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Tiny Loans Create Enormous Change in Bangladesh, Nobel Winner Says
Last year’s Nobel Peace Prize winner, microbanker Muhammad Yunus, said trusting impoverished women with “enormous” sums like $35-$40 dollars has created generational change in his native Bangladesh.
Yunus spoke Monday at the Little Rock Hilton as part of the Little Rock Regional Chamber of Commerce’s Fortune 500 luncheon series and was the guest of honor earlier at a reception at the Wright Lindsey & Jennings law firm.
Yunus said he had been to Arkansas many times since 1986, when he was instrumental in designing the work of Southern Good Faith Fund of Pine Bluff. By then, he had a dozen years of experience lending very small amounts – by American standards – to the desperately poor of Bangladesh. Today the Grameen Bank he founded has 7.5 million borrowers, 97 percent of them women.
Yunus, who earned a Ph.D. in economics from Vanderbilt University in 1969, returned to the newly independent Bangladesh in 1972 and began making micro-loans when a famine in 1974 threatened millions with starvation.
“What good is my economics when people are dying? I felt worthless, useless,” he said Monday.
He discovered 42 people in a single village who were entrapped by debts to “loansharks” – and their total debt was $27. He personally paid off their debts, giving all of them a fresh start.
“Now they look at me differently than before,” he said. “They look at me as if I descended from heaven.”
If you could become an angel for $27, he asked, “wouldn’t you want to do more of it?”
From that beginning, Yunus began guaranteeing bank loans to poor people. But that strategy didn’t last long because “the more successful the program became, the more reluctant the bankers were to do this.” That’s when he founded Grameen Bank.
The repayment rate among Grameen borrowers has always been near 99 percent, he said. “No lawyers are involved – sorry for the lawyers. It’s basically handshake lending.”
Initial loans are generally $35-$40, which the borrowers use for income producing activities. The typical borrower is afraid of the responsibility for such a large debt, he said, “and she promises to herself, ‘If they have trusted me with so much, I will give my life to protect this trust.’”
A year later, with the initial debt paid back, she will have the courage to borrow a more amazing amount – like $50, he said.
During its more than 30 years of work, the Grameen Bank has also helped convert 10,000 beggars into peddlers and “personal shoppers” who buy for women who are not welcome in the markets. And more than 30,000 children are going to school on scholarships provided by the bank. One surprise, he said, has been the academic achievement of children whose parents are utterly illiterate but who have been lifted out of abject poverty by the power of micro-lending.
Grameen Bank’s goal is to eliminate poverty in Bangladesh by 2030. At that time, Yunus said, his homeland will need a “poverty museum” because “you won’t be able to see poverty in Bangladesh. If you want to see poverty, you’ll have to go to a museum.”