Banker to the Poor Muhammad Yunnus
http://curtisvoisin.wordpress.com/tag/poverty/
May 13, 2010 curtisvoisin
We all consider money to be an important enabling tool and as a necessary
condition of realizing our dreams. Yet when we donate money to the poor we
prefer that the money be handled by those deemed most capable to use that
funding effectively. More often than not we don’t trust impoverished people to
be architects of their own cure for poverty.
We see this in various charities, not-for-profits and government programs, most
of which fail to address the core issues in the development of a sustainable cure
for poverty. These organizations act and are legitimately with the best intentions,
but many times efforts result in patchwork are short lived. I know people that
have had the amazing opportunity to work first hand to help alleviate poverty by
helping to build schools and providing other much needed infrastructure
solutions. This is truly amazing, however such projects are short term and when
funds are exhausted and volunteers head home momentum can taper off. The
governments of wealthier nations arrive with a bigger purse but will often use
self-serving approach to the cure whereby one of the conditions of receiving
foreign aid is to buy goods from the donor nation. We think that the scale of
donations should correlate directly with progress towards the cure but the cycle
somehow persists.
If we’re failing on a macro level why not make an effort to go micro?
Throwing money at poverty stricken countries does little to capitalize on the motivation these people. As a result we
fail to empower individuals with a basic order need that we often take for granted. “The poor must be made active
players rather than passive victims, in the process of globalization” Muhammad Yunus. His book outlines the story
of why credit should be a fundamental human right and why the belief in the resiliency of the poor has been so
successful in lifting people out of poverty.
Banker to the Poor - Muhammad Yunus
“Small things really do make a big difference” is an age old maxim that basically sums up why microfinance is our
best shot at a cure for poverty. Muhammad Yunus, an economics professor from India, was fed up by how financial
institutions in India always required collateral for loans and that loan sharks charged such astronomical interest rates
that those brave enough to take out loans would eventually be enslaved by their creditors so he created the Grameen
Bank and began making micro-loans.
Microfinancing is the process of granting small loans to the poor at affordable rates of interest, teaching basic
financial principles and building a community of people driven to raise themselves out of poverty. Micro-credit
gives people a chance to get themselves and their family out of poverty and since chances have not come around
often if at all for these people, failure is not an option. Yunus said “I realize how resilient and creative human beings
can be when given a chance”. With a small loan a family can afford to secure basic order needs and buy raw
materials to use to make goods to sell at a profit.
The Grameen bank model has been able to generate a repayment rate of 95% or better in many of its branches in
India (a rate unheard of in many North American banks). Its methodology has been so successful that there are now
250 similar institutions operating in nearly 100 countries.
Microfinancing Summary:
• Helps families to secure basic order needs
• Empowers the poor and capitalizes on their intrinsic motivation to improve their circumstances
• Teaches financial principles and responsibility
• Affordable interest on terms convenient to the borrower which frees them from traditional institutions requiring
collateral and loan sharks
• Creates a community of micro-entrepreneurs that are eager to learn from each other and succeed together
• Lending to women helps end poverty more quickly since they enrich the lives of their children who become the
recipients of better education, food, and living conditions
• Micro-lending institutions are a social enterprise first and for-profit second all of which gets reinvested into the
program