Tuesday, August 19, 2008
The Grameen Bank: Part 1
Jo Hunter Adams
I've been thinking about how to use The Concrete Gardener as a tool for my own learning, as well as a tool to facilitate other people's learning. One way to do this might be through book-centered topics. Where, ordinarily, I might read a book and then forget about it, here I can share a few key points as I go along, and perhaps be more likely to remember the stories and approaches I convey to you.
Unfortunately, I seldom find enough time to read and write, so please bear with me as I try to figure out the minimum amount of time needed to produce good quality content. My wager is that I'll get better with experience.
After I learned about the Green Belt Movement at the end of last month, I wanted to learn more about really large community based movements that seem to work. An obvious choice was the Grameen bank. I first read The Price of a Dream by David Bornstein, and am currently starting Banker to the Poor by Mohammed Yunus himself. I wanted to write one article before encountering what Yunus has to say about his "own" movement.
Laying the Foundation
The word "Grameen" comes from the Bangla word gram, or village. As I learned about the origins of the movement, I was struck by how long it took before The Grameen Bank really became a bank, or really began at all. Mohammed Yunus spent five years in a small, extremely poor village in Bangladesh (Jobra), walking and talking with long-time residents, and learning about their needs and priorities. Although he was from Bangladesh, he was an extremely well-educated professor and so belonged, quite literally, to a completely different world. I thought about what this would mean, both in terms of the way that 6 month- 2 year contracts work in the Development/NGO industry, and in terms of my own life trajectory. Either way, five years is a long time. Reading about the process, however, these five years seemed to be one of the most important keys to the success of the Grameen Bank. The Bank has been such a success because it started as something people wanted. It might also have been a success because it suited a specific geographic context, and foundations had been carefully laid in the place where the first branches were built.
What is the Grameen Bank?
In short, the students of Yunus, and Yunus himself, determined that small, short-term credit could make the difference between extreme poverty and progress. The response to this need became the Grameen Bank.
The Bank challenged the notion that only credit that requires collateral is credit that works. Rather, they said, lending to the very poor can be sustainable. In order to receive a loan, a prospective member must join a group of five individuals, who pay back a portion of their loan during their weekly meeting. The five individuals are responsible for all the loans within the group. This allows for a degree of self-supervision. Loans generally start small enough to be paid within one year.
The idea behind this strategy is that poverty reduction can best be achieved through the creation of assets. In opposition to the trickle down effect, The Grameen Bank model argues that wealth can bubble, or trickle, up.
I think one of the most important questions Yunus, and The Grameen Bank, raise, is the question "Is Credit a Human Right?" Thinking about the bank from a position of very limited knowledge, I can't help but think that the world's common approach to credit is all wrong. In the United States, much individual (and perhaps even national) debt seems to lead to time poverty, a lack of career choices, stress and fear. In the coming weeks, I will be talking about Third World Debt, another kind of credit that has lead to absurd and pernicious decisions that affect the health and livelihoods of millions. Yet credit has tremendous potential for the poor, for whom it can mean increased freedom and decision making power.
Other Organizations/Banks involved in Microfinance
Kenyan Rural Enterprise Program