Banker to the Poor

Last updated

Banker to the Poor
BankertoPoor.jpg
Author Muhammad Yunus, Alan Jolis
Country Bangladesh
LanguageEnglish
Subject Economics, Poverty
Genre Autobiography
PublisherPublicAffairs
Publication date
1999
Media type Paperback
Pages288
ISBN 1-58648-198-3
OCLC 40723664
332.1/095492 21
LC Class HG3290.6.A6 Y86 1999
Preceded byBanker to the Poor: The Autobiography of Muhammad Yunus, Founder of Grameen Bank 

Banker to the Poor: Micro-Lending and the Battle Against World Poverty is an autobiography of 2006 Nobel Peace Prize Winner and Grameen Bank founder Muhammad Yunus. This book shares the details of Yunus' early life, moving into his college years, and into his years as a professor at Chittagong University. While a professor at Chittagong University, Yunus began to take notice of the extreme poverty of the villagers around him. In 1976, Yunus incorporated the help of Maimuna Begum to collect data of people in Jobra who were living in poverty. Most of these impoverished people would take a loan from moneylenders to buy some raw material, using that raw material to create some product, and then selling back the good to the moneylender to repay the loan, earning a very meager profit. One woman interviewed made no more than two cents per day creating bamboo stools using this system. The list Begum brought back to Yunus named 42 women who were living on credit of 856 taka (which is equivalent to 27 U.S. dollars).

Contents

Upon seeing this data, Yunus found it regrettable that all it took was 856 taka to bring these women to self-sustainability. He decided to loan them his personal money with no collateral attached and no interest on the loan. After this money was all repaid, he continued to survey the community to see if this was a rare occurrence. He found that the cycle of essential enslavement to moneylenders was far too common throughout the country of Bangladesh. Yunus decided that something must be done. He went to his local bank and asked them to loan money to these poor and destitute borrowers. His local bank refused. He took the case clear up to the top bank in Dhaka, finally securing credit to loan to local borrowers. Thus, in January 1977, the Grameen Bank was born.

This bank started under completely new principles, different than any other bank in Bangladesh at the time. Its premise was that each borrower had a human right to credit. The borrowers had to form groups of five people in order to provide some type of security on the loan. A loan was then given to two members of the group. After payments were successfully made for six straight weeks, the next two members could take out a loan from Grameen. The chairperson is usually the last person to obtain ability to borrow. The repayment terms for the loans follows five basic guidelines: (1) loans last one year, (2) installments on the loan are to be paid weekly, (3) repayment on the loan begins one week after the loan is extended, (4) the interest rate is 20% on the loan, and (5) repayment every week is 2% of the total loan for fifty weeks straight. This micro-credit program, started by Grameen, has been tested throughout Bangladesh and has even been expanded into much of the world today through similar programs of different names. This micro-credit system has been proven to work over and over again with minor variances on the major principles.

In 1987 [1] a Grameen program opened up in a country other than Bangladesh – Malaysia – and soon micro-credit banks based off the Grameen bank appeared in countries such as the Philippines, India, Nepal, Vietnam, China, Latin America, Africa, the United States, and Europe. The micro-finance model of Grameen has proved versatile and has adapted well to the customs of many countries.

As Grameen continued to grow, it branched out into new projects to aid the poor. In 1986 [2] Grameen acquired 783 ponds to eventually start a Fisheries Foundation, utilizing previously unused resources while providing jobs for the local poor. Grameen Uddog (which means Grameen Initiatives) began in 1993, [3] created an avenue for poor textile weavers in Bangladesh to sell their quality cloth to the garment industry. A cell phone business was the next to open up, in 1997. [4] One Grameen borrower in each rural Bangladesh village was entrusted with a cell phone and the job of selling telephone service to her neighbors. GrameenPhone is the name of the nonprofit company that deals directly with the villagers. This company, in turn, buys airtime from a for profit company called Grameen Telecom. Grameen also formed a nonprofit company called Grameen Shakti (meaning energy) in 1996 to provide renewable energy sources. Also in 1996, [5] an Internet provider called Grameen Cybernet was introduced. To further education and research purposes in Bangladesh, a second internet provider called Grameen Communications was started as well.

Banker to the Poor concludes with a description of Yunus' dream – a poverty-free world. Yunus believes that charity is not the way to become a poverty-free world. Instead, he states, "the real issue is creating a level playing field for everybody, giving every human being a fair chance." [6]

The Italian film company Eurofilm s.r.l. owns the worldwide and exclusive film and television rights of the book. Film director Marco Amenta is currently working on making the film Banker to the Poor for the big screen, based on the international bestseller.

The movie tells the story of Muhammad Yunus, a Bengali economist and banker, inventor of microcredit and recipient of the Nobel Peace Prize in 2006 along with his Grameen Bank. For the script of his Banker to the Poor, written together with the famous Sergio Donati, Amenta was awarded and praised by Robert De Niro at the Tribeca Film Festival. Italian producer Simonetta Amenta purchased the film rights to the story through her company Eurofilm - before Professor Yunus won the Nobel Prize.

Grameen Bank and Poverty Reduction

In Muhammad Yunus' early efforts to alleviate poverty in the regions near his home, he worked to improve local farmers' crop yields. Though he succeeded in his short-term project goals, he discovered another problem: a whole section of Bangladesh's poor had slipped through the cracks in poverty reduction programs. To combat that problem, he researched the poor in the village of Jobra, later redefining the previously vague 'poverty' and developing and studying categories of 'poor people.' [7] In Banker to the Poor, Yunus writes: "I found it useful to use three broad definitions of poor to describe the situation in Bangladesh: P1—the bottom 20 percent of the population (absolute poor) P2—bottom 35 percent of the population P3—bottom 50 percent of the population [7] Watching the poor in each of these categories, he discovered that slightly impoverished citizens who were eligible for aid crowded out those who desperately needed aid. When Yunus started Grameen Bank, he tailored its programs toward these desperately poor. Some people disagree that Yunus' approaches are the best possible way to address poverty or microfinance. For instance, Milford Bateman with the Overseas Development Institute wrote, "When microfinance-funded enterprises are set up, they tend simply to displace other tiny businesses without funding, meaning there is generally no net impact on poverty." [8] Bateman also contends, "It turns out that as more and more microenterprises were crowded into the same local economic space, the returns on each one began to fall dramatically. Starting a new business or a basket-making operation or driving a rickshaw required few skills and only a tiny amount of capital, but such a project generated very little income, because everyone else was pretty much already doing exactly the same things in order to survive." [8] In Yunus' attempt to help the absolute poor (which is different from the 'nonpoor' [7] or middle business sector of the economy), Bateman argues that he inadvertently crowded out this vital middle business sector, hurting the absolute poor to which he devoted Grameen's efforts. Bateman further argues, "To the extent that local savings and remittance income are increasingly channeled into such simple activities via microfinance institutions, and so channeled away from more sophisticated and scaled-up activities associated with small and medium enterprises, the more the economic structure of that country, region or locality is inevitably undermined and destroyed." [8]

Related Research Articles

Microcredit is the extension of very small loans (microloans) to impoverished borrowers who typically lack collateral, steady employment, or a verifiable credit history. It is designed to support entrepreneurship and alleviate poverty. Many recipients are illiterate, and therefore unable to complete paperwork required to get conventional loans. As of 2009 an estimated 74 million people held microloans that totaled US$38 billion. Grameen Bank reports that repayment success rates are between 95 and 98 percent.

Microfinance is a category of financial services targeted at individuals and small businesses who lack access to conventional banking and related services. Microfinance includes microcredit, the provision of small loans to poor clients; savings and checking accounts; microinsurance; and payment systems. Microfinance services are designed to reach excluded customers, usually poorer population segments, possibly socially marginalized, or geographically more isolated, and to help them become self-sufficient.

Grameen Bank is a microfinance organisation and community development bank founded in Bangladesh. It makes small loans to the impoverished without requiring collateral.

Muhammad Yunus Bangladeshi banker, economist and Nobel Peace Prize recipient

Muhammad Yunus is a Bangladeshi social entrepreneur, banker, economist, and civil society leader who was awarded the Nobel Peace Prize for founding the Grameen Bank and pioneering the concepts of microcredit and microfinance. These loans are given to entrepreneurs too poor to qualify for traditional bank loans. In 2006, Yunus and the Grameen Bank were jointly awarded the Nobel Peace Prize "for their efforts through microcredit to create economic and social development from below". The Norwegian Nobel Committee said that "lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty" and that "across cultures and civilizations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development". Yunus has received several other national and international honours. He received the United States Presidential Medal of Freedom in 2009 and the Congressional Gold Medal in 2010.

Sixteen Decisions is a documentary film directed and produced by Gayle Ferraro, exploring the impact of the Grameen Bank on impoverished women in Bangladesh. The bank provides micro loans of about $60 each to the poor, as well as promoting a social charter that gave the film its title.

Grameen Foundation, founded as Grameen Foundation USA, also known as "GFUSA", is a global 501(c)(3) non-profit organization based in Washington DC that works to replicate the Grameen Bank microfinance model around the world through a global network of partner microfinance institutions. Its CEO is Steve Hollingworth. Grameen Foundation's mission is, "To enable the poor, especially the poorest, to create a world without poverty."

The non-governmental organisation based in Bangladesh which provides microcredit financing.

Lift Above Poverty Organization

LAPO is a Nigerian organisation with a Microfinance Bank (MFB) dedicated to self-employment through microfinance and an NGO, a non-governmental, non-profit community development organization focused on the empowerment of the poor and the vulnerable. The institution was founded as a non-profit entity by Mr. Godwin Ehigiamusoe while working as a rural co-operative officer in Delta State, Nigeria. LAPO started its activities in 1987 and was formally incorporated as a nonprofit nongovernmental organization (NGO) in 1993. In Nigeria, LAPO has partnered with the Grameen Bank. In 2010, LAPO transformed it's Microfinance activities into a regulated microfinance bank, while the remaining activities continued under the LAPO NGO.

Village banking is a microcredit methodology whereby financial services are administered locally rather than centralized in a formal bank. Village banking has its roots in ancient cultures and was most recently adopted for use by micro-finance institutions (MFIs) as a way to control costs. Early MFI village banking methods were innovated by Grameen Bank and then later developed by groups such as FINCA International founder John Hatch. Among US-based non-profit agencies there are at least 31 microfinance institutions (MFIs) that have collectively created over 800 village banking programs in at least 90 countries. And in many of these countries there are host-country MFIs—sometimes dozens—that are village banking practitioners as well.

Solidarity lending

Solidarity lending is a lending practice where small groups borrow collectively and group members encourage one another to repay. It is an important building block of microfinance.

Grameen family of organizations company

The Grameen family of organizations has grown beyond Grameen Bank into a multi-faceted group of profitable and non-profit ventures, established by Muhammad Yunus, the Nobel Peace Prize winning founder of Grameen Bank. Most of these organizations have central offices at the Grameen Bank Complex in Mirpur, Dhaka, Bangladesh. The Grameen Bank started to diversify in the late 1980s when it started attending to unutilized or underutilized fishing ponds, as well as irrigation pumps like deep tubewells. In 1989, these diversified interests started growing into separate organizations, as the fisheries project became Grameen Fisheries Foundation and the irrigation project became Grameen Krishi Foundation.

Bharat Financial Inclusion

Bharat Financial Inclusion LimitedBFIL is a banking & finance company (NBFC), licensed by the Reserve Bank of India. It was founded in 1997 by Vikram Akula, who served as its executive chair until November 2011. The company's mission is to provide financial services to the poor under the premise that providing financial services to poor borrowers helps to alleviate poverty. In 2013, the company operated across 17 Indian states.

Grameen America is a 501(c)(3) nonprofit microfinance organization based in New York City. It was founded by Nobel Peace Prize recipient Muhammad Yunus in 2008. Grameen America is run by former Avon Chairman and CEO Andrea Jung. The organization provides loans, savings programs, financial education, and credit establishment to women who live in poverty in the United States. All loans must be used to build small businesses.

Microcredit for water supply and sanitation

Microcredit for water supply and sanitation is the application of microcredit to provide loans to small enterprises and households in order to increase access to an improved water source and sanitation in developing countries. While most investments in water supply and sanitation infrastructure are financed by the public sector, investment levels have been insufficient to achieve universal access. Commercial credit to public utilities was limited by low tariffs and insufficient cost-recovery. Microcredits are a complementary or alternative approach to allow the poor to gain access to water supply and sanitation.

To Catch a Dollar: Muhammad Yunus Banks on America is a 2010 documentary film directed and produced by Gayle Ferraro about the 2006 Nobel Peace Prize winner's ongoing campaign against poverty around the world. It touches on the beginnings of the original Grameen Bank in the 1970s, then focuses primarily on the beginnings of Grameen America's work in the US, especially the launch of its first programs in Queens, New York in 2008. The title of the film comes from a clip of Muhammed Yunus speaking in the film: "In a world where you need a dollar to catch a dollar, you need to have something to help the bottom people to lift themselves up."

The 2006 Nobel Peace Prize was awarded to Muhammad Yunus and Grameen Bank "for their efforts through microcredit to create economic and social development from below".

Yunus Centre organization

The Yunus Centre, in Dhaka, Bangladesh is a think tank for issues related to social business, working in the field of poverty alleviation and sustainability. It is 'aimed primarily at promoting and disseminating Professor Yunus’ philosophy, with a special focus on social business' and currently chaired by Prof. Muhammad Yunus. Its Executive Director is Ms. Lamiya Morshed.

YND is the one of the largest online P2P (Peer-to-peer) lending platforms in China. It allows people to lend directly to women in rural area, especially the Northwest China. YND is a social enterprise based in Beijing, China. It is supported mainly by individual lenders from the Internet.

The impact of microcredit is a subject of much controversy. Proponents state that it reduces poverty through higher employment and higher incomes. This is expected to lead to improved nutrition and improved education of the borrowers' children. Some argue that microcredit empowers women. In the US and Canada, it is argued that microcredit helps recipients to graduate from welfare programs. Critics say that microcredit has not increased incomes, but has driven poor households into a debt trap, in some cases even leading to suicide. They add that the money from loans is often used for durable consumer goods or consumption instead of being used for productive investments, that it fails to empower women, and that it has not improved health or education.

Kashf Foundation

Kashf Foundation is a non-profit, microfinance and wealth management organization, founded by Roshaneh Zafar in 1996. Kashf is regarded as the first microfinance institution (MFI) of Pakistan that uses village banking methodology in microcredit to alleviate poverty by providing affordable financial and non-financial services to low income households - particularly for women, to build their capacity and enhance their economic role. With headquarters in Lahore, Punjab, Kashf has regional offices in five major cities and over 200 branches across the Pakistan.

References

  1. ↑ Yunus, Muhammad (1999). Banker to the Poor (First ed.). United States: PublicAffairs. p.  155. ISBN   1-891620-11-8.
  2. ↑ Yunus, Muhammad (1999). Banker to the Poor (First ed.). United States: PublicAffairs. p.  218. ISBN   1-891620-11-8.
  3. ↑ Yunus, Muhammad (1999). Banker to the Poor (First ed.). United States: PublicAffairs. p.  223. ISBN   1-891620-11-8.
  4. ↑ Yunus, Muhammad (1999). Banker to the Poor (First ed.). United States: PublicAffairs. p.  225. ISBN   1-891620-11-8.
  5. ↑ "A Brief History". Grameen CyberNet Ltd. Retrieved 9 September 2014.
  6. ↑ Yunus, Muhammad (1999). Banker to the Poor (First ed.). United States: PublicAffairs. p.  237. ISBN   1-891620-11-8.
  7. 1 2 3 Yunus, Muhammad (2003) [1999]. Banker to the Poor. PublicAffairs. pp.  40, 41. ISBN   978-1-58648-198-8.
  8. 1 2 3 "Does Microfinance Work?". Share The World's Resources. Archived from the original on 18 July 2012. Retrieved 5 May 2014.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.