Founded in Bangladesh by Muhammad Yunus in 1976, the Grameen Bank is one of the most successful attempts ever to employ capitalist principles to achieve social goals. By approaching poverty from a different tact, Grameen seeks to reconcile the inequalities inherent in capitalism by mobilizing the "informal sector" of society-the self-employed poor. By addressing the root cause of poverty (i.e. lack of access to capital) Yunus has succeeded where many others have failed. Often, well-intentioned governments fail to solve the issue of poverty because of "misguided development" policies and bloated bureaucracies. Similarly, many international financial institutions, such as the World Bank, have failed because their heavy-handed top-down approach excludes those most in need of aid. Yunus writes, "I have always believed that the elimination of poverty from the world is a matter of will" (248). Grameen succeeds where others fail because they appeal to the most downtrodden, the poorest of the poor-the bottom 50% of those already below the poverty line.
A precocious child and avid reader-especially of comicbooks-Yunus was one of fourteen children born to devout Muslim parents. The family lived on the second floor located above the jewelry store that his father owned and operated in Chittagong, the largest port-city in Bangladesh. His mother, despite her later mental illness, instilled a sense of charity early on in her son that would last a lifetime. While the seeds of the Grameen Bank were planted when Yunus was a child, they were certainly nurtured while studying under the tutelage of professor Nicholas Georgescu-Roegen in America. Yunus left to attend Vanderbilt University as a Fulbright scholar in 1965 after opening a successful packaging business in Bangladesh. The professor encouraged Yunus to question traditional economic theory, and to adopt a more pragmatic and social perspective. These influences resurfaced when Yunus returned to Bangladesh in 1972 to chair the economics department at Chittagong University.
Yunus experienced an epiphany one day while lecturing to his students. Amidst his moribund surroundings, Yunus became compelled to confront the obvious incongruence between the high theory he was espousing and the omnipresent reality of daily-life, "What good were all my complex theories when people were dying of starvation on the sidewalks and porches across from my lecture hall? Nothing in the economic theories I taught reflected the life around me" (viii). Yunus at once realized that he had an obligation as both a Bengali and a college professor to help alleviate the rampant starvation that wracked Bangladesh at the time.
After much contemplation Yunus decided that the best way to improve the material condition of the poor was to offer them a hand-up, rather than a handout. Yunus concluded that the poor were quite capable of prospering if only they were given the credit necessary to break out of poverty. He writes:
"But if you go out into the real world, you cannot miss seeing that the poor are poor not because they are untrained or illiterate but because they cannot retain the returns of their labor. They have no control over capital, and it is the ability to control capital that gives people the power to rise out of poverty (141)."
The limited access to capital kept the poorest of the poor enslaved to usurious rates charged by moneylenders whose strict terms affected the ability of the poor to ever repay. However, the very fact that the poor had managed somehow to survive is proof-positive that they too could become successful entrepreneurs if given the opportunity. With access to capital the poor can compete and retain control over profits.
In fulfilling its promise to raise the rural poor out of poverty Grameen has expanded its original income-generating loans to now include housing and education loans. The interest rates for each of the aforementioned loans are calculated based on simple interest and are 20%, 8%, and 5%, respectively. Proof of the strength of the Grameen project lies in its 98% recovery rate. Yunus attributes this success to making 95% of its loans to women. He believes that women are more likely to share the benefits of the opportunity with their family than are men. Unfortunately, this approach continues to meet strong opposition from conservative forces that view Grameen as a threat to their religious and traditional values. Nonetheless, the passion and commitment shared by villagers over the opportunity offered by Grameen eventually overcomes all local resistance.
The program requires a group of five to operate. As required by Grameen, an interested borrower must first pass an exam and also enlist others by explaining the program to them. Once they form a group, a chairman and secretary are elected. Then, two of its members requests a loan, typically for $25 each. Grameen encourages these groups to deposit 5% of each loan in a group-fund that can later be loaned out to members interest-free. After six weeks of successful repayment two more members may request a loan. Yunus writes:
"This is the beginning for almost every Grameen borrower. All her life she has been told that she is no good, that she brings only misery to her family, and that they cannot afford to pay her dowry. Many times she hears her mother or her father tell her she should have been killed at birth, aborted, or starved. But today, for the first time in her life, an institution has trusted her with a great sum of money. She promises that she will never let down the institution or herself. She will struggle to make sure that every penny is paid back (65)."
Despite all the good accomplished by Grameen, its micro-credit program represents only one element of a multi-pronged strategy needed to one day eradicate poverty from the surface of the earth, relegating it once and for all as an artifact of an unenlightened past.
Yunus envisions a more comprehensive program that would expand the notion of economic development to include "improving the general standard of living, reducing poverty, creating dignified employment opportunities, and reducing inequality" (72). He argues that the goal of such development should be measured by a new set of objective criteria, such as the "per capita income of the bottom 50% of the population" (146). The efforts of Grameen and others committed to fighting poverty culminated in the first ever "Micro-credit Summit of 1997" co-chaired by Hillary Clinton. Yunus believes that future success will require a new breed of "social entrepreneurs" who are driven by social goals rather than maximizing profit. The Grameen Bank's success has created an abundance of opportunities for social entrepreneurs to serve the needs of this emerging market.
Despite its demonstrated successes, Grameen still suffers attacks from its critics. Undeterred, Yunus embraces this criticism, "innovation can only sprout in an atmosphere of tolerance, diversity, and curiosity" (102). Pejoratively referred to by some as "poverty banking," Grameen has proven that its success is no fluke. Since making its first micro-loan of $27 to a Bengali basket weaver the Grameen Bank has grown to over 11,000 employees committed to ending world poverty. Grameen now operates in nearly 100 countries, originating over $4 billion in loans made to approximately 2.6 million borrowers worldwide. Much like its founder, Grameen continues to grow and meet the constantly evolving needs of its borrowers.