wells. 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 daughter’s wedding. 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.

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