Economy Graph

Grameen Bank’s 18,795 staff, meet 6.61 million borrowers at their door-step in 71,371 villages spread out all over Bangladesh, every week, and deliver the bank’s service.


Grameen Bank methodology is almost the reverse of the conventional banking methodology. Conventional banking is based on the principle that the more you have, the more you can get. In other words, if you have little or nothing, you get nothing. As a result, more than half the population of the world is deprived of the financial services of the conventional banks. Conventional banking is based on collateral, Grameen system is collateral- free.


Grameen Bank starts with the belief that credit should be accepted as a human right, and builds a system where one who does not possess anything gets the highest priority in getting a loan. Grameen methodology is not based on assessing the material possession of a person, it is based on the potential of a person. Grameen believes that all human beings, including the poorest, are endowed with endless potential.


Conventional banks look at what has already been acquired by a person. Grameen looks at the potential that is waiting to be unleashed in a person.


Conventional banks are owned by the rich, generally men. Grameen Bank is owned by poor women.


Overall objective of the conventional banks is to maximize profit. Grameen Bank’s objective is to bring financial services to the poor, particularly women and the poorest, to help them fight poverty, stay profitable and financially sound. It is a composite objective, coming out of social and economic visions.


Conventional banks focus on men, Grameen gives high priority to women. 96 per cent of Grameen Bank’s borrowers are women. Grameen Bank works to raise the status of poor women and their families by giving them ownership of assets. It makes sure that the ownership of the houses built with Grameen Bank loans remain with the borrowers, i.e., the women.


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. First principle of Grameen banking is that the clients should not go to the bank, it is the bank which should go to the people instead. Grameen Bank’s 18,795 staff, meet 6.61 million borrowers at their door-step in 71,371 villages spread out all over Bangladesh, every week, and deliver the bank’s service. Repayment of Grameen loans is also made very easy by splitting the loan amount in tiny weekly installments. Doing business this way means a lot of work for the bank, but it is a lot convenient for the borrowers.


There is no legal instrument between the lender and the borrower in the Grameen methodology. There is no stipulation that a client will be taken to the court of law to recover the loan, unlike in the conventional system. There is no provision in the methodology to enforce a contract by any external intervention.


Conventional banks go into ‘punishment’ mode when a borrower is taking more time in repaying the loan than it was agreed upon. They call these borrowers “defaulters”. Grameen methodology allows such borrowers to reschedule their loans without making them feel that they have done anything wrong (indeed, they have not done anything wrong.)


When a client gets into difficulty, conventional banks get worried about their money, and make all efforts to recover the money, including taking over the collateral. Grameen system, in such cases, works extra hard to assist the borrower in difficulty, and makes all efforts to help her regain her strength and overcome her difficulties.


In conventional banks, charging interest does not stop unless specific exception is made to a particular defaulted loan. Interest charged on a loan can be multiple of the principal, depending on the length of the loan period. In Grameen Bank, under no circumstances total interest on a loan can exceed the amount of the loan, no matter how long the loan remains un-repaid. No interest is charged after the interest amount equals the principal.


Conventional banks do not pay attention to what happens to the borrowers’ families as a result of taking loans from the banks. Grameen system pays a lot of attention to monitoring the education of the children (Grameen Bank routinely gives them scholarships and student loans), housing, sanitation, access to clean drinking water, and their coping capacity for meeting disasters and emergency situations. Grameen system helps the borrowers to build their own pension funds, and other types of savings.


Interest on conventional bank loans are generally compounded quarterly, while all interests are simple interests in Grameen Bank.


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 programme which pays off the entire outstanding amount with interest. No liability is transferred to the family.


In Grameen Bank even a beggar gets special attention. A beggar comes under a campaign from Grameen Bank which is designed to persuade him/her to join Grameen programme. The bank explains to her how she can carry some merchandise with her when she goes out to beg from door to door and earn money, or she can display some merchandise by her side when she is begging in a fixed place. Grameen’s idea is to graduate her to a dignified livelihood rather than continue with begging.


In Grameen, we see the poor people as human “bonsai”. 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. It is not because of any fault in the seed, because there is no fault in the seed. It is only because the seed has been denied of the real base to grow on. 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.


If we can succeed in doing that, there will be no human “bonsai” in the world. We will have a poverty-free world.


(Professor Muhammad Yunus is the founder of the Grameen Movement and the Grameen Bank. He
recently won the Nobel Peace Prize)


Grameen Bank Bhavan, Mirpur-1, Dhaka-1216, Bangladesh. Ph: (88 02) 9005257-69
Source: Grameen Communi-cations

All religious books including the holy Quran advise mankind to follow the natural laws for the well being of all people on this planet.


The writer, a Faizur Rahman has rightly raised a very important topic for debate among economists of the world. He has quoted Jeffrey D. Sachs’s book “ The End of Poverty” in his article “Do we think of the poor?” (Islamic Voice November 2006). Mr. Sachs is a strong believer of capitalism. He is trying to find solutions to remove poverty, which is an uphill task for any one, including himself, living within that economic system. Capitalism is based on the strong principle of making maximum profits at any cost; and this profit can come only from its poor customers. This naturally leads us to have few rich people and more poor people.


Maximizing profits is made possible in capitalism due to many man-made laws, which bestow monopoly powers on the industrialists. These laws are patents, trade- marks, brands, copyrights, limited liability companies, trade unions, etc. These laws give enormous power to restrict the knowledge of production and distribution of products in the hands of few industrialists. There is a nexus between the rulers and the industrialists in this regard for mutual benefits. Most of these powers are of long durations. Who exploits more is the key competitive chase in that artificial world. Let us look at the world’s top exploiters’ monopoly powers in terms of number of patents held by them. There is a competition among them also to top the list within the top-ten.


These patents are secured only in one year. During the lifetime of each of such companies there must be many thousands of patents of most of the industrial products. Each patent must be giving the company each year billions of dollars profits. Today patents can be registered even for one’s own idea. This would stop people’s natural innovative minds and skills. The whole population thus would eventually become mental slaves of such patent-holders. Over a period, very few corporations and persons have accumulated huge wealth thereby depriving almost 90-95 people of the world’s population from developing their own productive activities. Their existence and living will always be at the mercy of these patent-holders. This kind of unlimited greed for wealth would help to implode the whole capitalist system soon.


Let us look at Americans accumulating such wealth at the cost of millions of the citizens of their own country. A research paper, “Evolution of Top Incomes: A Historical and International Perspective” by Thomas Picketty of Ecoles Normales Superior in Paris and Emmanuel Sarz of University of California at Berkley, states: “Share of national income by richest 1% of Americans – stable at about 32% throughout the middle decades of the 20th century – began to rise sharply in the late 1970s and by 2002 had surpassed 40%. In the past few years, most income gains have gone to people at the very top of the income ladder, with middle class Americans seeing only a small boost in their income standing”.


In the most developed country, the USA, almost 25% people are struggling to survive due to imbalanced distribution of national wealth. The main culprit is the government passing the monopoly laws in connivance with those in industry. The story is the same everywhere, including India. Today in India we are shamelessly allowing thousands of farmers to commit suicides, which are taking place due to unjust distribution of national wealth. Wrong government policies are responsible for these deaths. The industry and the government machinery is fully taking advantage of the gullible conditions of our poor and illiterate farmers with the help of monopoly powers.


The creator of this universe has provided more than enough resources for all those born every day not only to survive, but also to enjoy good living conditions. Nature is the biggest balancer. There are natural laws that human beings have to follow.


Indian rulers are practising the same failed lessons in this country for the past 60 years. They refuse to budge from this exploitative path. As long as they stay on this path, let us be clear that the talk of poverty alleviation is all an eye-wash. Poverty would be alleviated only when we scrap all the man-made laws and start afresh to follow the natural laws. All the religious books including the holy Quran advise mankind to follow the natural laws for the well being of all those living in this planet. It would therefore be appropriate to mobilise the people to pressurize the government to repeal all the monopoly laws at the earliest. We, therefore need to do this when we think of the poor.


(The writer can be reached at bokaredg2001@yahoo.co.in)