Banker to the Poor, Muhammad Yunus. New York: Public Affairs, 2003.
Summary: Yunus’ personal account of developing micro-lending and the Grameen Bank to help lift the rural poor out of poverty by providing the small loans they needed to develop their own small businesses.
How often does it happen that a person has an epiphany, a revelatory moment that changes their lives? For Muhammad Yunus, brought up in a merchant family, and as a Fulbright scholar representing the “best and brightest” of a Bengali elite that would achieve independence in Bangladesh, the future looked promising. Returning to Chittagong, he became chair of the university’s economics department. Then came studies of the really poor in Jobra, a village near the university, and the day that he realized that 42 stool makers lacked the resources they needed to buy raw materials, tallied up the need and discovered that all they lacked was $27, which he promptly lent them himself.
At the time, banks would not give loans in such small amounts, and moneylenders charged usuri0us rates that only drove them deeper into debt. And so Yunus conceived the idea of micro-lending. In this book, we follow the narrative of the development of the Grameen (“rural”) Bank from the initial pilot project to expansion to neighboring villages and the eventual chartering of the bank. He recounts the development of its innovative lending practices (for example, no collateral, no lengthy applications, weekly payments on loans) and the conviction that the poor had the initiative and character to both develop businesses and pay back loans (typically Grameen-style banks had repayment rates between 98 and 100 percent). He describes the organization of borrowers into groups of five who all must pass a test before receiving their loans, who hold each other accountable for loan repayment without being liable for non-payments, and the setting aside of additional funds in a group loan fund, against emergencies. These groups actually acquire an ownership stake in the bank. Underlying all this is a basic trust in the borrowers, along with good structures that help with financial development.
Along the way, Yunus describes the cultural and business challenges that had to be overcome. What is striking is the gentle persistence of Yunus and an ability both to respect and creatively engage existing institutions and cultures, whether it is working out a charter for his bank, or dealing with male objections to women borrowing. One is also taken with his vision for the poorest of the poor, who he believes simply need the resources to help themselves. It is obvious that he infuses that vision in his staff, who often pass up better jobs because of the social mission of Grameen.
The latter part of the book describes the extension of Grameen Bank ideas to other nations, including the poorest of the poor in the United States. It is humorous to see how hosts in this country would bring to Yunus small business people who needed loans, when Yunus wanted to meet with the poorest of the poor, those who didn’t have businesses, but simply an idea of what they could do to support themselves if they had the money to get started.
The book concludes with Yunus’ account of the development of various Grameen enterprises (including village phones, telecommunications, textiles and fisheries), the roll-out of Grameen II, further developing Grameen’s principles, and a final chapter on his passionate endorsement of the Millenium Development Goals to eradicate poverty, particularly among the bottom twenty percent of the world’s poor.
While Yunus talks about setbacks and challenges, most of these have to do with, or are attributed to external factors. It seems we hear almost exclusively of success stories and not much of failures or organizational mistakes. The book makes a strong case for the promise of micro-lending, but doesn’t explore the limitations or other factors in economic development. Perhaps that would distract from the story he is trying to tell but a greater place for discussion of these matters would give less the sense of micro-lending as a panacea rather than as a useful practice.
The book ends in 2003. Muhammad Yunus and the Grameen Bank were jointly awarded the Nobel Peace Prize in 2006. In 2011, the Bangladeshi government forced Yunus to resign his post at Grameen Bank due to age (he was 72). In 2013, the government passed the Grameen Bank Act, allowing it to make rules for any aspect of bank operations. Whether the Grameen Bank will continue to serve the poorest of the poor as it was conceived to do thus is an open question. What is clear however is that Yunus developed a model of micro-lending to the poorest of the poor, built on belief in their initiative and trust that they will repay, that has contributed to growing self-sufficiency for many individuals and economic development in many settings of poverty with lessons applicable throughout the world. In an era increasingly concerned about “helping that hurts” this account offers a model of “helping that helps” worthy of our attention.