Banker to the Poor by Jane Jones - Book Report/Review Example

?Banker to the Poor: Micro-Lending and the Battle Against World Poverty Jane Jones Introduction Banker to the Poor: Micro-Lending and the Battle against World Poverty is a well-thought out book on the subject of microfinance. Its author, Muhammad Yunus, is quite and interesting person in his own right. Bangladesh born, Yunus traveled to the West at an early age as a Boy Scout. Educated early in life in his home country, he received his PhD at Vanderbilt and taught in the United States for some years. Returning to Bangladesh in 1972, after their war of liberation, Yunus secured a teaching position at his alma mater, and was almost immediately horrified to discover the abject poverty and starvation his fellow countrymen were experiencing. The Government was handing out gruel but the excessive numbers made the task staggering. So many people were dying that the religious leaders organized teams of people to gather the dead, much like the European Black Plague of the Middle Ages. Yet he was part of the wealthier urban class, teaching, safe and secure, in a university literally across the street from the rural people dying in their houses. With this bleak aspect, by 1974 Doctor Yunus had quickly grown disillusioned with the thought of teaching Western style economics in such a culture. To quote him, “How could I go on telling my students make-believe stories in the name of economics?” Something had to be done but what? He quickly decided that Professor Yunus should become Student Yunus and that he should study the people of the neighboring village of the college. What he learned over the course of the next two years was the basis of his book and what economists would learn to call micro-lending. Discussion In a nutshell, by the mid seventies, the chasm between the haves and the have-nots was much greater in Bangladesh than in the West. Basically, one either lived quite comfortably or was starving to death. Yet the people were neither ignorant nor lazy. The civil war had devastated the country economically. George Harrison and others had attempted to raise Western money for Bangladesh relief but like any other aid monies that was simply a band-aid to try to heal the country’s wounds when there was a gashed artery. Added to the woes was their newly found independence, after years of rule by other countries. Maybe they didn’t know how to govern themselves, politically or economically. The infrastructure of Bangladesh’s economic system had to be rebuilt. With that in mind, the two years Doctor Yunus spent among the people of the village of Jobra convinced him that perhaps the Western brand of economics and finance was not the best model to apply to Bangladesh. It was probably a good thing he was one of their own people, albeit a highly educated and comparatively wealthy “city dwellers” that the poor villagers had come to distrust. After all, he was a Bangladeshi and Muslim, a man of peace and good intentions. Indeed, he had spent part of his time in the United States involved in peaceful protests of the war in Viet Nam. Still it took him the better part of those two years trying to learn the trust of those villagers. The Doctor also spent time testing various economics theories that he thought would work. Many did but he finally hit pay dirt when he discovered micro-lending. To put it simply, micro-lending essentially involves loaning ultra small amounts of money to very small business people, most of the time amounting between anywhere from a few dollars (his first loan was US $27!) to a few hundred. Western banking firms, used to business loans of thousands to millions, would literally laugh at such miniscule amounts. But who had the last laugh? In its first thirty years, the Grameen bank Yunus started had issued almost seven billion US dollars in loans to over two and a half million customers in over one hundred countries, on five continents. The core of Grameen Bank’s loans is the small business person, or the so-called cottage industry and the vast majority of its borrowers are women artisans. The cottage industry is one thing Doctor Yunus has vast experience in. His father was a quiet and unassuming man, a jeweler in the Bangladeshi port city of Chittagong and the Yunus family lived in the same building as the jewelry shop, where he and his siblings would visit and hang around on a daily basis. From his mother Yunus got the feeling for helping the impoverished, for she would put money away constantly for the poor who would visit. To quote the Doctor directly “it was she (his mother), by her concern for the poor and disadvantaged, who helped me discover my interests in economics and social reform” (P 5). Yet he also admitted his mother was the family disciplinarian who demanded methodical thinking, although her discipline was mixed with compassion. Born in and with early memories of Japanese bombings and invasions, during World War II, which his family had to flee to his father’s rural hometown, the Yunus family definitely knew hardship and doing without. Added to that, his parents endured the loss (in childhood) of five of their fourteen children. Besides that, although he doesn’t specify what, his mother began suffering some sort of mental illness (possibly Post-Partum Depression from having fourteen children?) when Yunus was nine which continued to haunt her for the rest of her life. Yet through it all they both remained devout Muslims and impressed upon their children the peaceful teachings of their religion. He speaks of his parents and their teachings with reverence even though Yunus was already fifty-nine when Banker to the Poor was first published in 1999. Another early influence in his life was Boy Scouting and his scoutmaster, a sensitive man named Quazi Huq who he observed weeping at the Taj Mahal. Huq told the highly impressed teenager that his tears were for the “burden of history” all his countrymen bore. Later, Huq was robbed and murdered for a paltry sum, which further shocked Yunus in that such desperation would end result in such violence. Boy Scouting Jamborees would also give him his first taste of international travel, which included such locales as Japan and Canada. Although his parents were not wealthy, they were able to give his brother and him a very good education. Yunus received his early higher education at the university in Chittagong. Going to business for a time after, he was able to make a healthy profit from the packaging business. Borrowing from the Government owned bank, he amazed them by actually paying the loan before it was due. Later, in the middle 1960’s, he received a Fulbright scholarship to continue his education in the United States, first to Colorado State in Boulder and finally to Vanderbilt, where he received his PhD in Economic Development. He also taught for three years at Middle Tennessee, Murfreesboro. It was during this period Yunus also wedded an American, although the marriage didn’t last. Also the America of turbulent sixties was to leave another lasting impression on the young man, in particular the hippie culture and the African American struggle for civil rights. Like with the Japanese invasions, the Doctor was witness to some of the most significant happenings of the Indian subcontinent in the twentieth century. For instance he was but seven years old when India received its independence from Great Britain. Yet the Bangladeshi people were no more enamored with Gandhi’s policies then they were those of colonial European powers. This led to skirmishes with Pakistan, whom they were tied to, and finally to the nine month long Bangladesh Liberation War in 1971. During the war, Yunus was still in the US and helped raise awareness for the Bangladeshi position in that country. Afterwards, he returned home to another position at Chittagong University, which he held during the aforementioned times of starvation. In 1976 he chanced upon a young lady named Sufiya who made simple stools from bamboo. After purchasing the raw materials on consignment from a supplier, she had to fashion the stools and sell them back to the same supplier, for which she only received two cents (US $.02) in profit per stool! Sufiya could purchase her own materials and make a larger profit but she would have had to borrow from the moneylenders, who charged as much as ten per cent interest per day .Only four years removed from the West, Yunus was both shocked and angered by this revelation and he began to establish the ideas for what was to become Grameen Bank. He loaned forty-two women in the village of Jobra US $27.00 of his own money to keep them from the clutches of these unscrupulous lenders. From there, Yunus was able to borrow money from the Government bank in December of that year, which enabled the Doctor and his associates to further the operations of Grameen. Although high at ten per cent per annum with a declining principal rate, Grameen’s interest on its business loans is much cheaper than conventional banks, especially for those impoverished people who are the bank’s target customers/shareholders. Also when US house rates were averaging around six per cent in 1999, at eight per cent Grameen was charging slightly more. With the housing loans, as Yunus puts it, Bangladeshis have a chance of living in a house with a tin roof and cot for each household member (P 202). By 1982, Grameen had 28.000 members and in October 1983, the bank became a nationwide recognized bank, falling under the auspices of the Central Government, helped by a grant from Ford Motor Company. It is strictly peer owned with an astronomical and enviable payback rate, for the threat of being cut off from further loans is usually sufficient to prevent default. Indeed, at the publication of the book, Yunus tells of a 95% payback rate, quite remarkable considering there is very little if any collateral involved. Also, there is no loan contract, and loans are based on a matter of trust. Instead, borrowers have to recite a creed of “Sixteen Decisions”, which state among other things, the pledge to have clean water, grow their own food, have sanitary bathrooms, etc. Also, the decisions dive into such social areas as child marriage and dowries. Interestingly enough, Grameen has only failed to make a profit in three years of its prominent existence in the book (sixteen years). The first was 1983. As it was incorporated in October the answer to that one is obvious. The only other years were 1991 and 1992, as Bangladesh (in particular Yunus’ hometown of Chittagong) was struck by a devastating cyclone in April 1991 which killed tens of thousands. In addition to the loss of life, the country suffered economic losses so devastating that Grameen was forced to borrow from the Government bank in order to survive. Yet it made a profit for thirteen of those years, a remarkable feat in the time of massive Western bank failures. As such, Yunus and the bank have not been without their detractors and controversy. Because 95% of the bank’s loans are to women business people in a predominately Muslim country, the Clergy and mainstream men alike banded together to denounce the procedures, in that empowering women in male denominated society would undermine the very basis of the religion, a very big no-no in the region. Yet the Muslim attackers developed another most unlikely ally in the socialist and communist communities. In essence, the communist theory was Grameen was making the people too happy. By sleeping in clean beds out of the weather, revolution, the key to leftist takeover was averted. As one person told Yunus, loaning money to them was akin to “giving little bits of opium to the poor people” (P 204). As stated earlier, Grameen’s presence is on five continents, not including Antarctica and Australia. That includes North America, where its microfinance efforts have been the most successful in the rural and poverty stricken US South and Native American tribes such as the Lakota/Sioux in the Plains and the Oklahoma Cherokee. For years, the United States was the only developed country using the initiative until other countries, including Italy, joined in during the early part of the 21st century. The native women were particularly interested in the minute business loans, as their handmade items like quilts and blankets were perfect for a cottage industry. The South, on the surface an unlikely candidate for such initiatives, was spearheaded in Arkansas in the 1980’s by then Governor Bill Clinton. In order to avoid confusion over the names, the project is called Good Faith in the US. In the years since the book’s 1999 publication (updated in 2003), the bank and its founder Muhammad Yunus received the Nobel Peace Prize in 2006. Former US President Clinton was one of those people instrumental in campaigning for the prize committee to make the award. It is nice to note that one of the borrowers ($20 for a goat) was chosen to travel to Oslo for the award acceptance. Yunus and the bank have also received numerous other awards from various countries throughout the world, including the Seoul Peace Prize, the UNESCO Simon Bolivar Award, and the United States Presidential Medal of Freedom, awarded by Barrack Obama in 2009. Although now past seventy, Doctor Yunus is still very much involved in the operations of the bank. Grameen has expanded way beyond its microfinance loans, although they are still the mainstay of its business. In keeping with the information age of the twenty-first century, the company controls such diversified entities as environmental and food concerns. They also delve into the Information Technology area, striving to establish Internet networking services and training in developing areas, so they too can have a fighting chance in the global economy. But one of its most successful ventures has been into wireless phone service, believing rightfully that the women in the rural villages could make a profit by turning that mobile phone into a pay phone system (Grameen). Notwithstanding, it controls over half of Bangladesh’s wireless phone services. Conclusion So, do the ideas of Doctor Yunus and Grameen Bank actually work? Not including the detractors inside of Bangladesh, critics have voiced their dissent from all over the world. For instance, the US Federal Reserve of Saint Louis makes a thought provoking argument about the ability of Grameen and Good Faith to work worldwide. True, maybe not everywhere with the same policies and principles, but the idea can be adapted for the political and economical climate of a given country. No matter how rich or poor a country is, there is always a poor population who could desperately use whatever help could be available. Look, even China has reached out to Grameen for assistance in one of its poorest provinces. Many thousands of people are eating better and sleeping out of the elements because of one man and his gentle ideas about destroying starvation. The same attackers who say Doctor Yunus’ notions will not work are reminiscent of those who said the ideas of democracy would not work in the eighteenth century. Just like what was said about Grameen above, over two hundred years later the ideas of freedom and capitalism have been successfully implanted in many countries around the world. Like democracy, let us all give it a chance to succeed before dismissing it as so much hoopla. References Yunus, Muhammad, (1999) Banker to the Poor: Micro-Lending and the Battle Against World Poverty, New York, PublicAffairs (Pergeus Books). GrameenPhone, Village Phone, accessed April 2012, http://www.grameenphone.com/about-us/corporate-information/social-initiatives/village-phone Read More