Banker to the Poor

I recently read the book “Banker to the Poor :the story of the Grameen Bank” by Mohammed Yunus. Prof. Yunus won the Nobel Peace Prize in 2006 for his pioneering work in the development of Bangladesh through the concept of microcredit and the Grameen Bank. Microcredit consists of lending tiny sums of money to the poorest demographic of the population, mainly for self-employment.

The most powerful thought in the book is the following quote :

“Development should be seen as a human rights issue rather than an economic one.”

The book traces the origin of the philosophy of microcredit when Dr. Yunus realized that since banks didn’t lend to the poor (for lack of collateral), they were left to borrowing at exorbitant rates from usurers and money lenders. Once they did, they got trapped in a cycle of poverty that was impossible to break through. He narrates the story of a cobbler who had to hand over half his daily income to the man who owned the brush and shoe-polish that he worked with. What was left of his earning was barely enough to sustain him. The cobbler would remain trapped in this hand to mouth existence for the want of money to buy a brush and shoe polish. This is where Yunus decided to step in.

Of course, the journey of developing the Grameen Bank was a long and difficult one. It faced opposition and ridicule at every stage, as is the fate of any pioneering effort. The journey is also a most inspirational one, and bears many lessons for those seeking to develop sustainable organizations, in public service, business or elsewhere.

Grameen was also pioneering in that it lends mainly to women. This has led to great socioeconomic development in Bangladesh with an increase in voter turnout, greater empowerment of women and reduction in domestic violence against women. The book is full of stories of women who rose from poverty against all odds. Most inspiring is the story of the woman who battled abandonment by her husband and family, banishment from society, a life-threatening disease, a house burnt by the Pakistan army in 1971, a flood, a disease that killed her livestock and only source of income and a famine, and 12 loans, to finally reach a stage where she didn’t have to worry where her next meal was coming from. Whenever I tend to fret over my befuddlement about a career choice, or how hard life is, I am reminded of her story.

Another powerful idea is the social cohesion that Grameen creates by making it mandatory for women to form groups (of 5) before they can borrow from Grameen. By interlinking the fates of the women in a group, Grameen manages to achieve several things at once. Firstly, it creates a great peer pressure mechanism to keep them motivated. But, since the failure of one group member implies no loans for any of the group members, the women have great incentive to help each other through difficult times rather than competing with each other. The sense of empowerment that it gives these women, who for most of their lives have been told that they are worthless, incapable and a burden, is phenomenal. By creating successful role models for the women, and raising the bar for who can join, Grameen has created a powerful self-sustaining engine of hunger for development among women in Bangladesh.

The book also provides many practical tips, insights and lessons that are of great use to not just social entrepreneurs but anyone in business. The writing is simple yet extremely powerful and inspiring. The book also shattered many of the assumptions I had about poverty and the eradication of it. The corruption and malpractices perpetrated by international donor agencies such as the World Bank was a revelation. The extent to which credit can be a powerful socioeconomic weapon, the fact that people don’t need long years of education or training to rise above poverty and the fact that development (of infrasructure, IT, etc) never helps the poorest unless there is an “enabling” mechanism in place were all explained beautifully through this book.

Banker to the Poor is both, an inspirational story of the great socioeconomic change brought about by a man and his vision and also a primer to the philosophy and nuts & bolts of the microfinance movement. While I believe that micro credit is at best only part of the solution to poverty and don’t agree with all the ideas and ideology in the book, much was gained from reading it.