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    Grameen Bank Paper Grameen Bank Paper Document Transcript

    • Critical Assessment Paper “Grameen Bank” By Paul Yang G Number: G10184226 FTS Box #963 MD 525 Poverty and Development Dr. Bryant L. Myers Winter 2009
    • Contents Introduction ...................................................................................................................................................... 1 Purpose ............................................................................................................................................................... 1 A Short History of Grameen Bank ........................................................................................................ 1 The Early Period ............................................................................................................................................. 1 Grameen Bank Project .................................................................................................................................. 2 Analysis of Yunus’ Views of the Poor and Understandings of Poverty ................................ 4 Views of the Poor ........................................................................................................................................... 4 The Poor and the Nonpoor.......................................................................................................................... 4 Which Poor? .................................................................................................................................................. 4 Who the Poor are not .................................................................................................................................. 5 Understandings of Poverty ........................................................................................................................... 5 Analysis Using Friedmann’s Theory............................................................................................................. 5 Analysis Using Christian’s Theory ................................................................................................................ 6 Analysis of Grameen’s Development Methodology ...................................................................... 8 See the Poor as Human “Bonsai” but with Endless Potential .............................................................. 8 No Collateral and No Legal Instrument ................................................................................................... 9 97 Percent Women ..................................................................................................................................... 10 Sustainability .................................................................................................................................................. 10 Service at the Doorstep ............................................................................................................................. 11 Conclusion ...................................................................................................................................................... 12 References ...................................................................................................................................................... 13
    • Introduction Two years ago, when I read Banker to the Poor, I was really touched and impacted by what Dr. Muhammad Yunus had done for the poor in Bangladesh. His dream that one day we will have to go to museum to see poverty (Yunus 2003, 248) still echoes in my head until now. As a full-time Christian worker with a background of business administration, I am very interested in the poverty alleviation done by Yunus and Grameen Bank, regarding it as a good example to explore and reflect on what is a holistic social practice and charity ministry for us Christians. Hopefully this paper will help us understand how to preach a true and whole salvation to the world. Purpose This paper will critically analyze Dr. Muhammad Yunus and Grameen Bank in several ways. First, I will trace the origin and history of Grameen Bank as described in the book— Banker to the Poor (Yunus 2003). Second, I will discuss Yunus‟ views of the poor and compare his understandings of poverty with Friedmann‟s and Christian‟s theory. Finally, I will critically assess Grameen‟s development methodology with course materials, theories, and concepts. A Short History of Grameen Bank The Early Period In the year 1974, there was a severe famine striking Bangladesh. At first it started in the remote villages of the north. However, when people found that there were more and more skeleton-like people crowding into the capital—Dhaka, they began to know the seriousness of the situation. At that time, Yunus was a professor of Economics teaching in the Chittagong University located in the southeastern extremity of the country. Yunus recalled, 1
    • I used to feel a thrill at teaching my students the elegant economic theories that could supposedly cure societal problems of all types. But in 1974, I started to dread my own lectures. What good were all my complex theories when people were dying of starvation on the sidewalks and porches across from my lecture hall…Nothing in the economic theories I taught reflected the life around me. How could I go on telling my students make-believe stories in the name of economics? I wanted to become a fugitive from academic life. I needed to run away from these theories and from my textbooks and discover the real-life economics of a poor person‟s existence. (2003, Introduction, viii) Therefore, Yunus decided to champion a university project called the Chittagong University Rural Development Project (CURDP), trying to help the village of Jobra nearby the campus of Chittagong University. He encouraged his students to go with him into the village and to figure out how to improve people‟s daily life there. During those two years, Yunus and his team indeed helped some villagers of Jobra grow more food through the promotion of high- yielding variety of rice and the improvement of irrigation. However, the success of the CURDP highlighted a problem Yunus had never paid attention to before. There were some really poor women who could not gain anything from the CURDP and were even exploited by the farmers there. He eventually found that it was important to distinguish the difference between the really poor and the marginal farmers, and that he should turn his focus on the landless poor. He argued, “In the world of development, if one mixes the poor and nonpoor in a program, the nonpoor will always drive out the poor, and the less poor will drive out the more poor, unless protective measures are instituted right at the beginning” (Yunus 2003, 42). This finding discouraged Yunus so much that he made up his mind to prevent the really poor from being taken advantage by the nonpoor. Grameen Bank Project In 1976, Yunus started to visit some poorest households in the Jobra. Meanwhile, he met Sufiya, a really poor woman who made stools. Since she was so poor, the way she made her 2
    • living was to borrow from the local traders to buy some raw materials to make stools and then sold back to them in such an irrational low price that barely earned her a living. It was because the amount she earned every day was just 50 poysha—about 2 cents. Yunus then found that not only Sufiya but many poor women there also had to maintain this kind of exploitative relationship with local middlemen and moneylenders only because they were too poor to deal with the financial institutions. Yunus stated that these disadvantaged women living in “a form of boned labor, or slavery” (2003, 48). To survive, however, they had to work in this way through the traders. After survey, Yunus found that there were 42 destitute poor women in Jobra living with such an oppressive contract that the money they borrowed was just a total of 856 taka— less than 27 dollars. He sadly said, People like Sufiya were poor not because they were stupid or lazy. They worked all day long, doing complex physical tasks. They were poor because the financial institutions in the country did not help them widen their economic base. No formal financial structure was available to cater to the credit needs of the poor....But if I could just lend the Jobra villagers the twenty-seven dollars, they could sell their products to anyone. They would then get the highest possible return for their labor and would not be limited by the usurious practices of the traders and moneylenders. (Yunus 2003, 50) Yunus eventually lent them this amount of money and decided to “create an institutional answer that these people could rely on” (2003, 51). From then on, Yunus started to experiment his Grameen Bank Project (“Grameen” means “rural” or “village” in Bengali language) with the local Janata bank to provide credit delivery and banking services to the rural poor in Jobra and neighboring villages during 1976- 1979. With the support of the central bank of the country and the nationalized commercial bank, the project was expanded beyond Jobra to Tangail (a district north of Dhaka, the capital city of Bangladesh) in 1979. Throughout the whole process, there were always many challenges and difficulties waiting for Yunus to overcome. In October 1983, however, the formal Grameen Bank was born by government legislation. Today Grameen Bank is owned by the poor whom it 3
    • serves, and helps bring the disadvantaged, especially the women from the poorest households, into a positive circle, “From low income to injection of credit to more investment to more income.” Analysis of Yunus’ Views of the Poor and Understandings of Poverty Views of the Poor The Poor and the Nonpoor From his study of Jobra‟s poverty during 1974-1976, Yunus realized “how important it was to differentiate between the really poor and the marginal farmers” (2003, 40), because though he helped the local farmers and sharecroppers through his CURDP, the poorest women in Jobra, “many of them widowed, divorced, or abandoned with children to feed” (2003, 40), could not gain anything from this project. It was because “they were too poor even to be sharecroppers; they were landless and assetless and without any hope; they were the poorest of the poor” (2003, 40). Just as what Myers says, “Even in the poorest communities, there is a small group who are less poor and who occupy positions of relative power and privilege” (Myers 1999, 63). This experience helped Yunus to focus on the landless poor who were mostly “women.” Which Poor? Yunus thinks that “conventional banks are owned by the rich, generally men,” but “Grameen Bank is owned by the poor, mostly women” (2009a). In his view, When a destitute mother starts earning an income, her dreams of success invariably center around her children. A women‟s second priority is the household....When a destitute father earns extra income, he focuses more attention on himself. Thus money entering a household through a woman brings more benefits to the family as a whole. (2003, 72) 4
    • Therefore, Yunus believes that if poverty alleviation works through women, it will be more efficient to improve gender equality, to reduce poverty, and to enhance general standard of living. Who the Poor are not In the early period, Yunus had known the truth that “people... were poor not because they were lazy or stupid” (2003, 50), since in Sufiya‟s case he saw that she had to work all day long and do various complicated physical tasks to earn a living. Therefore, in Yunus‟ development methodology, he always trusts and respects his poor borrowers, looking at “the potential that is waiting to be unleashed in a person” (2009a). His perspective is very similar to Chamber‟s, “People so close to the edge cannot afford laziness or stupidity. They have to work and work hard, whenever and however they can. Many of the lazy and stupid poor are dead” (Chambers 1983, 107). Understandings of Poverty Analysis Using Friedmann’s Theory Friedmann assumes that “poor households lack the social power to improve the condition of their members‟ lives” (1992, 66), so he defines poverty as “lack of access to bases of social power” (1992, 66-69). We can find that there are some of Yunus‟ views of poverty very close to Friedmann‟s. First of all, in the 10 Indicators used to evaluate the poverty level of the borrowers, the first one says, “The family lives in a house worth at least Tk. 25,000 or a house with a tin roof, and each member of the family is able to sleep on bed instead of on the floor.” According to this, Yunus‟ understanding of poverty agrees with what Friedmann says that a household should have 5
    • “the physical space in which household members cook, eat, sleep, and secure their personal possessions” (1992, 67). In addition, Friedmann states that poor households should “correctly perceive that education and technical training...are essential for enhancing its long-term economic prospects” (1992, 68). Similarly, Yunus also pays a lot of attentions to enhancing the education of the children of their borrowers through the provision of scholarships and student loans, since he believes that “education is one of the components for moving oneself out of poverty” (2003, 236). Moreover, Friedmann argues that poor households should belong to some social organizations serving as “a source of relevant information, mutual support, and collective action” (1992, 68) to help them enhance social power. From the early period of Grameen Bank Project, Yunus also discovers the importance of support groups so that he asks each borrower of Grameen Bank to “join a group of like-minded people living in similar economic and social conditions” (2003, 62). Through this way they can manage, encourage, and support each other more and better. Finally, also the most important of all, Yunus strongly believes that “credit should be accepted as a human right” (2009a). He thinks that “in economic theory, credit is seen merely as a means with which to lubricate the wheels of trade, commerce, and industry; in reality, credit creates economic power, which quickly translates into social power” (Yunus 2003, 150). Thus, he argues that we “need to promote credit as a human right‟ (Yunus 2003, 150). His concept happens to echo Friedmann‟s perspective that regards “financial recourses” as a base of social power to improve poverty (1992, 69). Analysis Using Christian’s Theory 6
    • Jayakumar Christian defines poverty as powerlessness (Christian 1994:17). For Christian, the powerlessness of the poor is contributed by the interactions of “personal system, social system, spiritual/religious system, and cultural system” (1994, 334). Here I will discuss Yunus‟ thoughts of poverty with Christian‟s perspective of the captivity to god-complexes of the non- poor (Christian 1994, 178). In the very beginning of Grameen Bank Project, Yunus had understood that because conventional banking was based on collateral, those poor people with nothing would never have an opportunity to deal with conventional banks (2003, 50-58). This rule implied that the less you have, the less you would get. Yunus thought that people were poor “because the financial institutions in the country did not help them widen their economic base. No formal financial structure was available to cater to the credit needs of the poor” (2003, 50) Therefore, the poor would be always excluded from conventional banking and credit services, being rejected by seeing them as “not credit-worthy” (Yunus 2003, 141). Through Christian‟s lens, we can find in Yunus‟ context the first god-complexes (Christian 1994:178), the conventional economic system. Yunus‟ angry at the evil god-complexes fully expresses in these words: “I wanted to cause some panic in this unjust, archaic [economic] system. I wanted to be the stick in the wheels that would finally stop this infernal machine [unjust economic system]” (2003, 56). Beside the unjust economic system, there were also other god-complexes from outside with the local god-complexes playing god in the lives of Bengali people, Yunus found. One research institution in Bangladesh estimates that of the more than $30 billion in foreign donor assistance received in the past twenty-six years, 75 percent was not spent in Bangladesh. It was spent on equipment, commodities, and consultants from the donor country itself. Most rich nations use their foreign aid budget mainly to employ their own people and to sell their own goods, with poverty reduction as an afterthought. The 25 percent that is spent in Bangladesh usually goes straight to a tiny elite of local supplies, contractors, and experts. Much of this money is used by these elites to buy foreign- made consumer goods, which is of no help to our country‟s economy or workforce. And there is a general belief that a good chunk of donor money ends up as kickbacks to officials and politicians who have helped make purchase decisions and sign contracts. (Yunus 2003, 145) 7
    • Yunus concluded that “the only people really benefiting from most of this aid...are those who are already wealthy,” and “foreign aid becomes a kind of charity for the powerful while the poor get poorer” (2003, 146). Again, Yunus found his poor people were trapped in the poverty of powerlessness. Analysis of Grameen’s Development Methodology The most useful tool Grameen Bank uses to fight poverty is microcredit, while the definition of microcredit was that “programms extend small loans to very poor people for self- employment projects that generate income, allowing them to care for themselves and their families” (Yunus 1997). In Yunus mind, however, “Grameen type microcredit or Grameencredit” (2009b) has its unique development methodology. Therefore, here I will examine, discuss, and analyze Grameen‟s development methodology with course theories and concepts. See the Poor as Human “Bonsai” but with Endless Potential “If a healthy seed of a giant tree is planted in a flower-pot, the tree that will grow will be a miniature version of the giant tree....People are poor because society has denied them the real social and economic base to grow on. They are given only the „flower-pots‟ to grow on. Grameen's effort is to move them from the „flower-pot‟ to the real soil of the society” (Yunus 2009a). Yunus always look at the potential of the poor, thinking that with the access to credit the poor must be able to move out of poverty and limitation the society impose on them. He says that “giving the poor access to credit allows them to immediately put into practice the skills they already know—to weave, husk rice paddy, raise cows, peddle a rickshaw. And the cash they earn is then a tool, a key that unlock a host of other abilities and allows them to explore 8
    • their own potential” (Yunus 2003, 140). Yunus believes that human beings have an “innate skill” (2003, 40) to survive, and what we should do is to help the poor find that. Myers explain better this concept that “allowing a [poor] community to describe its survival strategy reinforces in the minds of the [poor] community members the idea that they have skills, local knowledge, and ways of working that are good and worth building on” (1999, 141) However, as a Christian development practitioner we cannot only see the poor as human “bonsai” with potential but should help them to recover their true identity that they are made in the image of God and are God‟s children, and to discover their true vocation that they have gifts to contribute and they are called to be productive stewards of creation (Myers 1999, 115-116). No Collateral and No Legal Instrument Conventional banking is based on collateral but Grameencredit is collateral-free and without any legally enforceable contracts because it is based on “trust” (Yunus 2009b). This development methodology really helps clarify and heal “the marred identity” (Christian 1994, 339) of many poor borrowers, most of them are women. In Bangladesh, poor women have “the most insecure social standing” and they always “experience hunger and poverty more intensely than men”. (Yunus 2003, 72) This is the beginning for almost every Grameen borrower. All her life she has been told that she is no good, that she brings only misery to her family, and that they cannot afford to pay her dowry. Many times she hears her mother or her father tell her she should have been killed at birth, aborted, or starved. To her family she has been nothing but another mouth to feed, another dowry to pay. But today, for the first time in her life, an institution has trusted her with a great sum of money. She promises that she will never let down the institution or herself. She will struggle to make sure that every penny is paid back. (Yunus 2003, 65) In the perspective of Christian development worker, however, we need to help the poor heal their marred identity with not only trust but also the real love in Christ and the truth 9
    • that they are made in the image of God, God calls them his children, and God values them as much as God values the non-poor. (Myers 1999, 108) 97 Percent Women “Conventional banks focus on men, Grameen gives high priority to women. 97 percent of Grameen Bank's borrowers are women. Grameen Bank works to raise the status of poor women in their families by giving them ownership of assets” (Yunus 2009a). In Bangladesh, because of the religious restriction and male power culture there are huge amount of women suffering discrimination, violence in marriage, hunger, and poverty. In Bangladesh...women experience hunger and poverty more intensely than men. If one of the family members has to starve, it is an unwritten law that it will be the mother. The mother will also suffer the traumatic experience of not being able to breast-feed her infant during the times of famine and scarcity. Poor women in Bangladesh have the most insecure social standing. A husband can throw his wife any time he wishes. He can divorce her merely by repeating, “I divorce thee,” three times. (Yunus 2003, 72) As a result, Grameen Bank is constantly endeavoring to raise the status of poor women through the access to credit, helping them have more self-reliance and self-sufficiency. For Chambers, to achieve the goal of “responsible well-being” (1997, 9-11), he mentions the principle—equity, which “includes human rights, intergenerational and gender equity, and the reversals of putting the last first and the first last” (1997, 11). Yunus and Grameen Bank are practicing this kind of development philosophy, declaring that “the poor, weak, vulnerable and exploited should come first” (Chambers 1997, 11). Sustainability First of all, unlike many NGOs Grameen goes against traditional method of poverty alleviation by providing the access to credit, not money, goods and materials. Grameen believes 10
    • that “the poor have skills which remain unutilized or under-utilized. It is definitely not the lack of skills which make poor people poor” (Yunus 2009b). Therefore, Yunus thinks that if we just help the poor with direct money and goods, it will limit and kill the potential of the poor. On the contrary, with the access to credit the poor are able to live a self-reliant and self-sufficient life. Second, in traditional loan operations, conventional banks and credit cooperatives demand lump sum payments and it is often a big pressure for borrowers to pay back a large amount of money at the end of loan period. It is one of the most important reasons why some borrowers decide not to pay back the loan at all. Therefore, from the very beginning Grameen adopts a daily payment program to help borrowers pay back the loans more steadily and easier. In addition, Grameen also asks the borrowers to join a support group to manage, protect, and supervise the members by themselves. It is crucial to the success of Grameencredit. Finally, “in case of death of a borrower, Grameen system does not require the family of the deceased to pay back the loan. There is a built-in insurance program which pays off the entire outstanding amount with interest. No liability is transferred to the family” (Yunus 2009a). From the above development methodology, we can find that Grameen‟s implied value of development is “sustainability,” agreeing with Chambers‟ concept that “to be good, conditions and change must be sustainable—economically, socially, institutionally, and environmentally” (1997, 11). Service at the Doorstep Grameen “provides service at the doorstep of the poor based on the principle that the people should not go to the bank, bank should go to the people” (Yunus 2009b). Grameen staff members are asked to walk into each village, understanding the people they serve. Yunus believes that the best way to inspire Grameen staff members is to let them see the firsthand real-life problems of the poor. They should learn to encourage and help the poor—with inner 11
    • motivation, confidence, and strength—to overcome the obstacles in their lives (Yunus 2003, 80). Therefore, “Grameen Bank branches are located in the rural areas, unlike the branches of conventional banks which try to locate themselves as close as possible to the business districts and urban centers” (Yunus 2009a). Here we see a good example of “convergence of stories” (Myers 1999, 137-38). Grameen development philosophy is to walk with the poor, to show respect for the poor, and to help the poor with understanding and humility. However, we should consider that if there is no God‟s story within a development worker‟s story, the poor will at best get satisfied materially, physically, and emotionally. They cannot own the real joy, peace, love, hope, and eternal life in Christ. Conclusion Our God is the one who is willing “to live in solidarity with us, to share our joys and pains, and defend and protect us, and to suffer all of life with us” (McNeill, Morrison, and Nouwen 1982, 13). From what Yunus and Grameen Bank present, I find those who are willing to walk with the poor incarnationally. As a Christian, however, my deepest prayer is that Yunus and all his Grameen staff members can know and accept Jesus Christ personally. In this way, what they bring to the poor, weak, and vulnerable will not be only the rights to subsistence and development but also the true love, peace, and hope in Christ. 12
    • References Chambers, Robert. 1983. Rural Development: Putting the Last First. Essex, England: Longman Group. ———. 1997. Whose Reality Counts? Putting the First Last. Warwickshire, UK: ITDG Publishing. Christian, Jayakumar. 1994. The Powerlessness of the Poor: Toward an Alternative Kingdom of God Based Paradigm for Response, School of World Mission, Fuller Theological Seminary, Pasadena, CA. Friedmann, John. 1992. Empowerment: The Politics of Alternative Development. Cambridge, MA: Blackwell. McNeil, Donald, Douglas Morrison, and Henri Nouwen. 1982. Compassion: a Reflection on the Christian Life. Garden City, NY: Doubleday. Myers, Bryant. 1999. Walking with the Poor: Principles and Practices of Transformational Development. Maryknoll, NY: Orbis. Yunus, Muhammad. 1997. “Definition.” Grameen Bank. [Accessed 03/12/2009]. Available from http://www.grameen- info.org/index.php?option=com_content&task=view&id=32&Itemid=91 ———. 2003. Banker to the Poor: Micro-Lending and the Battle Against World Poverty. New York, NY : PublicAffairs. ———. 2009a. “Is Grameen Bank Different.” Grameen Bank. [Accessed 03/12/2009]. Available from http://www.grameen- info.org/index.php?option=com_content&task=view&id=27&Itemid=176 ———. 2009b. “What is Microcredit.” Grameen Bank. [Accessed 03/13/2009]. Available from http://www.grameen- info.org/index.php?option=com_content&task=view&id=28&Itemid=108 ———. “10 Indicators.” Grameen Bank. [Accessed 03/13/2009]. Available from http://www.grameen- info.org/index.php?option=com_content&task=view&id=23&Itemid=126 13