The real-life
economist
Muhammad Yunus is incomparably the most
honoured social activist of our era. He has received so many awards that
prize-givers vie not to be left behind. It is therefore a wonder that a Nobel
Prize was so long in coming. It may be because the Nobel Foundation does not
really have a prize for straightforward humanistic work, and there are not
enough peacemakers to win the Peace Prize although there are wars galore raging
across the globe.
It is difficult
to believe that Yunus started as a student and teacher of economics, for
although economists believe they work to make the world a richer place, they do
not have much time for doing good. In their eyes, everyone maximizes his own
happiness; if someone makes others happy, it must be because he gets a perverse
pleasure out of it. In such a view, Yunus must be one of the most perverse
people in the world.
But this exemplary perversity started in
a very natural act of philanthropy. Yunus could not bear the plight of people
starving in the famine of 1974 in Bangladesh, and took students to a village to
find an economic solution for the crisis. They tried various things, but the
one that worked was small loans to a group of village women. It was lending
with a difference. Unlike conventional bank lending, it was unsecured; instead,
Yunus invented a new collateral, namely the solidarity of poor women. They
together guaranteed the loan of each; if one failed to pay, the others did for
her. They not only promised to repay, but collectively insured the loans they
took. The poor often help out their neighbours; Yunus used their modest but
routine generosity to make lending to them viable.
He confined his generosity to the poor –
to those women whose family had less than half an acre. It was not because he
is a worshipper of poverty; the 16-storey head office of the Grameen Bank that
towers over Dacca should put paid to any such notion. The bank does not stop
financing women when they succeed and want to expand their business. Its average
loan today is about $1000 – that is small, but not modest. Recently, Grameen
Bank floated a mutual fund to enable its clients to invest in the stock market.
But its focus is on women, and on women who do not have the opportunities that
money or urban life bring. It would give Reserve Bank a fit, but the women
borrowers own 94 per cent of the Grameen Bank’s equity; and 99 per cent of them
repay their loans.
The Grameen Bank’s success tends to
obscure the hurdles it faced. Energizing women in a male-dominated society was
not easy; nor did the paternal attitude of Islam help. Grameen Bank charges
interest, which is supposed to be prohibited in Islam. Yunus ran into serious
trouble with the Muslim clerics in 1998. But for many women, a Grameen Bank
loan has meant three meals a day for the family, children in schools, ability
to treat illness in time, and a pucca house; these solid economic benefits keep
male discontent at bay.
Grameen Bank is of course subject to the
risks of lending to women who can bring little equity capital to their
business. The extensive floods of 1998, for instance, brought down the loan
repayment rate. But since most of the small business schemes that Grameen Bank
funds have short gestation periods, defaults also become apparent quickly, and
borrowers’ groups can deal with them before they get serious.
Although Grameen Bank is Yunus’s most
famous and most emulated achievement, he is not one to rest on his oars. He has
always been on the lookout to take new ideas, technologies and methods to
villages. Grameen Telephones provides a commercial cellphone service across
Bangladesh, but on its back, Grameen Communications sets up village women to
offer a cellphone public call service. Since telephones require electricity,
Grameen Shakti sets up solar chargers in villages. Grameen Shikkha provides
training. Perhaps its most innovative programme is unconditional interest-free
loans for beggars: the beggars do not have to promise to give up begging; the
only incentive to repay is that they can then get a bigger loan. With a
comparatively large sum of money in hand, they work out an occupation for
themselves – usually door-to-door selling – that is more secure. More than a
bank, Grameen is now a family of enterprises providing a range of mutually supporting
services in villages.
No wonder that the Grameen Bank is one of
the most widely emulated institutions in the world. Not least in India, where a
couple of hundred rural banks were started. But here, the experience was less
exhilarating. Many borrowers did not repay; defaults were so serious that
almost half of the rural banks went bankrupt and were merged with the others –
weakening the latter. Shamsun Nahar was keen on promoting women entrepreneurs
in Bangladesh. She introduced 60 women to Agrani Bank; before long, ten of them
stopped repaying loans. Inspired by Yunus, Satalpur Deshbandhu Club gave seeds
to farmers and promised to market the produce for them; they went and sold it
to traders instead. It arranged crop insurance from General Insurance
Corporation; when the crops failed, GIC refused to pay.
Many are impressed by the idea of Grameen
Bank; but few notice the continuing search for change that have characterized
Yunus’s enterprise. He concentrated on women, who have a stronger commitment to
their families and to the future than men. Elsewhere, microcredit institutions
have been gender-neutral, and as a result have lost a major motivational
element. Grameen Bank lent to groups of five women, generally women that were
close to one another; it could thus use the moral pressure they exerted on one
another. Elsewhere, institutions lend without heed to the size of cohesiveness
of a group. It made it a precondition of loans that the women should send their
children to school – thus ensuring that the next generation would be better
equipped to deal with poverty. The children not only went to school, but many
ended up in medical and engineering colleges. Grameen Bank finances 10,000
students. There is no transfer of finance across Grameen Bank any more; every
branch must collect its own deposits to lend. This practice makes every branch
intent on recovering its loans, and spreading its client network. As cellphones
spread, the business of Grameen Phones’ female PCOs began to decline, so they
were asked to go into the business of giving out new telephone connections to
women, and to collect dues from them, making it unnecessary for them to recharge
their prepaid cards.
Yunus inspired hundreds of emulators; now
he will inspire thousands. But what is most remarkable about him is the
ingenuity behind the continuous growth of the Grameen family. The biggest
service he could do to the world would be to teach young men and women who want
to serve the poor to observe, infer, adapt and experiment in the environments
they choose to work in. He will have no lack of acolytes; the challenge he
should take up is to teach them to use their intelligence constructively.
