Find out what happens when micro-financing and one man’s contribution change the lifestyles of a population.
For decades, global trends have displayed the unhealthy and increasing gap between the rich and poor. In order to challenge this concern, a new movement for empowering the poor was established by Muhammad Yunus. Yunus is a Bangladeshi banker whose goal originated with the drive to create a world without poverty. He initiated the first steps toward this idealistic world by creating the Grameen Bank, a microfinance organization that makes small loans to the destitute without requiring collateral. By doing so, the borrowers are able to develop a good credit standing and eventually ensure repayment. Furthermore, by creating this organization, Yunus has helped impoverished women manage economic resources and gain independence. This bank is predominantly driven by mutual trust and the motivation to eliminate poverty. As stated by former president Jimmy Carter, “By giving poor people the power to help themselves, Dr. Yunus has offered them something far more valuable than a plate of food––security in its most fundamental form.” The implementation of Yunus’ microfinancing has contributed to the development of multiple communities: Bangladeshi villagers, the region’s economy and literacy, as well as rising social entrepreneurs.
The Small Scale
Yunus created this bank in 1983 after he witnessed extremely poor village women being forced to take out usurious loans to pay their moneylenders. At this point, he realized that small loans made an enormous difference to a poor person. Consequently, his first loan of $27.00 from his pocket was made to 42 Bangladeshi women who needed his help to pay off their debt. Yunus inspired them to conduct their financial affairs with strict discipline in order to live a liberated lifestyle. Furthermore, Yunus helped the women reach their full potential, while also progressing towards his own goal of eradicating poverty. The most surprising aspect of this exchange was the return rate. Approximately 98 percent of the money he loaned was returned to him after the women had a few months to work and support themselves. Although Yunus made an insignificant amount profit by assisting these women, his generosity has helped them gain sovereignty and learn the importance of savings.
The Macroscopic Impact
On a larger scale, the Grameen Bank has provided $4.7 billion dollars to 4.4 million families and improved the economic status of rural Bangladesh. Since the inception of the Grameen Bank in 1983, Bangladesh has sustained a gradual economic growth. Moreover, the extreme poverty level of nearly 50 percent in the 1990’s has significantly decreased to about 25 percent in 2005. Currently, there are more than 2,500 branches of the Grameen bank that operate in 85,000 villages in Bangladesh. Over 40 million people, primarily women, have been impacted by the microloans, and the return rate of 98 percent has been maintained even with this large-scale venture. The most impressive aspects of the Grameen Bank are the contributions it has made to second-generation borrowers— a 100 percent literacy rate. In reference to the national average of about 47 percent, this improvement demonstrates the sustainability of the Grameen Bank project. The Grameen Bank is further sustained because the poor women who use the bank own 97 percent of Grameen shares. Consequently, the strategies implemented to provide microloans are locally diversified based on the needs of the poor. In the coming years, the Grameen bank pushes to have all of its borrowers overcome absolute poverty.
The Even Bigger Picture
The success that this bank maintains is established on one core concept: charity does not solve poverty because it creates dependence. Instead, microloans are promoted because they credit impoverished individuals with the expenses they require to initiate their independence. This motto has inspired many entrepreneurs to assuage the detrimental status quo present in regions around the world. These entrepreneurs include those that work with derivatives of the original Grameen Bank as well as those who work on a completely separate project with Grameen as their motivation.
One of the multiple extensions of the Grameen Bank is Grameenphone, the largest cellular operator in Bangladesh. Grameenphone works with the Grameen Bank to distribute Village Phones to women living in rural areas. As of September 2006, more than 255,000 Village Phones have been installed in 55,000 villages throughout Bangladesh. After the success of this venture, similar programs have been implemented in remote regions of Uganda, Ghana, Indonesia, and Rwanda.
The implementation of microfinancing has also transcended the Grameen boundary. One such example is a micro-enterprise, known as Acción Emprendedora, based in Santiago, Chile. Since 2003, this non- profit organization has been practicing a similar approach to the Grameen Bank and seeks to eradicate poverty in Latin America. In addition to the microfinancing opportunities provided by Accion Emprendedora, their developmental model also provides free consulting services to encourage their entrepreneurs to allocate money effectively and utilize technology when necessary. As a result of this educative style, over 85 percent of participants have increased their local productivity. Due to the organization’s high success rate, Accion Emprendedora has been recognized as one of the best social projects in Latin America. Furthermore, it has catalyzed the expansion of various business sectors including, agriculture, commerce, construction, and transportation.
The Grameen Bank’s efforts have contributed to getting 10 million Bangladeshi’s to earn more than $1.25 every day. Yunus’ utilization of microfinance accrued an extremely successful outcome primarily due to his focus on addressing the needs of the poor. Moreover, the small loans provided by the Grameen Bank have promoted monetary stability for these individuals in a self-sustainable manner. In 2006, the Grameen Bank and Muhammed Yunus were jointly awarded the Nobel Peace Prize for their “efforts to create economic and social development from below”. In response to this recognition, the Grameen outreach has expanded to impoverished citizens throughout the world. These regions include, but are not limited to Australia, Africa, Columbia, Ecuador, Haiti, as well as the United States. There is a long way to go for eliminating poverty; however, Yunus’ first step demonstrates that this dream will, one day, be a reality. z