Author: Pamela Philipose
Publication: The Indian Express
Date: February 5, 2001
It has been called Bangladesh's
most successful export - the idea of a "grameen bank". For Muhammad Yunus,
60, founder of the original Grameen Bank, which after 26 years of existence
lends to some 2.4 million people - 94 per cent of whom are women - sees
credit as a basic human right and believes microcredit has the potential
of unleashing the creativity of people who are otherwise left out of the
loop. He is in Delhi presently to attend the Asia Pacific Region Microcredit
summit, where he spoke to Pamela Philipose.
Q. Bangladesh's Grameen Bank model
has made it into development folklore. What was the single most important
engendering factor?
A. The realisation that the poor
were creditworthy. There was a gaping hole in the architecture of the global
financial system. A large number of human beings were left untouched by
it. What we did in response was to start an initiative that dared to give
loans to poor people. We discovered that they paid back. Then we gave them
more money, and they continued to pay back. Now that the system is shown
to be working you can no longer say the poor are not credit-worthy. Yet,
it is still a difficult idea to push across.
Q. What accounts for the credit-worthiness
of the poor?
A. It's simple. They make sure
they pay back so that they can come back for more. They want to ensure
that the one door that is open doesn't close on them. We now lend to some
2.4 million people and we have achieved a rate of return of 95 per cent.
I'd put it another way. The poor are much more credit-worthy than the rich.
Many of the big shots in our countries have defaulted on bank loans.
Q. How did you start the Grameen
Bank?
A. I was a frustrated lecturer
in economics in a Bangladesh university. We had severe famine in 1974.
I was teaching development economics as a theory, so I wanted to do something
practical. That was how I got involved with a local community close to
where I was. The one continuous difficulty poor people faced, I realised,
'was access to money. They needed small amounts of money, but did not know
how to get it. A list of needy people was made and the amount they required,
tabulated.
I was surprised to see the 42 people
on my list needed a sum of 856 thaka, or 27 US dollars. It was for such
small amounts that people get into debt-traps that last lifetimes. I decided
to give them the money from my pocket.
When I distributed it, they were
so excited, they thought it was a miracle. So many people were made so
happy with such a small amount of money. I thought to myself why can't
this be done on a larger scale and approached banks to cheeks this out.
They fobbed me off with the familiar argument that the poor are not credit
worthy.
Finally, I asked them to accept
me as a guarantor for these loans. I took the money from the bank, gave
it to people, returned the interest to the bank and so on. I did this successfully
in two villages, and then in some more villages, but still the banks themselves
were reluctant to step in. That's when I decided to go to the government
and seek permission to set up a bank myself.
Q. Bangladesh has had several brushes
with natural disasters which end up wiping out people's resource base.
What were the lessons learnt?
A. First the wonderful coping capacity
that people have. We face floods every year, so we remain prepared for
that. When you have credit facilities, it enhances coping capacity.
Second, we have learnt that the
Grameen Bank too has to prepare for such calamities. Disasters wipe out
all the money you gave, all the animals, all the crops, the houses, everything.
So we developed disaster policies. We give fresh loans instead of asking
them to pay back previous loans - old loans aye convened into long-term
ones. With this new capital, people can make a fresh start, instead of
weeping over what is lost.
Q. How do you think microcredit
can help rebuild Gujarat?
A. An earthquake, compared to floods,
is a sudden development. It comes as a major psychological shock. You'll
have to tell people, okay, let us start again. The most important thing
is to rebuild their confidence.
Life has to go on. Microcredit programmes
can provide a fillip to this process. India has some very successful microcredit
organisations. Some of them can think of setting up initiatives in Gujarat
and the government could expedite the process by making money available
to them.
Charity doesn't work- It takes away
ambition from people. It takes away their dignity. You have to protect
that dignity. You can do that by activating them, by bringing opportunities
to them.
Take the fund of Rs 10,000 crore
the Indian government hopes to raise through its recent quake tax measure.
Where are these funds going? To build a road? But it is only after you
build people's fives does a road become important.
Q. So what do you think the government
should do with this corpus? A. While some of this money will he needed
for building infrastructure, the rest will have to be used to restore people
so that they can rebuild their lives. Governments, after all, don't run
only for today, they have to prepare for tomorrow and the day after. They
have to create polices, help build institutions.
At a more general level, how many
people of India's billion have access to credit facilities? How much of
loans go to the bottom half of the population?
Why aren't we doing something about
correcting this, when such a process is sustainable, when it is making
profits, when it reduces poverty significantly and helps women? Why can't
India build a microfinance commission? When you talk of poor people, you
are not talking about "masses" without inherent capacities. These are people
with a lot of creativity, but this creativity has been ignored. Ultimately,
it is a battle to rework priorities.
