Banker to the Poor (22 page)

The public sector has failed. Or at least it is on the way out despite our best efforts. Bureaucratization cushioned by subsidies, economic and political protection, and lack of transparency is killing it off. It has become a playground of corruption. What started out with good intentions became a road to disaster.

With the demise of the public sector, the only thing left for the world is the personal gain–based private sector. This is not an inspiring prospect. If nothing else, we should remember that greed and corruption are prone to lure each other into solid partnership at the slightest opportunity. Before the world surrenders to greed and corruption, we must seriously examine the strength of social consciousness as a contestant.

Critics often argue that micro-credit does not contribute to the economic development of a country. And even if it does contribute something, that something is insignificant.

But it all depends on what one considers economic development. Is it per capita income? Per capita consumption? Per capita anything?

I have always disagreed with this kind of definition of development. I think it misses the essence of development. To me, changing the quality of life of the bottom 50 percent of the population is the essence of development. To be even more rigorous, I would define development by focusing on the quality of life of the lower 25 percent of the population.

This is where growth and development part their ways. Those who believe that growth and development are synonymous, or move at the same speed, assume that the economic layers of society are somehow linked to each other like so many railway carriages, and that one only need stoke the engine for the entire train and everyone in it to move forward at the same speed.

If there is no growth, nothing moves forward—that is true. But the often-used analogy of a train and linked human socioeconomic strata breaks down over one significant factor. A train is drawn by a locomotive located at the front or pushed from behind, or both. But in the case of human society, each economic entity or group has its own engine. Therefore, the combined power of all the engines together pushes and pulls the economy forward. If the society fails to turn on some of the engines, by simply ignoring some of those strata, the combined power of the economy will be much reduced. Worse still, if the engines of the social groups at the tail end are not turned on, those carriages may start sliding backward, independently from the rest of society, and to the detriment of everyone, including those who are better off.

Micro-credit pushes the entire train forward by helping each passenger in the rear (or third-class) carriages. This cannot reduce the speed of the train, it can only increase it, which most of today's so-called development projects fail to do.

Of course, investing in roads, dams, power plants, and airports increases the efficiency of the engines in the first-class carriages. Those are the fanciest and richest ones, and it enhances the train's engine capacity many-fold. But whether these investments can help ignite or enhance the capacity of the engines in the subsequent carriages, in all other layers and strata of society, remains uncertain.

Will micro-credit lead to major infrastructure building? Microcredit ignites the tiny economic engines of the rejected underclass of society. Once a large number of tiny engines start working, the stage can be set for bigger things.

Microborrowers and microsavers can be organized to own big enterprises, even infrastructure companies. Grameen has created a number of companies for speeding up the process of overcoming poverty. Some of the most exciting of these enterprises are described in the next chapter.

In 1985, I received a telephone call from the permanent secretary of the Fisheries Ministry of Bangladesh. "Dr. Yunus," said the voice on the other end of the line. "We have not met. But I know you very well through your work. I wanted to discuss a fisheries project with you. Have you ever visited Serajganj?"

"Yes, I have," I answered, "but only in limited areas. We are just expanding our work in Bogra."
*

"You must visit the fisheries ministry project in Nimgachi. We have nearly one thousand large ponds that were originally excavated by the Pal kings [local Hindu rulers of the Pal dynasty] over one thousand years ago to provide drinking water for the people and for the king's cattle herds. They have silted up. Our project was supposed to reexcavate them for fish farming."

"What happened to the project?" I asked.

"That's the tragedy. I recently visited the place to find out why the British foreign aid agency refused to give us more money for the project. I was stunned by the blatant corruption and mismanagement. Now I have a request for you."

"What is that?"

"My request is that you take over the project. You can do whatever you want. We'll stay out of it."

"What am I going to do with hundreds of ponds?"

"Please don't turn down my request. At least make a trip to the project area. You'll be inspired to see the beauty of these ponds and the potential they hold for the country."

"We are a bank. We don't know how to farm fish."

"Yes, I know that. If you think you can't do it, at least take the ponds for safekeeping. The way I see it, if they remain in government hands, nothing will be left of them."

The secretary was both accusing his own staff of corruption and trying to protect the ponds. Though I was reluctant to get involved in something I had no expertise in, I was also tempted by the challenge. I discussed it with my colleagues. They also felt that if the government genuinely wanted to give us the land, we should take it.

A week later I got another telephone call from the secretary, but I did not want to change my position yet, so I told him that my answer was still no.

"I am calling you for another reason," he replied. "I am convening a meeting on the future policy direction of the fisheries ministry. I want you there to help us formulate our ideas."

"If I attend, you'll again bring up the subject of the Nimgachi project and pressure me to take it over," I said.

"I give you my word. I won't bring up the subject of Nimgachi at the meeting."

I laughed and agreed. I laughed because I did not believe that he'd keep his promise. I agreed because I wanted to meet this man who had so much confidence in me, even though we had never met.

There were about a dozen people at the secretariat's meeting. Half of them were top government officials from the fisheries ministry. The other half came from universities and research institutes. The meeting went on for two hours. The secretary did not utter a word about the Nimgachi project.

Just as the meeting was about to conclude, the secretary leaned over and whispered in my ear, "Could you stay for a while so that we can have a cup of tea and a one-on-one discussion?"

When everyone had left, tea and snacks were brought in for us. Grinning at me, the secretary said, "Did you see? I kept my word. I did not bring up the subject of Nimgachi during the meeting. Now that the meeting is over, I am free to bring it up, am I not?"

He narrated the history of the project, the corruption of his staff, his plans about handing the ponds over to Grameen. He said he would be willing to give us the project on our own terms. He then handed me a stack of reports to help me make up my mind.

As I returned to my office, I decided that we should go for it. Here was a most unusual secretary who truly had the good of the country at heart. When the government wants to help the poor it usually comes up with a policy of free distribution—free distribution of money, land, or other assets. But along the way from the government to the poor, the free goods rarely reach the poor as more powerful people line up to take advantage of the distribution system. We wanted to reverse this trend and here was the opportunity. How could I not help the secretary? How could we go wrong in taking over properties from the government?

Fish is an important source of protein for Bengalis, and fishing is a significant income-generating activity. Here was an opportunity to transfer significant assets to the landless poor. The unexcavated ponds could be combined with the untapped abilities of the local poor to create a bold chemistry for improving the quality of their lives. If we succeeded in this venture, we would not only help the locals to feed, clothe, and house themselves but also help them become major economic players. We decided to take on the challenge.

I wrote a long memo to the secretary agreeing to take over the project, but only under certain rigorous conditions. I wanted a ninety-nine–year lease with low annual rent. And I wanted the government to withdraw all its staff as soon as the handing over took place. I also said we required a detailed list of everything that was being granted to us.

I sent the memo and the secretary called me the next day saying that he agreed to all my conditions but that government rules would allow us only a twenty-five–year lease. I replied that that would be acceptable to us. The secretary sounded relieved. It was strange. In my experience with Grameen, I had only met with "Mr. No's" in government offices. Having someone at the highest level of bureaucracy actually seek us out and agree to our conditions was a totally new experience for me.

The secretary moved with lightning speed to get everything done. His proposal went to the president and the land ministry for approval. It was quite a bureaucratic feat, yet the whole thing was achieved within a couple of months.

In January 1986, we signed the agreement with the government regarding the transfer of the Nimgachi project to the Grameen Bank. The project consisted of 783 ponds of various sizes and shapes, with a combined water body of 1,666 acres spread over four subdistricts in Pabna and Serajganj. In 1988, the government leased us more ponds for a total of 808.

We began our adventure in the new world of fisheries with high expectations, but we soon hit rough waters. In 1987, devastating floods hit Bangladesh and caused us serious losses. The following year, we suffered the worst flood in a century. More losses were added. Predator fish remained in the ponds, and our efforts to eradicate them were neutralized by the floods, which brought in new predators.

We inherited so few nurseries and rearing ponds that we had no alternative but to stock our excess hatchlings directly in the ponds. This led to a high mortality rate. The ponds had uneven bottoms, which led to turbidity, high acidity, sedimentation of harmful organic matter, and other problems. And though incidents of theft greatly decreased, poaching persisted, especially in remote areas. We gave up hope for production on the scale we had initially planned.

But more disheartening than the natural disasters was the human resistance to our efforts. From the beginning the old bureaucracy and local vested interests did not accept our presence with grace. The government officials who had been entrusted with the operation of the project were bitter about the decision to let Grameen run their show. They complained that they were being discredited. Their pride was wounded and they felt that Grameen had been brought in to enjoy the fruits of their labor.

Many of these officials also fanned anti-Grameen sentiment among the local people. Local leaders of major political parties were also antagonistic. Leftist leaders argued that development was the job of the government, not of a private bank. But the real source of their anger toward us stemmed from the fact that the politicians were no longer able to exercise influence on the management of the fisheries. In one area, a leading political party organized anti-Grameen demonstrations and public meetings. Leaders tried to convince villagers that we were a foreign organization intent on exploiting the locals and remitting our profits overseas.

The mood of the people ranged from skeptical to openly rebellious. There were days when our staff could not step out of the residential complex for fear of attack. But even during the worst, most tense standoffs, we were confident that we could turn the situation around and win the people's confidence. To that end, we held meetings with the locals and appealed for their support. We promised that proper management of the ponds would benefit not only the landless but the community at large. To prove our good faith, we organized some forty preschool learning centers for poor children. Eventually the patience and sincerity of our staff began to pay off and the initial animosity and suspicion subsided. The ultraleft underground armed revolutionary groups that burned down our offices and forced our staff to leave the villages at gunpoint now disappeared. We could finally concentrate on the production of fish.

The work was difficult. Without first establishing a technical, physical, and managerial base for production and effective control over the ponds, we could not begin to help the local poor. As our staff members had no background in fisheries, we enrolled them in crash courses on fish farming. We sent them to China to learn about pond management and hatchery operations. Eventually our large initial capital investment and staff training began to pay off. We invited the local poor to become our business partners: They contributed their labor and guarded the ponds against poaching while we provided all the technology and management. The harvest was divided on a fifty-fifty basis. Our partners received a good annual income from this agreement. We struggled to cover our costs.

We also adopted a bonus scheme to boost production. If fish from a pond exceeded a predetermined target, the staff was rewarded. The poor, who had stolen fish under the government's management, now became our best farmers, protectors, and partners out of self-interest in their profit share.

In the future, as we overcome our technical, financial, and managerial challenges, we hope to create for-profit subsidiaries of our not-for-profit Fisheries Foundation. The shares in these subsidiaries will be owned by the members of fisheries groups who now participate in the fifty-fifty production partnership. If this model of management and ownership works, we will extend it throughout Bangladesh to revitalize additional idle ponds. If we can combine our micro-credit and pond management programs, we will mobilize two hitherto-underutilized resources that Bangladesh has in abundance: vast numbers of landless poor people and 1.5 million freshwater ponds.

Grameen's experience with fisheries demonstrates that new grassroots systems can be designed and developed from scratch so that the poor can better control sophisticated technology and share in a macroeconomic project. Technology is an essential prerequisite for raising productivity, but it must be directed so that the increased production does not simply end up in the hands of the wealthy.

In Bangladesh, there is no reason why people should remain poor. Our problem is one of management, not lack of resources. With the proper management framework, the rich resources of Bangladesh can solve our poverty problem once and for all.

One such resource is textiles. Bangladesh has a long tradition of making fine hand-woven fabrics such as muslin that for centuries were in demand by the European courts. Unfortunately, with the advent of the industrial revolution in Europe and the sudden boom of machine-made fabrics in England, the demand for Bengali cloth died down. In their enthusiasm to gain control of the market, our colonial masters placed a ban on hand-loom weaving in Bangladesh and even punished those weavers who violated the ban by chopping off their thumbs. Despite such restrictions, hand-loom weavers passed their skill on from generation to generation. When the Indian independence movement began, one of its expressions of rebellion was the boycott of British fabric and the use only of locally produced cloth. Today in Bangladesh, there are 1 million hand-loom weavers desperately looking for a market for their products.

Hand-loom weavers have always been extremely poor. They make beautiful fabrics and manufacture the most gorgeous saris, but their women cannot afford to wear them. Their children go naked. Many of the women who join Grameen come from handloom weavers' families. In hand-loom villages we always had repayment problems during a particularly lean month of the year for the hand-loom trade. This lean month lies between two agricultural harvest seasons, when people run out of purchasing power. Grameen's deputy managing director, Khalid Shams, worried greatly about the repayment difficulties of the weaving families. He took great pride in our ancient tradition of weaving, and he wanted to see it regain its rightful place in the economy of Bangladesh.

Khalid wanted to understand the weavers' problems by living with them and experiencing their daily struggle, so he lived for a week in the Grameen branch with the highest density of weavers. He became convinced that the weavers' number one problem was not being able to buy yarn at a fair price. To solve this problem, he met the civil servant in charge of the textile ministry. But, whereas getting permission from the ministry to buy yarn directly from the factory was not difficult, actually receiving the delivery from the factory was quite another matter. We learned the hard way about how the yarn market in Bangladesh works, how textile trade union leaders and a handful of wholesalers control the price and supply of yarn.

Khalid also discovered that Bangladesh was importing roughly $150 million worth of an Indian fabric called Madras Check. We were shocked. While we were trying to create a local market for our own hand-loom fabrics, we were importing $150 million worth of fabric from our neighbor. We were told that the Indian fabric was of a very high quality that could not be matched by our local weavers. But when Khalid circulated some samples from Belkuchi, where some of the best
lunghis
are made, the garment factories and buying houses all agreed that our fabrics were superior to the imported Indian cloth. Still, the buyers did not show any interest in purchasing this local fabric. It was too difficult. They explained that they could not go door to door to each single weaver in Bangladesh to acquire the hundreds of thousands of yards they needed. It was much easier to place a huge order with the Indian suppliers, who could provide them with whatever they needed, right on time.