1. 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

2. 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

3. 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,
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4. 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
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5. 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
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6. 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)
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7. 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
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8. “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
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9. 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)
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10. 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
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11. 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
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12. 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
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13. 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
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14. 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.
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15. 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
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