In 1976, in Bangladesh, Professor of economics
Muhammad Yunus decided to test an idea that flew in
the face of conventional economic wisdom. He
witnessed the terrible poverty suffered by so many
of his country’s people, and saw that aid and
charitable handouts did little to solve the
underlying problems of low self-esteem, illiteracy
and poor distribution of resources.
The established banks, like banks everywhere,
decreed that poor people could not be trusted, and
so refused to give them credit facilities. Professor
Yunus disagreed with the traditional view that a
person’s credit-worthiness should be based on what
they already had, and the concept of ‘microcredit’
was born. The specific aim was to offer credit to
those who had nothing, and thereby to awaken the
latent potential that exists in every human being.
With two staff to assist him, he began to offer
small loans, as little as $20, to the country’s
poor, with no requirement for them to provide
collateral on the loan. They were encouraged to use
the money to buy something that could generate an
income, however small. A few hens might be bought,
which provided eggs, or a goat, which provided milk,
some flour to bake bread or some thread to be woven
into fabric.
The produce was sold, and as the fledgling business
began to make a profit, the loan was gradually paid
off. Then, if they wished, they could borrow a
larger sum, grow their business and continue the
virtuous cycle until they had a regular income and
were effectively out of the poverty trap.
With trial and error, encouraged by his early
successes, he adapted and extended the scheme to
more and more of the poor of Bangladesh, and in 1983
the Grameen (the word means ‘village’ in Bengali)
Bank was established. The majority of the loans were
taken up by women, who were so used to making the
most of so very little that they proved to be
particularly adept at running their own businesses
efficiently and at a profit.
Instead of requiring collateral or guarantees of
repayment, the loans were given on trust, and the
women were asked to get together with other
borrowers to form groups of five. The members of
each group supported each other and helped to ensure
that each individual kept their word and repaid the
money that was owed. They were not made jointly
responsible for each other’s debts, but simply
entrusted to support each other.
By normal banking standards, it ought to have been a
disaster. But here’s the good part. Today, Grameen
Bank operates in 71,371 villages, has 2,226 branches
and 6.6 million borrowers, 97 per cent of them
women. The bank has now lent more than five billion
dollars to the poor, and the repayment rate is an
astonishing 98.85 per cent, which is considerably
better than any mainstream bank could hope to
achieve. The bank itself is now 96% owned by the
women borrowers themselves, with the remaining 6%
share being held by the government of Bangladesh.
Professor Yunus has founded countless other
businesses, all with the common aim of empowering
the poor by the simple act of extending them the
trust they had previously been denied. The
microcredit model has been implemented in over
eighty countries worldwide, reaching over 100
million people so far.
It's truly an inspiring story, and serves to remind
us of what is possible when we begin to trust one
another.
