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‘Banker to the Poor’ by Dr. Muhammad Yunus

‘Banker to the Poor’ is the autobiography of Dr. Muhammad Yunus interwoven with accounts of his work with the Grameen Bank in Bangladesh. Sections of the book come across as the biography of a bank written by an economist. Dr. Yunus was Head of the Economics Department at Chittagong University when Bangladesh was hit by a famine in 1974. Distraught at the inability of his textbooks to address the suffering surrounding him, he decided to go to the nearby Jobra village and study ground reality. Among other experimental projects, Dr. Yunus realised that regularly extending micro – credit, i.e. small scale loans at low rates of interest to the poor could lift them out of poverty by making them self–reliant. This scheme of forming self–help groups and extending micro–loans without collateral and minimal paperwork is the essence of the Grameen Bank.

The book talks about how the establishment of the Bank was fraught with many difficulties—the main contention being that the poor are not considered credit–worthy. Even after the bank was established, its formalisation was fraught with red-tapism. The Grameen bank succeeded in making a ground impact after multiple little failures and triumphs through slow and steady work across two decades.

The struggles faced by the bank employees themselves are laud worthy. Women in rural Bangladesh perform purdah. Once, Dr. Yunus was talking to twenty – five women through a bamboo partition. Due to the bustling activity behind the partition, parts of it collapsed. It was not easy for male bank officials to communicate with women and lending to them was considered a challenge to the clerics’ and moneylenders’ authority.

Women employees who joined the bank were initially not allowed to do so by their families. In their job, they were encouraged to bear the harsh rural realities to understand the psyche of their clients. The tough working conditions discouraged their families from permitting them to work. Women were stigmatised against the smallest of things such as riding bicycles, making commute quite difficult.

The borrowers (94% women) had greater barriers to overcome—the greatest being their own sense of hopelessness. First–time borrowers from Grameen were reluctant to be indebted because of their prior experience with moneylenders or middlemen. They were reluctant to handle money, which was considered their husbands’ domain and were conscious of their illiteracy. Women in rural Bangladesh did not have collateral for loans, nor could they apply for one without her husband’s wishes due to the barriers in the formal banking system. This, along with the problem of filing papers on a regular basis, systematically pushed them out of the banking institutions. However, the Grameen project would offer them an opportunity to escape their misery and they would have nothing to lose.

The opportunities provided to these impoverished women filled them with such hope that they soon became ready to challenge the social tide for a chance to afford three square meals a day and send their children to school. Since the money was controlled by women, the funds were used more appropriately by the entire family, rather than ending up for the male members’ private usage.

The experiment yielded significant positive results. The women were able to earn better wages and find their own way out of poverty. They helped their peers in empowering themselves. The borrowers improved their status at home—nutritional status, opposing domestic violence, and going on to afford better amenities such as housing and sanitation.

Completely dispelling conventional notions, poor women worked hard to repay the loans—an overall recovery rate of 98%. They were accountable to their peers to complete repaying the sum in the form of small weekly payments. Repaying the loan was important for their prestige as well as to get loans in the future.

The experiment of lending is inspired by self - confidence. Dr. Yunus had himself started a venture of manufacturing packaging material in his youth. He started this industry with a loan from the bank. Coming from a privileged background, he was readily offered capital and could easily yield profits. It is probably the same sense of confidence, once stimulated by the borrowers of the Grameen bank, that would empower them to emerge out of poverty.

The conventional notions foretold that the poor needed training and education to generate revenue and that they would need to be made aware of how to spend their earnings more meaningfully. However, it was seen that the poorest of the poor were immensely enterprising and knew exactly what they should do, with minimal training or literacy. The bank’s weekly help sessions and their peer interactions provided enough support in that direction.

From the start, the Grameen bank tried to build an institution that would completely overturn conventional banking practices. The aim of the bank, instead of borrowing from other institutions like the World Bank, was to become self – reliant as quickly as possible. Economists raised concerns on the financial health of the bank, repeatedly forecasting that the institution would go bankrupt over time. However, the institution managed to succeed as a commercial bank and its replications around the world have also been effective.

The story of the Grameen bank is the story of a collective struggle against all odds by a community, for self – empowerment, through a financial institution. However, what sets it apart from other financial institutions is that the bank was run less on documents or bureaucratic machinery and rather by the actual people themselves, who took on the mantel of personifying the spirit of the bank.

(Written by Lavanya Goswami and Edited by Siya Kohli)

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