Banker to the Poor (19 page)

"Well, I don't know. To get a kennel, to advertise, and to buy dog food, I suppose I would need $500 for my first litter."

"Well, now we are in business. I will lend you $500."

"You agree! Just like that?"

"Just like that."

Everyone in the room started laughing. I could see people's eyes lighting up. Others were now raising their hands and sharing their money-making ideas.

"I would like to sell potted plants," said one. "I have a green thumb. Everything I touch grows well."

"Do you own land?" I asked.

"That is no problem. Here on the reservation, there is no private ownership of the land. It is free to anyone of the tribe who wants to use it properly."

"And do you think you could sell potted plants?"

"Oh, yes, that would be easy."

We came to an agreement for that loan, and I could see the others in the room scouring their brains for creative new ideas. By the time I left that meeting, they were all asking, "Yunus, when are you coming back? Bring money next time!"

Ron and Mary were not satisfied with simply helping the rural poor. Soon they set their sights on urban America. Some years earlier, they had bought an ailing community bank in a poverty-ridden area of Chicago. The South Shore had been abandoned by white storeowners and white-run businesses because blacks were moving into the neighborhood. Slowly, their South Shore Bank won back the community's confidence, acquired new depositors, and began lending to individuals whom traditional banks had avoided.

When the Ford Foundation needed some independent bankers to appraise my proposed guarantee fund, Ron and Mary were asked to visit Bangladesh to evaluate the Grameen Bank. From the outset, they loved what we were doing and hoped to accomplish the same in the ghettos of Chicago.

In 1985, at the request of Ron and Mary, I visited Chicago for the first time. I was invited to talk to social activists, economists, bankers, and community leaders. Almost everyone I spoke with dismissed what I said, arguing that the Bengali experience could not be relevant to poverty eradication in the United States. They claimed that Chicagoans needed jobs, training, health care, and protection from drugs and violence, not micro-loans, and that self-employment was a primitive concept lingering only in the Third World. Low-income people in Chicago needed money for rent and food, not for investment. They had no skills anyway.

I advanced the same arguments I had made to bankers in Bangladesh. "The poor," I said, "are very creative. They know how to earn a living and how to change their lives. All they need is opportunity. Credit brings that opportunity. Perhaps our two societies are different and thousands of miles apart, but I don't see any difference between the poor of Bangladesh and the poor of Chicago. The problems and consequences of poverty are the same."

No one seemed convinced. Only Ron and Mary believed in me. Mary took the lead in establishing the Women's Self-Employment Project (WSEP), a nonprofit organization that over time implemented a variety of innovative antipoverty programs. Among them was the Full Circle Fund (FCF). Started in 1988, FCF offered low-income women access to investment capital of $300 to 5,000 if they agreed to join a group of five peers and were able to present a sound business proposal. The credit rating or access to collateral of the prospective borrowers was not taken into account during their loan approval process.

Connie Evans, executive director of the WSEP, and Susan Matteucci, a recent MIT graduate, were new to the micro-credit business, but very willing to learn. Before launching the FCF, Connie and Susan came and lived in Grameen villages, spending long sessions with our field staff and zonal managers. When they returned to Chicago, they followed our Grameen handbook to the letter.

It worked, but there were frustrations. Through the FCF, I witnessed directly how welfare laws in the United States create disincentives for welfare recipients to work. Those who receive welfare become virtual prisoners not only of poverty but of those who would help them; if they earn a dollar, it must be immediately reported to the welfare authority and deducted from their next welfare check. Welfare recipients are also not allowed to borrow money from any institutional source. In fact, under the then-existing laws of Illinois, micro-credit programs such as the FCF could not approach welfare recipients at all. WSEP had to negotiate with the welfare authority to get a special dispensation. I was brought to the state welfare authority to testify that credit can help people get off welfare and that they should consider giving welfare recipients who become members of the FCF a waiver from the law for an experimental period of three years. After protracted negotiations, the state of Illinois approved a one-year waiver. Subsequently, this waiver was renewed on an annual basis. Now, thanks to the success of the FCF, the law in Illinois has been amended to allow people on welfare to borrow money.

Defying all conventional advice, the FCF made a bold start. Skeptics argued that the five-woman group idea would not work because Americans are too naturally independent. Not only did the peer system work, it worked in one of the toughest neighborhoods of inner-city Chicago. To encourage prospective borrowers to form groups, the FCF organized regular "parties" to help people get acquainted.

I was invited to meet the borrowers, visit their homes, and join them in celebrations once the FCF was well under way. In the faces of the poor people in Illinois, I saw the same excitement I had seen in the eyes of village women in Tangail. I heard the same expressions of self-discovery, the same aspirations, the same warmth in their voices. Of course, these urban Americans were not raising chickens or husking rice, but they knew what they could do to earn an income. They were confident in their skills and I was impressed by their creativity. One borrower used her loan to buy ingredients, bake, and sell coffee cake. Another, known for her storytelling, produced audiotapes of her stories and sold them in neighborhood stores. Two other borrowers designed and sold clothes in a jointly rented store.

One particularly moving experience I had in Chicago occurred while I visited WSEP borrowers in a Hispanic neighborhood on the West Side. I was shocked to hear that the English language had basically disappeared from the area. All I could hear was Spanish, and as I could not speak a word, I became doubly dependent on the bilingual WSEP staff members who toured with me. They took me to meet several members of their borrowing groups.

One of those members, a frightened-looking woman in her early forties, spoke only Spanish. I told her, "These are beautiful quilts and embroidered designs you make. When did you think of starting a business with this?"

Through an interpreter she explained her life to me in great detail: "When Jenny [a staff member of the WSEP] came and talked to me, I was scared. I thought she is going to try to sell me something. I avoided her. She came back another time with another woman, a Hispanic woman from the neighborhood. They tried to talk to me, but I was still too afraid to listen. They were talking about business. I had no understanding of business. My husband has a hard life. He works in a factory. He gets very angry if I ever try talking to outsiders. He does not like me to leave the apartment by myself. I didn't know anybody in Chicago. I had been living here with my husband for the past fifteen years since I came from Mexico.

"Jenny kept coming back. She told me about the Grameen Bank in Bangladesh—a faraway country. She told me how women in that country changed their lives. I liked the stories she told me, and I wished I could be like the women in that country. But here things were so rough. I did not dare do anything by myself. My husband would kill me if I created trouble for him.

"I started talking to Jenny. She introduced me to other women in the neighborhood. I listened to them. They told me about their hard lives, about their children, about their husbands, about their parents, their brothers and sisters, their childhood. I saw how alike we all were. We talked about Jenny and about the WSEP and about the Grameen Bank. We began to imagine what we might do with loans. We encouraged each other and collected information for each other. Finally, we formed a group. Two by two we took loans. We helped each other in business. I have paid back my first loan of $600. Now I am in the middle of my second loan. I took $1,000 the second time."

"Do you have problems in selling your products?"

"No, not at all. I am behind in filling my orders. I could sell much more, but I do everything alone by hand. I have nobody to help me. My son goes to school. He is always out. I am the only one home."

"Are you happy with the income you make?"

She remained silent for a long time. Then in a whisper, she started talking very slowly. I assumed that she was saying that the money was not much but it helped her—something like that. When she stopped speaking, the interpreter said in English, "I never expected that I would ever earn money. My husband never gives me any money to spend. We shop together. He pays. I never had money of my own. For the fifteen years that I have lived in America, I have never even had a bank account. Now I have money and I have my own bank account. I have a checkbook. My husband does not know anything about it. I have not dared to tell him yet."

I did not know what to say. To hide my emotion I asked, "Many people tell me that if WSEP did not insist on forming groups it would be so much easier for people to borrow. Do you agree?"

She looked at me when the interpreter translated the question and replied softly, "In the fifteen years I have been here, I never had a friend. I didn't even know anybody. I was all alone. Now I have many friends. My four friends in the group are like my own sisters. Even if the WSEP did not give us money, I would not leave the group."

Her eyes filled with tears. She covered her face with both her hands while the translator relayed her words.

Alex Counts originally came to Grameen as a Fulbright scholar in 1988. In 1996, he wrote a book,
Give Us Credit,
*
comparing the impact of Grameen in a village in Bangladesh with that of the Full Circle Fund. Because he spoke both English and Bengali fluently, he was able to immerse himself completely in the lives of borrowers in both cultures. He collected so many interesting stories about micro-credit's effect on women's lives that the first draft of his book was more than 600 pages. After many painful editorial decisions, it was reduced to about 350 pages. It is the most fascinating storytelling I have ever read.

Today Alex is the president of the Grameen Foundation USA (GF-USA), the Washington, D.C.–based nonprofit organization discussed in Chapter 9 that jump-starts Grameen-style microcredit programs in places such as Tulsa, Oklahoma; Dallas, Texas; and Harlem in New York City. As members of many organizations in the United States, Canada, and Latin America cannot imagine traveling to Bangladesh, we direct them to GF-USA.

There are also many U.S. programs that have taken the microcredit idea and adapted it. Some do not require borrowers to form groups. Others do not target the poor. Many do not focus on women. Quite a few offer only business training, as opposed to credit. These organizations, some 250 of them, have formed a network called the Association for Enterprise Opportunity (AEO) to coordinate their activities and hold annual conferences. We keep in close contact with the fifty or so AEO member organizations that operate along Grameen principles as well as the many other AEO members that use alternate approaches to microcredit.

Micro-credit has also succeeded in Europe, both in wealthy Western European countries that suffer from high unemployment and in the poorer Eastern European nations now emerging from Communist rule. But though many European charitable organizations, not to mention intellectuals, bankers, and journalists, are interested in our ideas, few are willing to initiate micro-credit programs themselves. I have addressed German parliamentary committees in Bonn and the German Council of Bishops. I have appeared before French TV audiences and received honorary degrees in England, but still people refrain from real action.

Maybe Grameen upsets too many preconceived European ideas. In the developed world, my greatest nemesis is the tenacity of the social welfare system. Over and over, our clones have run into the same problem: Recipients of a monthly handout from the government feel as afraid to start a business as the
purdah-
covered women in Bengali villages. Many calculate the amount of welfare money and insurance coverage they would lose by becoming self-employed and conclude the risk is not worth the effort.

Some borrowers do try to take loans in secret, hoping the government will not find them out. But government inspectors are often quick to track down any entrepreneurial welfare recipients and immediately remove their state benefits. In industrialized countries, "informal businesses" are akin to illegal street hustles. To be legal, the self-employed poor must file documents, petition bureaucracies, and keep accounting books. It is wholly unrealistic to expect an inexperienced, relatively uneducated person to satisfy all the requirements of a bureaucratic state. As a result, many of our first borrowers from Grameen-type programs in Europe are technically lawbreakers. They are counseled to get paid under the table and to keep their loans off the books.

Often, even when the law allows a poor person to own a business, charity program operators will not allow it. One young man, newly out of prison, wanted to start up a french fries stand. The Parisian charity that housed him would not accept this independence. Instead, it opened its own food stand and hired the man as a salaried employee.

But the situation in Europe is slowly changing. An increasing number of intellectuals and social scientists no longer look to the state as a savior, but turn their eyes to private initiative instead. One such impressive visionary is Rosalind Copisarow, a Polish graduate of Oxford University and the Wharton School of Business, who became a high-powered executive at the J. P. Morgan Investment Bank. Rosalind had never made loans smaller than $100 million when she read a
Financial Times
story on the Grameen Bank during a flight between London and Warsaw. She immediately realized that micro-credit was just what Poland needed. She discussed the idea with Poland's finance minister, who immediately challenged her to quit her job and devote herself to creating a Grameen program there. In December 1993, she decided to accept the challenge. She left J. P. Morgan.