Banker to the Poor

The Story of the Grameen Bank

Muhammad Yunus

• Publisher: Aurum
• Year: 2003
• Print ISBN: 9781854109248
• eBook ISBN: 9781845137540
• Topic: Business
• Subtopic: Business Biographies
• Index: Business

Muhammad Yunus set up the Grameen Bank in his home country of Bangladesh with a loan of just £17, to lend tiny amounts of money to the poorest of the poor - those to whom no ordinary bank would lend. Most of his customers - as they still are - were illiterate women, wanting to set up the smallest imaginable village enterprises. It was his conviction that this new system of 'micro-credit', lending even such small sums, would give such people the spark of initiative needed to pull themselves out of poverty. Today, Yunus's system of micro-credit is practised around the world in some 60 countries, including the US, Canada and France. His Grameen Bank is now a billion-pound business. It is acknowledged by world leaders and by the World Bank to be a fundamental weapon in the fight against poverty. Banker to the Poor is Yunus's enthralling story of how he did it: how the terrible famine in Bangladesh in 1974 focused his ideas on the need to enable its victims to grow more food; how he overcame the sceptics in many governments and among traditional economic thinking; and how he saw his micro-credit extended even outside the Third World into credit unions in the West. Such is the importance of his book that HRH the Prince of Wales has contributed a Foreword in which he hails 'a remarkable man [who] spoke the greatest good sense'.

PART I: BEGINNINGS

1940–76

From my village bank to the World Bank

1

Jobra Village: From Textbook to Reality

The year 1974 was the year which shook me to the core of my being. Bangladesh fell into the grips of a famine.

Newspapers were reporting horrible stories of death and starvation in remote villages and district towns in the north. The university where I taught and served as head of the economics department was located in the south-eastern extremity of the country, and at first we did not pay too much attention to it. But skeleton-like people started showing up in the railway stations and bus stations of Dhaka. Soon a few dead bodies were reported in these places. What began as a trickle became a flood of hungry people moving to Dhaka.

They were everywhere. You couldn’t be sure who was alive and who was dead. They all looked alike: men, women, children. You couldn’t guess their age. Old people looked like children, and children looked like old people.

The government opened gruel kitchens to bring people to specified places in town. But every new gruel kitchen turned out to have much less capacity than was needed.

Newspaper reporters were trying to warn the nation of what was going on. Research institutions tried to collect information about where all the starving people were coming from. Would they ever go back, if they survived? And what was the chance of their surviving?

Religious organizations were trying to pick up the dead bodies to bury them with proper religious last rites. But soon the simple act of picking up the dead became a manifestly bigger task than they were equipped to handle.

One could not miss these starving people even if one wanted to. They were everywhere, lying very quiet.

They did not chant any slogans. They did not demand anything from us. They did not condemn us for having delicious food in our homes while they lay down quietly on our doorsteps.

There are many ways for people to die, but somehow dying of starvation is the most unacceptable of all. What a terrible way to die. It happens in slow motion. Second by second, the distance between life and death becomes smaller and smaller.

At one point, life and death are in such close proximity one can hardly see the difference, and one literally doesn’t know if the mother and child prostrate on the ground are of this world or the next. Death happens so quietly, so inexorably, you don’t even hear it.

And all this happens because a person does not have a handful of food to eat at each meal. In this world of plenty, a single human being does not have the right to a precious handful. Everybody else all around is eating, but he or she is not. The tiny baby, who does not yet understand the mystery of the world, cries and cries, and finally falls asleep, without the milk it needs so badly. The next day maybe it won’t even have the strength to cry.

* * *

I used to get excited teaching my students how economics theories provided answers to economic problems of all types. I got carried away by the beauty and elegance of these theories. Now all of a sudden I started having an empty feeling. What good were all these elegant theories when people died of starvation on pavements and on doorsteps?

My classroom now seemed to me like a cinema where you could relax because you knew that the good guy in the film would ultimately win. In the classroom I knew, right from the beginning, that each economic problem would have an elegant ending. But when I came out of the classroom I was faced with the real world. Here, good guys were mercilessly beaten and trampled. I saw daily life getting worse, and the poor getting ever poorer. For them death through starvation looked to be their only destiny.

Where was the economic theory which reflected their real life? How could I go on telling my students make-believe stories in the name of economics?

I wanted to run away from these theories, from my textbooks. I felt I had to escape from academic life. I wanted to understand the reality around a poor person’s existence and discover the real-life economics that were played out every day in the neighbouring village – Jobra.

I was lucky that Jobra was close to the campus. Field Marshal Ayub Khan, the then President of Pakistan, had taken power in a military coup in 1958 and ruled until 1969 as a military dictator; because of his strong distaste for students, whom he considered troublemakers, he decided that all universities founded during his rule had to be located away from urban areas so that students would not be able to disrupt the centres of population with their political agitation.

Chittagong University was one of the universities founded during his regime. The site chosen was in a hilly section of Chittagong District, next to Jobra village.

* * *

I decided I would become a student all over again, and Jobra would be my university. The people of Jobra would be my teachers.

I promised myself to try and learn everything about the village. I thought I would be fortunate if I could understand the life of one single poor person. This would be a big departure from traditional book learning. By attempting to equip the students with a bird’s eye view, traditional universities had created an enormous distance between students and the reality of life. When you can hold the world in your palm and see it from a bird’s eye view, you tend to become arrogant – you do not realize that when looking from such a great distance, everything becomes blurred, and that you end up imagining rather than really seeing things.

I opted for what I called the ‘worm’s eye view’. I thought I should rather look at things at close range and I would see them sharply. If I found some barrier along the way, like a worm, I would go around it, and that way I would certainly achieve my aim and accomplish something.

I started to feel useless in the face of so many starving people pouring into Dhaka. Social organizations set up feeding centres in various parts of the city. Neighbourhoods made special efforts to find food for the hungry. But how many can one feed every day? Famine was spreading before our eyes in all its ugliness.

I tried to overcome the feeling of uselessness by redefining my role. I explained to myself that I might not be able to help many people, but I certainly could make myself useful for a day, or just a few hours, to one other human being. That would be a great accomplishment for me. This idea of providing small-scale yet real help, not just theory, to at least one living person gave me enormous strength. I felt alive again. When I started visiting the poor households in Jobra, I knew very clearly what I was looking for, and why. My motivation had never been clearer.

* * *

I began visiting the poor households in Jobra to see if I could help them directly in any way. My colleague, Professor Latifee, usually accompanied me. He knew most of the families and had a natural gift for making village people feel at ease.

There were three parts to the village: a Muslim, a Hindu and a Buddhist section. When we visited the Buddhist section we used to take our student, Dipal Chandra Barua, with us. He came from a poor Buddhist family in Jobra and was always ready to volunteer for any assignment.

One day, as Latifee and I were making our rounds in Jobra, we stopped at a completely run-down house. We saw a woman working with bamboo making a stool. We did not have to strain our imaginations to guess that her family found it extremely difficult to survive.

‘I want to talk to her,’ I told Latifee.

He led the way through scavenging chickens and vegetable plants. ‘Anybody home?’ Latifee asked in a friendly voice.

She was squatting on the dirt floor of her verandah under the low rotten thatched roof of her house, totally absorbed in her work. She was holding the half-finished stool between her knees while plaiting the strands of bamboo cane.

On hearing Latifee’s voice, she immediately abandoned her work, sprang to her feet and disappeared inside the house.

‘Don’t be frightened,’ said Latifee. ‘We are not strangers. We both teach up at the university. We are neighbours. We want to ask a few questions, that is all.’

Reassured by Latifee’s manner and warmth, she said in a low voice, ‘There is nobody home.’

She meant there was no male at home. In Bangladesh, women are not supposed to talk to men who are not close relatives.

Children were running around naked in the yard. Neighbours appeared and watched us, wondering what we were doing there.

In the Muslim sections of the village, we often had to talk through a bamboo wall separating us from the women we interviewed. The Muslim custom of purdah (literally ‘curtain’ or ‘veil’), whereby married women stay in a state of virtual seclusion from the outside world, was strictly observed in Chittagong District. That is why I sometimes used a female intermediary, a student or a local schoolgirl, to run back and forth with messages.

Since I am a native Chittagonian and speak the local dialect, it was easier for me to gain their confidence than it would have been for an outsider. But, still, it was difficult.

I love children, and complimenting a mother on her baby was always a natural way for me to put her at her ease. My mother had fourteen children (nine of whom survived), and as I was the third eldest I grew up feeding and changing the nappies of my brothers and sister. Whenever I had a free moment at home I would pick a baby up in my arms and cuddle it. This experience has been invaluable to me in my fieldwork.

I now picked up a small naked baby, but he started crying and rushed over to his mother. She let him climb into her arms.

‘How many children do you have?’ said Latifee.

‘Three.’

‘He is very beautiful, this one,’ I said.

Feeling reassured, the mother appeared in the doorway holding her baby.

She was in her early twenties, thin, with dark skin, black eyes. She wore a red sari and could have been any one of a million women who labour every day from morning to night in utter destitution.

‘What is your name?’

‘Sufia Begum.’

‘How old are you?’

‘Twenty-one.’

I did not use a pen and note-pad for that would have scared her off – I let my students do that on return visits.

‘Do you own this bamboo?’ I asked her.

‘Yes.’

‘How do you get it?’

‘I buy it.’

‘How much does the bamboo cost you?’

‘Five taka.’ That was 22 US cents.

‘Do you have 5 taka?’

‘No, I borrow it from the paikars.’

‘The middlemen? What is your arrangement with them?’

‘I must sell my bamboo stools back to them at the end of the day, so as to repay my loan. That way what is left over to me is my profit.’

‘How much do you sell it for?’

‘Five taka and 50 paisa.’

‘So you make 50 paisa profit?’

She nodded. That came to a profit of just 2 US cents.

‘And could you borrow the cash and buy your own raw material?’

‘Yes, but the money-lender would demand a lot. And people who start with them only get poorer.’

‘How much do the money-lenders charge?’

‘It depends. Sometimes they charge 10 per cent per week. I even have a neighbour who is paying 10 per cent per day!’

‘And that is all you earn from making these beautiful bamboo tools, 50 paisa?’

‘Yes.’

Usurious rates have become so standardized and socially acceptable in all third world countries that not even the borrower notices how oppressive the contract is. In rural Bangladesh, a weight of unhusked rice (a maund of paddy) borrowed at the beginning of the planting season has to be repaid with two and a half weights (2.5 maunds) at harvest time.

There are many alternatives. If land is used as security, it is placed at the disposal of the creditor who enjoys ownership rights over it until the total amount is repaid. In many cases, the formal documents (such as Bawnanama) are made to establish the right of the creditor. To make repayment of the loan difficult, the creditor refuses to accept any part-repayment. After the expiry of a certain period, the creditor has a right to ‘buy’ the land at a predetermined ‘price’. Another form of security is the obligatory supply of labour on the creditor’s land.

Under the dadan system, traders advance loans against standing crops for the compulsory sale of the crops at a predetermined price which is obviously lower than the market rate. (Sufia Begum was producing her bamboo stools under a dadan arrangement with a paikar.)

Sometimes the loan is taken out for social or investment purposes (to marry off a daughter, to bribe some official, to fight a court case, for a social occasion), but sometimes for physical survival (the purchase of food or medication, or to meet some emergency situation).

But in all cases it is extremely difficult for the borrower to extricate him- or herself from the burd...

Table of contents

• Cover
• Title page
• Dedication
• Epigraph
• Contents
• Acknowledgements
• Illustrations
• Foreword by H.R.H. The Prince of Wales
• Author’s Preface
• PART I: BEGINNINGS 1940–76
• 1 Jobra Village: from Textbook to Reality
• 2 The World Bank, Washington, DC, November 1993
• 3 20 Boxirhat Road, Chittagong
• 4 Through the Viewfinder: Boyhood Passions
• 5 Campus Years in the US, 1965–72
• 6 Marriage and the War of Liberation, 1967–71
• 7 Chittagong University, 1972–74
• 8 Farming: the Three-Share Farm Experiment, 1974–76
• 9 Banking: Climbing the Prison Walls of Collateral, 1976
• PART II: EXPERIMENTAL PHASE 1976–78
• 10 Why Lend to Women rather than to Men?
• 11 Reaching Women Borrowers
• 12 Women Bank Workers
• 13 The Delivery System: the Mechanics of Joining
• 14 The Repayment Mechanism: the World Upside Down
• 15 A Comparison with Conventional Banks
• 16 Grameen as an Experimental Branch of the Agricultural Bank, 1977–79
• 17 Eid-Ul Fitr, 1977
• PART III: CREATION 1978–90
• 18 Taking our Time at the Start, 1979–83
• 19 Against the Mind-Set
• 20 Natural Disasters: Our Other Enemies
• 21 Training Grameen Staff
• 22 Birth of Grameen as a Separate Corporate Entity, 1982–83
• 23 Full Independence of the Bank, 1985–90
• PART IV: REPLICATING THE GRAMEEN PRINCIPLE
• 24 International Replications
• 25 The US Urban Experience
• 26 The US Rural Experience
• PART V: PHILOSOPHY
• 27 Discovering Economics: the Social Consciousness-Driven Free Market
• 28 Self-Employment
• 29 What Role for Educating and Training the Poor?
• 30 On the Population Problem
• 31 Poverty: the Missing Issue in Economics
• PART VI: NEW HORIZONS 1990–97
• Introduction
• 32 The Housing Loans: a Great Success Story
• 33 Health and Retirement
• 34 Grameen Check: Weavers are Back in Fashion
• 35 Grameen Fisheries Foundation
• 36 GrameenPhone: Technology for the Poor
• 37 The Grameen Trust: the People’s Fund
• PART VII: A NEW WORLD
• 38 A World That Will Assist the Poorest
• 39 World Micro-Credit Summit: to Reach 100 million by the Year 2005
• 40 A Poverty-Free World: How and When?
• 41 What Would it be Like?
• Appendix I: A Look at the Balance Sheet
• Appendix II: Analysis of Some of the Most Popular Grameen Loans
• Appendix III: The Grameen Family of Companies
• How to Contact the Grameen Bank
• Endnotes
• Index
• About the Author
• Copyright