Tuesday, February 5, 2013

A MAN WHO STARTED A POOR PEOPLE'S BANK


Photo: Dr Yunus (right) speaking with women from villages. (Pic from grameen.com)

A CHAMPION FOR THE POOR ... I wrote this item and it appeared in The National newspaper of PNG in the Weekender pages on Friday, February 1, 2013.

IN 2009, while teaching young people a bit of Calculus at the local campus of the University of South Pacific in Nauru, I was drawn into one aspect of the subject that I was, for more than a decade, uninterested in.

The applications of Calculus (the subject that deals with how fast rates are changing) in the exercises given in the course books were in Science/Physics and Economics. I was more interested in helping students with the science applications which included studying the trajectories or paths of projectiles and falling objects.
However, on that island nation (at one time was one of the richest countries in the world) which was coming out of an economic crisis where billions of dollars of funds and properties were lost due to misappropriation and bad management by the government, it was obvious that the application of Calculus to falling objects would not be attractive as its application to economics, business and money.

You see, the country had no real bank. The national bank was used only to transact money, including the salaries and wages of government workers.
Transacting money out of or into the country was also difficult and expatriate workers as well as locals found using the Western Union agent was more convenient.
It was clear to me then that the young people in class needed more emphasis in Calculus to deal with money than discussing projectiles.
The situation there on the island of 10,000 people also reminded me of a statement that a relative told me more than a decade ago.

The relative was studying business economics at the University of PNG when he told me that a young lecturer in an Asian country had started a bank for the poor people and had surprised many on how he did that.
I did a search on the internet and found out that the subject of the story was a Prof Muhammad Yunus of Bangladesh. (I later confirmed with the relative that Dr Yunus was the subject of his story years ago.)
In 1974, Dr Yunus was an economist at Chittagong University in Bangladesh. While the US-educated teacher was on a field trip with his students to a poor village, and interviewing a woman who made a bamboo stools, he found that the woman had to borrow 15 pence to buy raw bamboo for each stool made. After repaying the middleman, she was left with only one penny as profit.
Dr Yunus realised that if the woman was to borrow money at much better rates, she could have made a good sized profit to help her over a period of time to raise her standard of living.
He realised that there was something wrong with the economics he was teaching and decided to do something about it.
Out of his pocket, he lent about US$27 to 42 basket-weavers. He found that it was possible, with the tiny amount lent, to create interest in the poor villagers to venture into enterprise and as a result pull themselves out of poverty.

As detailed in his biography in www.grameen-info.org, Dr Yunus went against the advice of banks and the government, and gave out micro-loans.
In 1983, Dr Yunus formed Grameen Bank, meaning “village bank”. The loans given were micro-loans. They were helpful for the millions of poor people in Bangladesh because the terms required to repay the loans received were long and the interests charged were very low.
In Banglandesh today, Grameen has 2,564 branches serving 8.29 million borrowers in 81,367 villages. Among others, its objectives include:
-          Extend banking facilities to poor men and women;
-          Eliminate the exploitation of the poor by money lenders;
-        Create opportunities for self-employment for the vast multitude of unemployed people in rural Bangladesh; and
-        Bring the disadvantaged, mostly the women from the poorest households, within the fold of an organisational format which they can understand and manage by themselves.

The model used by Grameen Bank is now used in many countries in giving out micro-loans to poor or low-income earners.
Dr Yunus, who grew up in a home that extended its hands to the poor, has been a champion for the poor.

He said: “People were poor not because they were stupid or lazy. They worked all day long, doing complex physical tasks. They were poor because the financial institution in the country did not help them widen their economic base.”

Muhammad Yunus was awarded the 2006 Nobel Peace Prize, along with Grameen Bank, for their efforts to create economic and social development.

In the prize announcement, The Norwegian Nobel Committee stated: “Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Loans to poor people without any financial security had appeared to be an impossible idea.”

NB: This item follows my post on January 30.

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