Banker to the Poor (20 page)

Rosalind and her small team examined two hundred different lending methodologies. They tested nine pilot models. They wanted to adapt Grameen to the traditions of their country. Today they have twenty branches lending to four thousand clients, with a repayment rate of 98.5 percent and loans of $10 million. Rosalind's organization, Fundusz Mikro, intends to be self-supporting with a full banking license.

"When I reflect on my previous career, it seems two-dimensional," says Rosalind today. "It lacked soul. What I do now has put real meaning in my work—and therefore in my life." She is just one of many social entrepreneurs who have devoted their lives to helping provide micro-credit opportunities to the poor.

Another micro-credit visionary is Bodil Maal, who worked in the Norwegian Fisheries Ministry. In 1986, Bodil came to visit her husband, a Norwegian consultant living in Bangladesh. One of Bodil's assignments in the Fisheries Ministry was to encourage young girls who had grown up in the Lofoten Islands to return home. For some years, these islands, situated in a rather desolate spot off the northern coast of Norway, had been experiencing a serious depopulation problem. Though young men often returned to the islands after university, the local girls did not. There was little incentive. While the women waited for their fishermen husbands or fathers to return from sea, there was almost no social or commercial activity to occupy them. They suffered from loneliness. Once the girls began disappearing, young men started to leave too.

A similar depopulation problem was also occurring in northern Finland and in the nearby region of northern Russia. But thanks to the ceaseless efforts of Bodil Maal, the government of Norway decided to initiate a Grameen project through the Fisheries Ministry. This project offered women commercial credit for income-generating activities to help keep them on the islands and make their lives less lonely and more meaningful.

I was invited to visit the projects in northern Norway and was astonished at what I saw: another social transformation, similar in scope to what we are seeing in Bangladesh, but of a very different nature. Now for the first time, the women of the Arctic Circle had access to credit. And thanks to the program, they had access to community support groups and financial opportunities. Currently, they are using their loans to make such diverse items as sweaters, paperweights, postcards, wooden troll statues, and paintings of the local scenery. The work provides them with an important source of income and helps them and their families to cope financially. More important, however, the Norwegian project promotes micro-credit as a tool for social integration and an effective way to add new meaning to people's lives.

Nearby countries have caught on. In Finland, Finnish Microcredit Ltd. has started prototype operations in the Helsinki district. The cooperative Eko-Osuusraha, a "green" credit union, gives microloans to people in ecological and social fields. Four other micro-credit initiatives in rural Finland are governed by the Ministry of Internal Affairs. All of these are based on the model (
nettverkskreditmodel
) begun by Bodil Maal in Norway's Lofoten Islands.

In December 1990, the military government that had ruled Bangladesh for ten years was toppled in a popular uprising. The major political parties that had campaigned for a return to democracy agreed to support a caretaker government headed by a former Supreme Court justice. The following February, the caretaker government organized an election that remained mercifully peaceful and resulted in a victory for Begum Khaleda Zia and her Bangladesh Nationalist Party. Sheikh Hasina, the leader of the second largest party, was wise enough to honor Zia's victory. She became prime minister five years later.

In a Third World country like Bangladesh, democracy allows the poor to take advantage of their greatest asset—their large numbers. But to do so, they must be actively organized. I knew how crucial it was that all Grameen borrowers' voices be heard, and I asked our staff to work during the weeks before the 1991 election to ensure that 100 percent of all adult Grameen family members were registered to vote. I also recommended that each center collectively decide which candidate the members would support and that they parade to the voting booths together as a voting block. Even if political office seekers did not take them seriously in that election, they would in the future. I made it clear to everyone that Grameen staff should not attempt to influence which candidates our borrowers supported in any way.

Selecting leaders through democratic means was not new to Grameen borrowers. All Grameen groups elect a chairperson and secretary, and each center chooses a center chief and deputy center chief from among the group chairpersons. So I was not surprised to see how enthusiastically our borrowers embraced the idea of exercising their democratic rights in the national election of 1991. The members of many centers paraded to the voting booths with banners reminding everyone that they were from a Grameen Bank center and were voting as a block. In some cases, local politicians asked if they could address Grameen center meetings.

The real proof of Grameen's influence, however, came after the election, when several defeated candidates came to my office to complain that the Grameen borrowers in their constituency had not supported them. I always told these politicians that they should be talking to the Grameen borrowers, not to me, since I was not the one who cast the ballots.

The election of 1991 also served us as a warm-up for the crucial elections of 1992, 1996, and 1997. In 1992, some four hundred Grameen borrowers were elected to union councils, and in 1996, Grameen borrowers led the way to an almost unthinkable feat—more women voted in the national election than men, which helped to nearly wipe a political party that had taken positions against women's rights out of Parliament. In addition, over 1,750 Grameen members (1,485 female and 268 male) and 1,570 members of Grameen borrowers' families were elected to local offices in 1997. Two Grameen male borrowers and fifty-seven male family members were voted in as chiefs of local bodies. These successful candidates constituted 6 percent of the total elected representatives in all the local bodies in the country. These astonishing results proved to us that once Grameen borrowers grew in self-esteem they would readily express their opinions.

We were so pleased by the results of the February 1991 election and by the continuing expansion of our micro-credit program that we were caught off guard by a series of setbacks that would make 1991 one of our hardest years ever. The first of these hit when the newly elected government decided to forgive all loans from government banks that were under 5,000 taka (approximately $125 at the time). Though this policy may sound as though it would benefit the poor, in reality almost 100 percent of these loans made by government banks went to land-owning, wealthier members of the population. But because most of our loans were also under 5,000 taka, many Grameen borrowers thought that their loans had been forgiven. It was extremely difficult to explain to our borrowers why the rich people in their villages were getting their loans written off but they were not. Yet we had no choice. Grameen did not survive on government subsidies, and writing off all our loans under $125 would have meant the end of us. In the end, our borrowers accepted our arguments, but it was a bitter pill for them to swallow. It is to be hoped that in the future the Bangladeshi government and all governments in countries with micro-credit programs will think twice before trying to garner popularity by forgiving loans.

Even with the loan situation settled, our problems were far from over. On April 30, a cyclone hit the southern region of Bangladesh, killing 110,000 people in one terrible night. The cyclone hit at 2
A.M
., catching much of the population unawares. Many Grameen bank workers and managers were badly hurt. After recovering from their shock, those who could went out in boats looking for survivors. Bloated bodies of dead people and animals floated around the flooded remains of former houses.

The survivors were led to dry land. Many of them suffered from severe shock. Fearing that looters would steal their few remaining belongings, some refused to leave their devastated houses. In the hours directly following the flood caused by the cyclone, many traumatized survivors died, as they could not bring themselves to make immediate provisions for shelter and food.

When I arrived in Chittagong to assess the devastation, I was overcome with emotion. One woman told me that she had been running with her child to the cyclone shelter, only to have the child blown right out of her arms by the high winds. After a few minutes, she realized that if she did not enter the shelter immediately she would be killed. She never saw her child again.

We waived all the usual restrictions that apply to housing loans and declared our intention to ensure not just that our borrowers rebuild what they had lost but that they build something better. Many of our borrowers did just that. They also restarted their income-generating enterprises and began making token payments on their loans. It always surprises me how quickly our staff and borrowers are able to recover from natural disasters. Human beings are extremely creative and resilient, especially when they are operating within an institutional framework that encourages and supports their actions. Every time I hear people arguing that Grameen will collapse when another disaster hits Bangladesh, I respond that Grameen and its borrowers will emerge from our rehabilitation efforts stronger than we were before. And every time this has proven to be the case.

By 1994, we had fully recovered from the challenges of the decade's beginning and were enjoying our best financial year ever. We had disbanded our donor consortium
*
the previous year and were operating on purely commercial terms. Two years later, in April 1996, we extended our one-billionth dollar in loans to one of our 2 million borrowers. It was a thrilling moment. A project that had started with a spontaneous twenty-seven–dollar loan from my own pocket had reached its billionth dollar. Just over two years later, we loaned our two-billionth dollar. Grameen was picking up steam.

And when I went to the villages I saw how many of our borrowers had not only crossed the poverty line but left it far behind. I met borrowers whose weekly installment (representing about 2 percent of the loans they were making payments on) was more than five hundred taka ($12)—and heard them tell me that their first loan from Grameen ten years earlier had been five hundred taka. Their capacity to borrow, invest, and repay had increased fiftyfold in ten years.

One such wonderful success story comes from Murshida Begum, who was featured in a PBS documentary on micro-lending called "To Our Credit." Though Murshida's story may strike some as exceptional, it really is a microcosm of what goes on in Grameen—how people are able to reach their full potential much more easily after accessing credit.

Murshida was born into a poor family of eight children. Neither her father nor grandfather owned any farmland. At fifteen she was married to a man from a nearby village who worked as an unskilled laborer in a factory. The first few years of the marriage went relatively well, but things turned sour when Murshida began having children. Just as their family expenses went up, her husband started bringing home less and less money. Finally it became clear that he was a compulsive gambler. During the 1974 famine, he was given a company bonus of 1,800 taka. He lost it all gambling. When Murshida complained, her husband beat her.

To earn some extra money, Murshida took up spinning raw cotton into yarn. She worked on contract for other people and was paid very little, sometimes no more than a handful of broken rice. Still, the work prevented her from starving. She considered other options—working as a domestic servant for a rich family or begging. But what would happen to her children?

One day Murshida's husband came home after a week's absence and complained that there was not enough food for him. Murshida had cooked up something modest and had not eaten the entire day. Angry, her husband beat her and then left, saying he would return later in the morning. That day there was a thunderstorm, and as her husband had sold the roof of their house to pay gambling debts, Murshida and her three children were soaked. At that moment Murshida decided that something had to change. When her husband returned at midnight, Murshida confronted him.

"You have only brought a small quantity of flattened rice for your daughter," she remembers saying, "but nothing for me. Yet everyone in the village says you earn a lot of money." Her husband flew into a rage and beat her. Then he divorced her on the spot and told her to leave the house.

"What about the children?" Murshida asked.

"You can throw them into the river and let them drown, for all I care," he responded.

Murshida sent word to her brother, who offered to take her into his home. Once she had moved in, Murshida found some more work spinning on contract. She heard about the Grameen Bank when it came to her village. Initially, the village leaders opposed Grameen and tried to prevent it from opening centers. One Grameen worker discouraged Murshida from joining, thinking she would move back to her husband's village. But Murshida stopped another bank worker on the village path and begged him to give her money. "I told him I would swim across a river to attend Grameen Bank meetings if necessary. I told him that I wanted to follow him to wherever he was going to form a group, so I could join. I told him that he must give me money, otherwise I would not be able to survive with my children. He said I could not form a group right then, but that he would come to my home and form a group in a few days. And he really came!"

At first Murshida borrowed 1,000 taka to purchase a goat and she paid off the loan in six months with the profits from selling the milk. She was left with a goat, a kid, and no debt. Encouraged, she borrowed 2,000 taka, bought raw cotton and a spinning wheel, and began manufacturing lady's scarves. She now sells her scarves wholesale for 100 taka with tassels and 50 taka without. Murshida's business has grown so much that during peak periods she employs as many as twenty-five women in her village to manufacture scarves. In addition, she has bought an acre of farmland with her profits, built a house with a Grameen Bank housing loan, and set up her brothers in businesses that include sari trading and raw cotton trading. Murshida has also emerged as a leader in her center. She was elected center chief several times.

To encourage successful borrowers like Murshida, Grameen started a variety of new loan programs in the 1990s. These included seasonal loans for borrowers who were sharecroppers or who had bought some land since joining Grameen. We also established a tube well loan program for borrowers who needed $50–$100 to sink a hand-powered well to access safe drinking water. Our new family loan program enabled borrowers to take out loans for family members' income-generating projects. And our equipment-and cattle-leasing program allowed borrowers to slowly purchase costly equipment and livestock through a lease-to-own agreement with us. Borrowers used this program to buy such diverse items as videocameras to record the weddings of upper-class people, power tillers and irrigation pumps for cultivation, baby taxis for transportation services, rice mills, photocopy machines, small herds of better-bred cattle, and much more. Grameen borrowers were constantly branching out into new, creative money-making schemes and we wanted to help them leave the poverty line so far behind that their young children would barely remember what it felt like to be born poor.

Though we wanted to encourage our most successful borrowers to take out bigger and bigger loans, we did not abandon those who were still starting the struggle against poverty. We declared a new goal: to make every Grameen branch "poverty-free" within an allotted period of time.

How did we define "poverty-free"? After interviewing many borrowers about what a poverty-free life meant to them, we developed a set of ten indicators that our staff and outside evaluators could use to measure whether a family in rural Bangladesh lived a poverty-free life. These indicators are: (1) having a house with a tin roof; (2) having beds or cots for all members of the family; (3) having access to safe drinking water; (4) having access to a sanitary latrine; (5) having all school-age children attending school; (6) having sufficient warm clothing for the winter; (7) having mosquito nets; (8) having a home vegetable garden; (9) having no food shortages, even during the most difficult time of a very difficult year; and (10) having sufficient income-earning opportunities for all adult members of the family. We will be monitoring these criteria on our own and are inviting local and international researchers to help us track our successes and setbacks as we head toward our goal of a poverty-free Bangladesh.

As I thought more about what we had accomplished at the Grameen Bank, I wanted to convey to other economists and policy makers that our success was not an aberration, but rather a specific example of a new kind of enterprise—an enterprise driven by an attitude that I labeled "social consciousness." But my explanation almost necessitated the creation of a new branch of economics. Traditional theories did little to help me explain what I was trying to do with Grameen.