Author: Muhammad Yunus Publisher: Penguin Books India Pvt. Ltd., New Delhi
“When I gave $27 as loans to forty-two people, I could not believe one could produce so much happiness in so many people with so little money”
This was how the Grameen bank started in 1974 from a small village Jobra in Bangladesh.
‘Banker To The Poor’ is the story of Grameen Bank; written by its founder, Muhammad Yunus. He believes that poverty is not created by poor but it results from the social structure and negligence and shows faith that a poverty-free world is achievable. On the same lines of thoughts, he founded Grameen Bank. This Bank provides micro-loans to poor without collateral and works along with them to improve their quality of life. In 2006, Grameen Bank and Muhammad Yunus were awarded the Nobel Peace Prize.
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The book consists of seven sections. First three sections lay down the development phases of Grameen Bank: Beginnings (1940-76), Experimental (1976-78) & Creation (1978-90). Fourth section illustrates the replication of the model in different countries & distinct cultures. In last three sections, author describes the philosophy of the organization with a view on the future.
Grameen Bank: How it all began
The concept of Grameen Bank was ushered in 1974 when Muhammad Yunus, the author was working as a professor of Economics at Chittagong University. He observed that the residents of the nearby Jobra village were trapped in the vicious circle of debt from money lenders who charged an exorbitant amount of interest. When he prepared the list of total borrowings of the villagers, he was surprised o see that all the suffering was just for a total borrowing of 856 Takka ($27). Institutionalized banks denied the poor any loans due to the absence of collateral.
Muhammad Yunus decided to fight this traditional system of banking and after six months of persuasion and struggle with the bureaucratic machinery, he succeeded to get the loans of villagers sanctioned from local bank on personal guarantee. The idea of the Grameen project was born from here but real breakthrough came in 1978 when the then deputy governor of Bangladesh Central Bank authorized the Grameen Bank Project. Now the bank stepped out of Jobra village and spread its branches in the district of Tangail. Four years later, in 1982, Bank launched its operations to five more districts with the support of Ford Foundation and IFAD.
In 1983, the then president of Bangladesh General Ershad recognized Grameen Bank as a separate corporate entity. But this success came with strings and government took the ownership of the bank. Ownership was finally restored to borrowers with lots of efforts but problems continued to impede the progress. The resolution recognized the Grameen Bank as a private bank being run by government officials. Muhammad Yunus did not want government interference and got the amendment approved giving the Grameen Bank power to choose its own head.
Finally the Grameen Bank was born with full independence. By 1998, Grameen bank had moved to $2.3 billion lent to 2.3 million families from the beginning at Jobra of $27 lent to 42 people in 1976. Success of Grameen Bank in Bangladesh prompted its replication in more than fifty nine countries. On replication, author strongly rejects the exact duplication of the model to all cultures rather he stresses on reshaping it as per the needs of local society and culture.
Book also throws light on the personal life of the author who stayed in Chittagong before moving to USA for higher studies. It also covers the strains of his marriage with Vera Forostenka which ended in 1977 due to disagreements on cultural differences. In 1971, author returned to Bangladesh and started teaching at Chittagong University. However, author could not effectively intertwine his personal life with the story of Grameen Bank. Anecdotes and episodes related to his personal life appear only in few initial chapters but even there, they seem to impede the flow.
Grameen Bank: Challenges faced
As the Grameen Bank went on to oppose the set social norms and customs, it also became a victim of social opposition. In Bangladesh, women are not supposed to talk to outside men and the custom of Purdah is still strictly observed in many areas. Bank took the support of female intermediaries and workers to overcome this problem. It was also not easy for female workers since they had to fight with various social taboos as a woman riding a bicycle or going someplace alone was seen with disrespect.
Religious Conservatives and clerics also opposed the Grameen Bank and accused them of destroying the Islamic culture and religion. Rumors were spread to malign the image of bank. But, since the principles and policies of the bank were totally people-focused, opposition relented under social pressure and people’s support to the Grameen Bank. Biggest challenge came when Bank decided to exclusively lend to women. Bank believes that the money entering in a household through a woman brings more benefits. But rural womenfolk had always lived with a mind set of male supremacy in household and were fearful to deal with a bank. This also became an issue of many household discords. Finally, Grameen Bank came up with the solution of lending husbands but through their wives. Today 94% of their borrowers are women.
Grameen Bank also followed the policy of daily repayment and lending in social groups so as to use the phenomenon of collective responsibility as the support. Grameen bank never used the judiciary in seeking loan repayment. They worked on the philosophy of building trust through human relationships.
Though Grameen Bank was quite supported by government time to time but author also describes about the government machinery and bureaucratic processes killing both valuable time and resources. Bank had a strained relationship with the World Bank for almost two decades before agreeing to work with them in 1996. He also illustrates the dynamics of multi-lateral aid institutions and enormous pressure on them to use the targeted amount. These institutions even go to the extent of bribing the government officials and politicians to achieve their targets.
Institutionalized banks disburse loans only on collateral and rarely involve with micro loans considering them as pittance. Grameen Bank went on to challenge this basic banking principle of – “The more you have, the more you get” and took the charge to cater the needs of the poor vowing to end this financial apartheid. All the apprehensions laid flat against astonishing recovery figures of 99% for Grameen Bank as opposed to 10% achieved by conventional banks.
Author believes all economics theories are of no good if people die of starvation. He analyzes the problem of poverty at the core how it negates the right of an individual for an adequate standard of living. Loans by bank became a tool of confidence and faith in oneself. Author supports the idea of social-welfare-driven enterprises with no government interference and rejects the phenomenon of laissez-faire.
Banker to the Poor: Quick glance
The Book brings up the issue of poverty and micro-financing as its solution in an emphatic manner but there are certain shortcomings impeding the flow of ideas in the book. Chapters on the personal life of author seem to be out of place and look to add no value to the central theme. Book is far outdated in terms of data. It was first published in 1998 and has not been revised till date. Best available data in book is from year 1998 which makes it impossible to understand the current economical and social impact of the Grameen Bank. The field of microeconomics has also undergone significant changes in recent years and Grameen Bank is also facing new conflicts with the government and bureaucracy as the Bangladesh government recently sacked Muhammad Yunus, the author from his position in Grameen Bank. Thus a revised edition inclusive of recent issues and updated data will be of great help.
Despite shortcomings, book is a good piece to read. Language is easy and lucid. Author changes his tone beautifully so as to draw a sketch of poverty, hunger or misery and emotions of love, care, anguish or frustration. Growth of Grameen Bank from a small village experiment to an international self-help organization plants an impeccable impression. At the same time, commitment and belief shown by the author leave the reader with an energy and enthusiasm for transformation. As the author comes to the end, he looks beyond for a poverty-free world –
“Poverty does not belong to civilized human society. Its proper place is in museum.”