Virtual Learning Resource Centre

Banker to the poor: The story of the Grameen Bank

Book cover

by Muhammad Yunus with Alan Jolis, Aurum Press, 2003.


Muhammad Yunus, winner of the 2006 Nobel Peace Prize, set up the Grameen Bank in Bangladesh to lend tiny sums to the poorest of the poor who are usually shunned by ordinary banks. The money enables them to set up the smallest village enterprises and pull themselves out of poverty. Today, Yunus’s system of “micro-credit” is practised in 59 countries and his Grameen bank is a billion-pound business acknowledged by world leaders as a fundamental weapon in the fight against poverty.

(Reviewed by Kevin Barham in November 2006)

(These book reviews offer a commentary on some aspects of the contribution the authors are making to management thinking. Neither Ashridge nor the reviewers necessarily agree with the authors’ views and the authors of the books are not responsible for any errors that may have crept in.

We aim to give enough information to enable readers to decide whether a book fits their particular concerns and, if so, to buy it. There is no substitute for reading the whole book and our reviews are no replacement for this. They can give only a broad indication of the value of a book and inevitably miss much of its richness and depth of argument. Nevertheless, we aim to open a window on to some of the benefits awaiting readers of management literature.)

Winner of the Nobel Peace Prize

This is the extraordinary story of how Muhammad Yunus set up the Grameen Bank in Bangladesh to lend tiny sums to the poorest of the poor who are usually shunned by ordinary banks. The money enables them to set up the smallest village enterprises and pull themselves out of poverty. Today, Yunus’s system of “micro-credit” is practised in 59 countries and his Grameen Bank is a billion-pound business acknowledged by world leaders as a fundamental weapon in the fight against poverty.

In 2006, Yunus won the Nobel Peace Prize. His citation says that Yunus “has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries.”

His story is one we should all learn about.

Back to the top

Early days

Mohammad Yunus was born in 1940 into a relatively prosperous Muslim family in Chittagong in what is now Bangladesh, and where his father owned a jewellery shop. His father made sure he went to a good school (where he was active in the Boy Scout movement) but it was his mother’s concern for the poor and disadvantaged that helped him, Yunus says, to discover his destiny.

For as long as Yunus can remember he has thought of himself as a teacher and still does today. After graduating from Dhaka University in 1961, he taught economics at a college for four years. During this time, though, he also tried his hand at private business by setting up a packaging and printing plant with his father as chairman of the board. The business did very well and gave him confidence as it proved that, although he had no intention of becoming a businessman, he could be a commercial success if he wished.

Offered the opportunity to study for a PhD in the US, he jumped at the chance to go there on a Fulbright scholarship. While he was there, the Liberation War broke out in Bangladesh in 1971 and Yunus immediately devoted himself to promoting the cause in the US, giving interviews to newspapers and TV stations and demonstrating on the steps of Capitol Hill. When Bangladesh won its independence from Pakistan that year, he was eager to return and help rebuild his country. “Full of idealism and dreams (as he describes himself) and bathed in the nirvana of the Western world’s rational approach to all problems”, he now became head of the economics department of Chittagong University.

Back to the top

The 1974 famine

Yunus says that 1974, when Bangladesh fell in to the grip of a famine, was the year which shook him to the core of his being. He watched appalled as a flood of starving people flocked to the city from the countryside. “They were everywhere. You couldn’t be sure who was alive and who was dead. They all looked alike: men, women and children. You couldn’t guess their age. Old people looked like children, and children looked like old people.”

He had once thought that economic theories provided answers to economic problems of all types. He got carried away with the beauty and elegance of these theories. Now all of a sudden he had to ask what good were all these elegant theories when people were dying of starvation on pavements and doorsteps? Outside the classroom, in the real world, daily life was getting worse and the poor were getting poorer. For them death through starvation looked to be their only destiny. Where, he asked, was the economic theory which reflected their real life? How could he go on telling students “make-believe” theories in the name of economics?

Yunus felt the need to escape from academic life and all the theories. He wanted to understand the reality around a person’s existence and discover the real-life economics that were played out every day in the poor villages. Not far from the university was a village called Jobra. He decided to become a student again and that Jobra would be his university. The villagers would be his teachers. He would try to understand Bangladesh by understanding Jobra.

Yunus set out to learn everything he could about the village and the lives of its people. He might not be able to help many people but perhaps he could make himself useful, if only for a short time, to one other human being. This idea of providing small-scale yet real help gave him enormous strength.

Back to the top

Sufia Begum

He began visiting the poor households in Jobra to see if he could help them directly in any way. One day he saw a young woman Sufia Begum making a bamboo stool outside a completely run-down house. He asked her where she got the bamboo. She said that she bought it for 5 taka (22 cents US) and that she borrowed the money from the paikars, the middlemen. She explained that she had to sell the stools back to the middlemen at the end of the day so as to repay the loan. What was left over was her profit. She sold it for 5 taka and 50 paisa, so she made 50 paisa profit, just 2 cents.

Asked if she could borrow the cash and buy her own raw materials, she explained that the money-lender would demand a lot and that people who start with them only get poorer. The money-lenders charged 10% per week, sometimes 10% a day. Yunus says that usurious interests rates have become so standardised and socially acceptable in all third world countries that not even the borrower notices how oppressive the contract is. It is usually difficult for the borrower to extricate himself from the burden of the loan. Often they have to borrow again just to pay the prior loan. The only way out is death. Unless the poor can be liberated from the bondage of the money-lender, no economic programme can arrest the steady alienation of the poor.

Yunus asked himself how Sufia Begum’s three children could break the cycle of poverty and aspire to a better life. It seemed hopeless to imagine they could ever escape. How could they go to school when the income she earned was barely enough to feed her, let alone shelter and clothe her family?

That she earned the equivalent of just 2 cents a day paralysed him. In his university courses he was used to talking in millions and billions of dollars but here the problems of life and death were posed in pennies. Why did the university course he taught not mirror the reality of her life?

Yunus was angry with himself and at an uncaring world. Sufia Begum was illiterate but, despite the adverse conditions, she displayed a useful skill – that of survival. But there was no chance of her improving her economic base. The existing economic system made sure her income would be kept perpetually at such a low level she could never save anything to invest in expanding her economic base. Yunus said it seemed preposterous to him. He was tempted to reach in his pocket and give her the pittance she needed for capital. That would have been so easy, but he resisted because it would not have solved the problem in any permanent way.

Trying to see the problem from Sufia’s point of view, Yunus realised that Sufia’s life was miserable because she could not break free of the cycle of borrowing from the trader and selling back to him. The answer was simple – all he had to do was lend her 5 taka.

As of now, her labour was almost free creating a form of bonded labour or slavery. The trader made sure he paid her a price that only covered the cost of the materials and just enough so she would not die but needed to keep on borrowing from him. Her status would not change if she could not find the 5 taka to start with. But credit could give her that money enabling her to sell her products in a free market and get a much better spread between the cost of her materials and her sale price.

Yunus had one of his students make a list of how many other people in Jobra were in Sufia Begum’s position. The list named 42 people who in total had borrowed 856 taka, less than $27. Yunus was astounded. All this misery in 42 families, all for the lack of $27. Yunus gave his assistant the $27 and told her to lend it the people on the list. They could then repay the traders what they owed them and sell their products wherever they could get a good price. They could pay him back when they were able and he would not charge any interest.

It soon struck Yunus that what he had done was not sufficient because it was only a personal and emotional solution. He had to find an institutional solution, so he decided to approach the local bank and request it to lend to the poor. “What was required was an institution that would lend to those who had nothing. It seemed so simple, so straightforward.”

That was the beginning of it all. He was not trying to become a money-lender, Yunus says. He had no intention of lending money to anyone. All he wanted was to solve an immediate problem. To this day, he sees his work and that of Grameen, as trying to solve the same immediate problem: the problem of poverty which humiliates and denigrates everything that a human being stands for.

Back to the top

Defining poverty

The 1974 famine focused Yunus’s efforts on farming. Bangladesh badly needed to increase its food production so he decided to help the villagers of Jobra grow more food. He focused his attention on solving the problem of irrigation in order to raise an extra winter crop of rice during the dry season.

He discovered that the local farmers were not using the deep tubewells which the government had built with donor aid. This was a capital intensive technology with heavy operating and costs requiring an efficient water distribution system, a large number of farmers implementing uniform crop policies, and technical expertise for fertiliser, plant protection and maintenance of the pumps. (Less expensive manually operated tubewells would have been a much more appropriate technology but government and donors are often more attracted to high-end technology solutions.)

Yunus came up with the idea of creating a new type of agricultural co-operative – the Three Share Farm – whereby the landowners/farmers would contribute the use of their land during the dry season, share-croppers would contribute their labour, and he himself would contribute all other costs including fuel for running the tubewells, seeds for high-yield crops, fertiliser, etc. In return, each of the three parties (farmers, share-croppers and himself) would receive one-thirds of the harvest.

Despite initial suspicion by farmers, the scheme was a success. But Yunus had misgivings as the scheme highlighted a problem he had not seen before. When the harvest was over, manpower was needed to separate the rice from the straw. This mindless work was given to day labourers, destitute women, who toiled all day for a pittance. The farmers were better off but the very poor had nothing to show from the scheme.

This led Yunus to realise that, while international development jargon often talks about “small farmers” to denote the poor, the bulk of the agricultural labour is provided by the landless and near-landless. It also creates an unconscious gender separation as it makes us think about male issues and forget about the role of women. Furthermore, Yunus found that agricultural labourers only spend one-fifth of their time working on farms. Farming is only a minor part of their lives and should not be used to categorise them. It draws attention away from looking at other potential sources of employment and income and keeps it focused on an aspect of their lives – farming – that does not have much promise.

Yunus therefore realised it was necessary to separate the really poor from farmers. Conceptual vagueness about definitions of poverty greatly damages our attempts to alleviate it. The poor is a much larger collection of people than small or marginal farmers. In Bangladesh, half the total population is worse off than the marginal farmer. Yunus has found the following three definitions of poverty, each broader than the other, useful in Bangladesh:

  • P1 – hardcore poor, the bottom 20% of the population
  • P2 – bottom 35% of the population
  • P3 – bottom 50% of the population

Yunus believes that each country should have its own definition of poverty (25 acres of land can make you poor in a desert country, but rich in a fertile country). This is not for theoretical hair-splitting but for operational strength. Without firm demarcation lines, anyone trying to alleviate the worst poverty can easily slip from the poverty zone into the non-poverty zone without realising it. Wherever a poverty alleviation programme allows the non-poor to be co-passengers, Yunus says, the poor will soon be elbowed out by the better-off. In the name of the poor, the non-poor will reap the benefits.

Back to the top

The prison of collateral

Yunus therefore turned his attention to the problem of the most destitute – the landless and the assetless. He believes that farming, being tied to land, makes people conservative. The landless, without those ties, are likely to be more mobile and receptive to new ideas; they are fighters for survival, free from the traditional lifestyle.

When he approached the bank, first locally and then at regional level, to ask them to lend money to the poor in Jobra, he came up against a whole range of objections, what he calls “myths and half-myths”, that he was to meet time and time again: The poor cannot save. They consume everything they have because their consumption needs are so great. Credit alone is useless; it must be packaged with training, marketing, transportation. The poor are too hungry to make rational judgements, they are not interested in change. The rural power structure is too entrenched. Poor women have no skills; their husbands wouldn’t let them keep their borrowings anyway. Encouraging the poor to take up independent professions will create a shortage of wage labour.

The biggest objection, however, was that the poor have no collateral. The bank insisted on collateral as a guarantee it would get its money back. Yunus argued that this doesn’t make sense. The poorest of the poor work, he said. They need to sell and earn income in order to eat. They have every reason to pay back the loan in order to make another loan and live another day. Their life is the best security you can have. The bank still refused, however.

Faced with the bank’s unbreakable rule that only those with collateral could borrow, Yunus after months of negotiation finally persuaded the bank to make a loan to the poor of Jobra with himself as guarantor. But, he says, the bank would not deal with the borrowers on the spot, they would only deal with him. They did not want to deal with the actual poor who used their capital.

He was, he says, discovering the world’s basic banking principle: “The more you have, the more you get. If you don’t have it, you don’t get it.” Collateral is one of those principles that gets passed on from one generation to another without being questioned. But it creates financial apartheid.

Out of desperation, Yunus questioned the basic banking premise of collateral. He wanted to show that the financial untouchables are touchable, “even huggable”. To his amazement, he found that the repayment of loans by people who borrow without collateral are much better than those whose borrowings are secured by enormous assets. Over 98% of their loans are repaid because the poor know this is the only opportunity to break out of poverty. They want to do a good job because they have no choice.

Back to the top

Women are the best borrowers

In 1977, Yunus made his first tentative step towards what would become the Grameen Bank by setting up an experimental university research project to help the poor, using students on an unsalaried basis and using the budget from his field research to pay expenses.

One of the principles that Yunus established very early on is that he would lend to women rather than men. The traditional banking system in Bangladesh was very gender-biased but he wanted at least 50% of the projects’ borrowers to be women. He found that credit given to women brings about changes faster than when given to men. Women experience hunger and poverty more intensely than men as the unwritten rule is that one family member has to starve, it has to be the mother. Being poor is tough in Bangladesh, but being a poor woman is toughest of all.

Women give top priority to the family. Money going through a woman is more likely to bring benefit to the family as a whole than through man whose priorities are different. That is why economic development and reduction of poverty should start with women and why Grameen has come to focus almost exclusively on lending to women – and which inevitably produced opposition from husbands, money-lenders and civil servants.

It is the same in other lesser-developed countries – in most development planning, women are seldom reckoned as an economic force. Giving women access to credit in Bangladesh is tantamount to a social revolution. Yunus admits they made some mistakes at first and created tensions between wives and husbands. It now lends money to husbands, but only through their wives.

Reaching potential women borrowers was hard in a country like Bangladesh where women had never borrowed from a bank before and where 85% of women cannot read. The rules of purdah (literally a “curtain” or “veil”) meant they did not dare to enter a house at first. To meet village women, Yunus used to go to Jobra and stand in a clearing between several houses so everyone could see his behaviour and that he was respecting their privacy. He would chat as informally as possible explaining what he was trying to do. He would also take, as a go-between, a female student who would enter a house, speak on his behalf and bring back questions to him.

At first, the women were frightened of getting into trouble with their husbands. They were afraid too of money-lenders and borrowing. Winning their confidence was slow going, a task that involved returning again and again to the village, tramping throughout the monsoon and through the dry season.

Back to the top

The borrowing groups

Yunus and his students did not know anything about lending to the poor so they had to learn from scratch. It required patience, moving with slow but steady steps, and the willingness to correct their mistakes.

Yunus also tried to learn from the mistakes of other banks in Bangladesh. Instead of demanding lump sum repayments which became a psychological hurdle for borrowers and often led them to default, he did the opposite. He made the payments so small the borrower would not even notice them. It would also be a daily payment to make monitoring easier and to enhance self-discipline among people who had never borrowed before.

For ease of accounting, he asked loans to be repaid fully within one year. So a 365 taka loan could be paid at 1 taka a day. As the number of borrowers grew, daily collection of repayments (originally through the local pan or betel leaf seller) later proved to be impractical and the bank went over to weekly collection which it still maintains.

They discovered that the formation of a borrowing group (usually of five members) was essential for success. A group provides a sense of protection for the individual and peer pressure makes the borrower more reliable and keeps them in line with the broader objectives of the credit programme. It makes keeping track of individual members easier and shifting the task of initial supervision to the group reduces the work of the bank worker and increases the self-reliance of the group.

The group approves the loan request of each member so feels morally responsible for it and, if a member of the group ever gets into trouble, the other members usually help out. They therefore require an applicant to form a group of like-minded people with similar economic and social status. Loans are given to the individuals, however, and each borrower is responsible for their loan.

Yunus describes the first day that a group member asks for a loan, typically the equivalent of $15. She is terrified of taking on the responsibility but the group members promise to support her. Trembling, she receives the money and carries it away like a delicate bird. All her life she has been told she was no good, just another mouth to feed, another dowry to pay. Now an institution has trusted her with all this money. She is stunned. She vows she will never let the institution down and will repay every singe penny. And she does it, Yunus says.

In his eyes, the Grameen loan is not simply cash. It is a ticket to self-discovery that allows people to explore their potential and discover their creativity. Every one of its borrowers represents a thrilling story of self-discovery. (Throughout the book, Yunus tells the stories of individual borrowers and how their lives have changed as a result of a small loan from Grameen.)

Grameen does not use the judiciary or lawyers to seek repayment of its loans. Yunus says, if they don’t know their business, they should get out of it. There is no legal instrument between lender and borrower, the relationship is with people not with papers. The bank succeeds or fails on how strong the personal relationship is with its borrowers. No matter how large we grow, says Yunus, we must never lose that close relationship between the borrower and the bank.

Unlike commercial banks, Grameen assumes that every borrower is basically honest and, according to Yunus, in 99% of cases this proves correct. Their experience with bad debt is less than 1%. Even then, they don’t conclude that the defaulter is a bad person. Rather, that their circumstances were such they couldn’t repay. Bad loans of 0.5% are the cost of doing business and a reminder of what they need to improve.

Back to the top

The creation of Grameen Bank

Yunus worried about not being able to compensate the students who were helping him. The operation was holding by a thread and needed institutional support. One had a lucky chance meeting with a sympathetic acquaintance, the managing director of the Bangladesh Krishi (Agricultural) Bank (BKB), one of the country’s largest banks. The MD invited Yunus to set up his operation as an experimental branch of the BKB, with the students as formal employees of the bank. He could now turn his tiny university research project into a banking experiment which could catch national attention.

It was at this point that Yunus decide to call his operation “Grameen” to make the point that he wanted his operation to cover all aspects of rural life, not just agriculture. Grameen comes from the word “gram” which means “village” so Grameen means “rural” or “of the village”.

Grameen still only had 500 borrowers in Jobra and Yunus needed to expand the programme. His chance came when the deputy governor of the Central Bank invited him to present his ideas at a meeting with the managing directors of all the state-owned banks. The MDs told Yunus they believed his borrowers were only repaying because he was a respected university professor and was a native of Chittagong. The upshot was that Yunus, in order to demonstrate his approach could be replicated elsewhere, took a two-year leave of absence from the university to become a full-time banker and set up in another district, Tangail, where he was not known.

Each national bank made available to them three branches in Tangail (plus another six in Chittagong). Conditions in Tangail were personally uncomfortable for Yunus. His office building was still under construction, there was no toilet and his temporary home was a tiny unfurnished room in another building also still under construction. The district was in the middle of a guerrilla war so there was considerable danger for the Grameen employees working in the villages.

Nonetheless, they soon started disbursing funds to the landless in Tangail. By 1982, the Grameen membership had jumped from 500 to 28,000. Yunus says that they achieved this remarkable increase by taking things slowly. Whenever Grameen starts in a new area, it keeps everything low-key and small and takes its time to avoid making mistakes. The aim is to avoid upsetting antagonistic people and to develop a system that works, not to rush out a service as fast as possible.

It was now that Grameen developed its procedure for entering new territory. In a village where Grameen has decided to set up a branch, the manager, accompanied by a trainee associate manager (both of them university graduates), arrives with no office, nowhere to stay and knowing no one. This makes them very different from government officials who usually arrive in a very self-important way, and signals that Grameen brings new ideals and ways of doing things.

The Grameen people’s first assignment is to find out everything about the area. They have to pay for a room and are not permitted to stay in fancy surroundings or accept food from the well-to-do. The villagers are intrigued as to why two well-educated young people should want to come and live in their village. The two Grameen walk for miles every day in all kinds of weather talking to villagers and explaining how to set up a borrowing group. Ultimately, it is not their words but their hard work which wins the trust of the villagers.

Having decided to set up a branch, the manager invites the village leaders, religious leaders and local officials to a meeting with a senior Grameen manager who explains Grameen’s procedures and gives the villagers the option to accept Grameen or tell it to leave. No village has ever asked it to leave.

Back to the top

Unlike conventional banks

Under Yunus’s leadership, Grameen went from strength to strength and in 1986 the bank achieved full independence and Yunus was appointed as managing director. Yunus says that, in creating Grameen, they looked at conventional banks and turned everything around:

  • Conventional banks ask their clients to come to their office. An office is a terrifying place for the poor and illiterate so Grameen goes to its clients.
  • Conventional banks look at what a person has already acquired. Grameen looks at the potential waiting to be released by that person.
  • Grameen clients do not have to show how large their savings are or how much wealth they have. They need to prove how poor they are, how little savings they have.
  • A conventional bank is answerable only to its shareholders to earn a profit within limits set by government and regulators. Grameen is answerable to its shareholders – the borrowers and the government which owns 6% of the shares. (In this sense, Grameen is more like a building society in the UK.)
  • A successful commercial bank has high profits and provides high dividends to its shareholders. Grameen wants a high return too but this is often a return in kind to its borrowers in terms of housing and increased standard of living.
  • For Grameen, people’s needs and their welfare are not a sideline; they come first and foremost. Success is not measured by bad debt or repayment figures; it is measured by whether the lives of its borrowers have become less miserable.
  • Grameen does not stipulate what economic activity its borrowers should undertake. But unlike a conventional bank which leaves its borrowers alone once the loan is made, Grameen carries out regular checks on borrowers to make sure they can repay the loan and the family is benefiting.

Back to the top

Working against the mindset

Yunus has encountered plenty of resistance to his ideas. Some people say that Grameen is engineering a social revolution. True or not, it certainly opposes what Yunus calls “pernicious” practices like dowry payments, under-age marriages,and the maltreatment of rural women. To counter opposition, including that from religious leaders in the villages, Grameen works in a slow, deliberate manner, not hurrying anyone or anything. Grameen, says Yunus, is not fighting against anyone or any philosophy. It is merely trying to liberate people from the tyranny of poverty. It makes loans to Muslim, Hindu, Christian and Buddhist women alike.

The other opponents in a country like Bangladesh are natural disasters, such as the severe flooding to which the country is prone. When disaster strikes, Grameen’s local bank managers and staff are expected to go out immediately and scour the region to save as many people as possible and provide shelter, medicines and food. Afterwards, Grameen always tries to get people to pay back their loans, even if at only a halfpenny a week. This is to boost borrowers’ self-reliance and their confidence in their abilities. It lends money to help people start up again and converts old loans into very long-term loans that the borrower can pay off very slowly. Giving new loans is important psychologically as it helps to prevent people from sinking into despair and apathy.

Back to the top

Training Grameen’s staff

Grameen gives a lot of attention to training its staff. It does not hire “experts” from other banks or organisations because they would try to do things in the same old way. It prefers its people to come up through the ranks. Training is simple, but tough and rigorous. It is mainly “self-taught”, there are no books to read. The villages of Bangladesh teach young people more about life than any book could teach them, says Yunus.

Trainee bank managers, all university graduates, spend six months in the field in a Grameen branch observing how the bank is run. During this six months, they come face to face with the harsh reality of Bangladesh for the first time in their lives. Initially, they will be deterred but then they start to see that all the hard work is producing results, bring about changes they can see and touch. They want to be instruments of change themselves.

Unlike other conventional bank staff, Grameen sees its people as teachers above all else. They help their borrowers to develop their full potential, discover their strengths, and push their horizons and capabilities. Grameen staff are given the opportunity to use all their knowledge, imagination and experience to become true teachers. The job of manager is a personal adventure, a challenge a student has never had an opportunity to take up before.

Grameen makes it clear to trainees that its primary objective is people, not rules and procedures. Helping the poor is far more important than any regulation it may adopt to further that objective.

Back to the top

The social-consciousness-driven free market

The Grameen principle has been replicated in 59 countries across the world, mostly in lesser-developed countries but also in the US and the UK. Yunus insists that, if the recovery rate is not near 100%, it is not Grameen. All the strength of Grameen comes from its “near-perfect” recovery performance. It is not just the money, it is about the discipline this demonstrates. Nor should replicators compromise on the target population. Grameen advises any replicator to start with the bottom 25% of the population and to focus on the poorest women. Poverty is like being surrounded by high walls, says Yunus. Grameen and its replications around the world help people gather the will and strength to crack the walls and break them down.

Yunus makes a plea for the “social-consciousness-driven free market”, a redefinition of capitalism that would replace the narrow profit maximisation principle with a concern for both profit and social returns (subject to the condition that profit should not be negative).

To Yunus, changing the quality of life of the bottom 25% of the population is the essence of economic development. Economic growth and development are not synonymous. It is sometimes suggested that the different strata of society are linked together like railway carriages and that all is need is a locomotive to pull them forward. Yunus acknowledges that without growth nothing moves forward. But, he says, in human society each economic group has its own engine. If society fails to turn on some of the engines, the social groups at the tail end may slip backwards, to the detriment of everyone. Micro-credit starts up the engine at the rear of the train by starting up the engine in each passenger. This cannot reduce the speed of the train, it can only increase it. Once a large number of tiny economic engines start working, the stage is set for bigger things.

Back to the top

New horizons

Grameen has expanded into other areas to improve the quality of life of its borrowers and the community in general. It has a successful housing loan programme and has set up a Grameen-sponsored health programme to make healthcare available to its borrowers. Grameen companies export cotton cloth woven by poor hand-loom weavers, help fishermen, and provide Internet services and solar energy to remote villages.

In one highly successful scheme, GrameenPhone, now the largest private phone company in Bangladesh, brings mobile phones to rural areas to empower villagers. Loans are given to rural women to buy mobile phones with which they can set up their own business selling the use of the phone to other villagers. In addition to creating income, this can effect rapid social change by linking up many rural women who were subject to abuse and social domination because they were isolated. Suddenly they are connected to the entire world, and to distant relatives and friends who can help them.

In 2003, Grameen started a new programme aimed at the beggars of Bangladesh. The Struggling Members Program is a new initiative to bring micro-credit to those on the very lowest rung of poverty. So far, 81,000 beggars have joined the programme and have received interest-free loans. They are not required to give up begging but are encouraged to take up an additional income-generating activity like selling popular consumer items door-to-door. The aim of the programme is to help the very poor find a dignified livelihood, enable them to send their children to school, and to graduate into regular Grameen Bank members.

Back to the top

A poverty-free world

Today, Muhammad Yunus is hailed as the founder of micro-credit, now regarded as a major force in combating poverty worldwide. As Yunus’ Nobel Peace Prize citation says, lasting peace cannot be achieved unless large populations find ways in which to break out of poverty.

Grameen itself now employs over 16,000 people and has total assets of $678 million. The total amount of loans disbursed since its inception amounts to $5.7 billion. Grameen has 6.6 million borrowers (97% of them women) in over 877,000 borrowing groups. With 2,226 branches it provides services in over 71,000 villages, 85% of the total number of villages in Bangladesh. The average loan balance per borrower is $85 and the loan recovery rate is 98.85%. Grameen has made a profit in every year except three (1983, 1991 and 1992). In 2005 it made a profit of $15.2 million with a return on equity of 21%. Grameen estimates that it contributes over 1% of Bangladesh’s GDP.

Grameen is an inspiration for those who would like to see multinational compaines doing more to address the needs of the world’s 4 billion poor who live at the base of the economic pyramid (the “BOP”). CK Prahalad in his book The Fortune at the Bottom of the Pyramid cites Grameen’s repayment rate as evidence that the poor can be trusted and that MNCs need to overcome their prejudices and stereotypes of the poor.

The Prince of Wales, who contributes a foreword to the book, describes Yunus as an inspiring person who “sent me away with a new and invigorating sense of what can be achieved with energy and determination”. Yunus himself says his experience of working in Grameen Bank has given him an unshakeable faith in the creativity of human beings. Humans are not born to suffer the misery of hunger and poverty. They suffer now as they did in the past because we turn our heads away from the issue. We can create a poverty-free world, if we want to.

Yunus appeals to each and every one of us to consider what we can do.

I want to tell this story because I want you to figure out what it means to you. If you find the Grameen story credible and appealing, I would like to invite you to join those who believe in creating a poverty-free world and have decided to work for it. You may be a revolutionary, a liberal or a conservative, you may be young, or you may be old, but we can all work together on this one issue. Think about it.

Back to the top