Banker to the Poor (14 page)

The Central Bank rejected our application. Its experts and consultants decided that whatever one built for $125 would not satisfy the structural definition of a house. Specifically, they said that such a house would not add to the "housing stock of the country."

I protested. "Who cares about the 'housing stock of the country?'" I said. "All we want are leak-proof roofs and dry spaces for our members to live in."

We tried to make the Central Bank consultants see what a major improvement even this minimal housing would be over our borrowers' current situation, but our arguments were all in vain. They would not budge.

Then we came up with another idea. We sent in a second application, explaining that we no longer wanted to make housing loans but rather "shelter loans." We were hoping they did not have a definition or statistic for "shelter stock" that would disqualify us. But though the consultants in charge of the project showed no objection to our shelter loan idea, the economists in their group argued that our borrowers could not afford non–income-generating loans. Grameen was doing fine work with loans for income-generating endeavors, or "productive activities," as they called them, but shelter loans were "consumption items." Our borrowers could not afford loans that did not generate income to help them pay off their debt.

And so we went back to the drawing board. This time we said that we wanted to offer our borrowers "factory loans." We explained that the overwhelming majority of our borrowers were women and that they worked from the home. "Our borrowers look after their children while they work and they earn money from their work," I explained. "Most of this activity is performed in their own homes. Since their homes are places of work, we choose to call them factories. Furthermore, the monsoon plagues them for five months out of the year. During that time they can't work because they don't have sturdy roofs over their heads. To continue to work and generate income, they need protection from the rain. That is why we want to offer them factory loans. True, this 'factory' will double as a house, but more important, it will have a direct impact on their income-generating ability as it will allow them to work throughout the year with some comfort."

The consultants rejected our application for a third time. I arranged for a personal meeting with the Central Bank governor to ask him to override his bureaucrats.

"Are you sure the poor will repay?" the governor asked.

"Yes, they will. They do. Unlike the rich, the poor can't risk not repaying. This is the only chance they have."

The governor of the Central Bank looked at me. "I'm sorry you had difficulties with our officials," he said. "On an experimental basis, I will allow Grameen to introduce a housing loan program. Good luck."

To date, we have extended a total of $190 million in loans to build more than 560,000 houses with near-perfect repayment in weekly installments. The housing programs of the conventional commercial banks cannot boast such success. Few of their borrowers paid their loans back and the program was discontinued after three years. Our housing program continues to this day and is expanding.

Our position was also vindicated when Grameen's housing program was chosen in 1989 by a jury of some of the top architects in the world to receive the Aga Khan International Award for Architecture. At the awards ceremony in Cairo, distinguished architects kept asking me who the architect was who had designed our prototype, a compact $300 house.
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I answered that no professional architect ever designed the houses built by our borrowers. It is the borrowers who are the architects of their own houses—as they are the architects of their own fate.

Bangladesh has long attracted people who study population-related issues. They tell us that we are poor because there are too many of us on too small a piece of land. Approximately the size of Florida, Bangladesh has a population of about 120 million. If half of the U.S. population decided to move to Florida, those people would experience the population density we now have in Bangladesh. What does all this mean for Bangladesh? Should we curtail birth rates?

I believe there is a strong element of fear mongering in population policies promoted by international development agencies. We in the Third World often blindly echo these views, raising even more fear at home. Since Bangladesh became an independent country, our population has almost doubled. But we are certainly not twice as poor. Indeed, we are better off today than we were twenty-seven years ago. We have fewer food shortages and though we feed twice the population we are far more self-sufficient in food grains.

My suspicion is that governments and international agencies choose to scare people into action to distract attention from their own ineptitude. Rather than limiting population growth, they should concentrate on improving the economic status of the people in general and the people at the bottom half in particular. Governments and population agencies are not putting nearly as much effort into changing the quality of life of the poor as they put into their scare tactics, such as pressuring illiterate men and women to physically remove their ability to procreate.

UN studies conducted in more than forty developing countries show that the birth rate falls as women gain equality. The reasons for this are numerous. Education delays marriage and procreation; better-educated women are more likely to use contraceptives and more likely to earn a livelihood. I believe that income-earning opportunities that empower poor women and bring them into organizational folds will have more impact on curbing population growth than the current system of "encouraging" family planning practices through intimidation tactics. "Family" planning should be left to the family.

The Grameen Bank is often cited in population discussions because the adoption of family planning measures among Grameen families is twice the national rate of Bangladesh. During the Cairo Population Conference of September 1994, it was also noted that the birth rate among Grameen families is significantly lower than the national average. Once they have increased their incomes through self-employment, Grameen borrowers show remarkable determination to have fewer children, educate the ones they have, and participate actively in our democracy. If micro-credit can help bring family-planning awareness to families, why do not governmental and international agencies, which are so concerned about population growth, promote micro-credit more actively than they do? Could it be because micro-credit runs as a profit-oriented business? Are there vested interests in the current population programs? I believe that the emphasis on curbing population growth diverts attention from the more vital issue of pursuing policies that allow the population to take care of itself. The sooner we rearrange our priorities, the better it will be for all people on the planet, now and in the future.

I first began to see societal problems being solved, one Grameen family at a time, during annual workshops we held for center leaders at each branch. These workshops gathered together center leaders to review their problems and achievements, to identify areas of concern, and to look for solutions to social and economic challenges. The workshops worked so well that we held a national workshop of selected center leaders in 1980 in Tangail. At the end of it we wrote down four decisions resolved on by the group. We did not expect these decisions to be taken more seriously than the proceedings of the meeting, but we soon started getting requests for copies from centers throughout Bangladesh.

At our second national session in 1982, we concluded the workshop with "Ten Decisions." These ten decisions were increased to sixteen in our 1984 workshop in Joydevpur. We never imagined how deeply these decisions would affect our members. Today, at every Grameen branch, our members take enormous pride in reciting the Sixteen Decisions. They are as follows:

 

1. We shall follow and advance the four principles of the Grameen Bank—discipline, unity, courage, and hard work—in all walks of our lives.
   
 

2. Prosperity we shall bring to our families.
   
 

3. We shall not live in a dilapidated house. We shall repair our houses and work toward constructing new houses at the earliest opportunity.
   
 

4. We shall grow vegetables all the year round. We shall eat plenty of them and sell the surplus.
   
 

5. During the plantation seasons, we shall plant as many seedlings as possible.
   
 

6. We shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health.
   
 

7. We shall educate our children and ensure that they can earn to pay for their education.
   
 

8. We shall always keep our children and the environment clean.
   
 

9. We shall build and use pit latrines.
   
 

10. We shall drink water from tube wells. If they are not available, we shall boil water or use alum to purify it.
    
 

11. We shall not take any dowry at our sons' weddings; neither shall we give any dowry at our daughter's wedding. We shall keep the center free from the curse of dowry. We shall not practice child marriage.
    
 

12. We shall not commit any injustice, and we will oppose anyone who tries to do so.
    
 

13. We shall collectively undertake larger investments for higher incomes.
    
 

14. We shall always be ready to help each other. If anyone is in difficulty, we shall all help him or her.
    
 

15. If we come to know of any breach of discipline in any center, we shall all go there and help restore discipline.
    
 

16. We shall introduce physical exercises in all our centers. We shall take part in all social activities collectively.
    

Now in our national workshops, I plead with the participants not to increase the number of decisions. I argue that we should concentrate on doing a good job implementing the existing Sixteen Decisions rather than adding new ones. Local branches of Grameen, however, may formulate decisions that address problems specific to their areas. These decisions are a demonstration that the poor, once economically empowered, are the most determined fighters in the battle to solve the population problem, end illiteracy, and live healthier, better lives. When policy makers finally realize that the poor are their partners, rather than bystanders or enemies, we will progress much faster than we do today.

Bangladesh is a land of natural disasters. This is an unfortunate but unavoidable factor in our business. But no matter what cataclysm, weather disaster, or personal tragedy befalls a borrower, our philosophy is always to get that person to pay back his or her loan, even if it is only at the rate of a half penny a week. This discipline is meant to boost the borrower's sense of self-reliance, pride, and confidence. To forgive a loan can undo years of difficult work in getting that borrower to believe in his or her own ability.

If a flood or a famine decimates a village and kills borrowers' crops or animals, we immediately lend them new money to start up again. We never wipe out old loans, but convert them into very long term loans and try to get the borrower to pay them off more slowly and in smaller installments. In the extreme case where a borrower dies, we disburse funds from the Central Emergency Fund (a life insurance fund for borrowers) to the deceased's family as soon as possible. We then ask the group or center to adopt a new member from that same family to bring the group number back up to five.

Bangladesh has so many natural disasters that one area may be hit by several in the same year. It has happened that a village, a district, or a whole region is hit by floods as many as four times in one year, which can completely wipe out all the savings and assets of a family. We experienced severe flooding in 1981, 1985, 1987, and especially 1988, when our plight was broadcast overseas by the international media. There were also localized disasters, such as the tornado that hit the Manikganj District in 1989. Grameen's operational procedures in such situations are always the same. First, we suspend all rules and regulations of the bank. The local bank manager and all bank personnel are directed to immediately scour the region to save as many lives as possible and to provide shelter, medicine, food, and protection. Second, the bank workers visit the houses of our members and try to reestablish the victims' confidence by letting them know that the bank and their fellow members are ready to support them. We then find out what the survivors need and make provisions to provide it. We provide emergency food as well as water and saline solution to prevent dehydration and diarrhea. Emergency seeds for planting and cash for buying new cattle and new capital assets are also distributed. Disaster loans are provided. We want to give our members time to mourn their loved ones, but we do not want them to sink into apathy and lethargy from despair. We want them to start right up again thinking of survival schemes. Because national and international relief is usually late and inadequate, the only way that victims can get through the pain, suffering, and devastation is by rebuilding what they had. During periods of disaster, old loans are rescheduled and a grace period is accorded for repayment. In a special meeting, the local center is given the authority to decide how long this grace period should last. We also look into longer-term plans that will make the area safer, such as building cyclone shelters. Many of our Grameen branch offices along the coast are now built in solid, reinforced concrete.

Grameen keeps no overall statistics on how many natural catastrophes it has had to overcome, but I estimate that about 5 percent of our loans go to survivors of natural catastrophes. Pramila Rani Ghosh's story illustrates the kind of disasters that often confront our borrowers. In 1971, during the War of Liberation, Pramila's house was burned down twice by the Pakistani army. She joined Grameen in 1984. In 1986, she contracted enteritis and went into Tangail hospital. She was operated on and was told not to work for several years. Her fellow group members suggested she take a loan from their group fund to pay for her operation, but as there was not enough money, she sold her cow and her grocery shop.

She was given a new loan with which she bought milk cows. When these died of an unknown disease, she went to her weekly center and took out a loan of sixty dollars from the group fund with which she bought a new cow. During the floods of 1988, the village of Chabbisha was under water and Pramila's house was destroyed. She lost all her crops. For three weeks an epidemic raged in the village. The bank staff visited the villagers daily to distribute water purification tablets. Pramila, along with thousands of other Grameen families, received forty kilos of wheat. She paid back the value of that wheat into a center disaster fund. She also bought vegetable seeds from us, which we sold at cost. Three weeks later, when the situation had normalized, she was able to reopen her grocery store.

In 1992, the fire from an oil lamp spread and burned down Pramila's house. Neighbors and villagers tried to help her extinguish the fire, but in the ensuing blaze Pramila lost all her crops, food, her entire grocery store, and her two cows. All that was left were the clothes she and her husband had on their backs. The morning after the fire, the Grameen staff visited Pramila and organized a special meeting at which they offered her a loan from the center's disaster fund. Instead, she decided to take out a seasonal loan and a loan from her group fund. Part of the loan she used to start up a small grocery store and the rest she invested in fertilizer for her irrigated land. With the help of her three grown sons, she was able to start paying off the loan. Three months later Grameen granted her a housing loan, and she constructed herself a new home.

Pramila is currently on her twelfth loan. She owns and leases enough land to feed her whole family and sell about ten maunds of rice paddy a year.

From the very beginning, Grameen has gone against traditional methods of poverty alleviation by handing out cash without any attempt to first provide skills training. We have received a great deal of criticism for this policy, even from some of our friends. In Jobra, we simply did not see any need for formal training, and our experience in the 1980s gave us more confidence that we had taken the right approach.

Why give credit first?

I firmly believe that all human beings have an innate skill. I call it the survival skill. The fact that the poor are alive is clear proof of their ability. They do not need us to teach them how to survive; they already know how to do this. So rather than waste our time teaching them new skills, we try to make maximum use of their existing skills. 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 unlocks a host of other abilities and allows them to explore their own potential. Often borrowers teach each other new techniques that allow them to better use their survival skills. They teach far better than we ever could.

Government decision-makers, many NGOs, and international consultants usually start the work of poverty alleviation by launching very elaborate training programs. They do this because they begin with the assumption that people are poor because they lack skills. Training also perpetuates their own interests—by creating more jobs for themselves without the responsibility of having to produce any concrete results. Thanks to the flow of aid and welfare budgets, a huge industry has evolved worldwide for the sole purpose of providing such training. Experts on poverty alleviation insist that training is absolutely vital for the poor to move up the economic ladder. But if you go out into the real world, you cannot miss seeing that the poor are poor not because they are untrained or illiterate but because they cannot retain the returns of their labor. They have no control over capital, and it is the ability to control capital that gives people the power to rise out of poverty. Profit is unashamedly biased toward capital. In their powerless state, the poor work for the benefit of someone who controls the productive assets. Why can they not control any capital? Because they do not inherit any capital or credit and nobody gives them access to it because they are not considered credit-worthy.