Tuesday, March 26, 2013

Banker to the Poor: Muhammad Yunus

I finally got around to reading Banker To The Poor: Micro-Lending and the Battle Against World Poverty by Muhammad Yunus (published in 1999 and 2003). An Bangladeshi Economics Professor by training, Yunus developed the Grameen Bank in 1983, dedicated to promoting the poor lift themselves out of poverty by providing micro-loans - on the order of a few hundred dollar - to start businesses. He saw a huge divide between the university where he worked and the surrounding community, that the theoretical laws discussed in his economics courses did not, and could not, relate to the poverty around him. After numerous meetings with banks all over the country, Yunus concluded that the current banking system was not built to support the poor, so he developed Grameen. From stories of women weaving stools to lending for home repair and construction, the Grameen Bank has risen to be one of the largest (if not the largest) mico-lending institution.

Yunus mostly maintains neutrality with regards to politics and international development (as much as one can when promoting a hugely successful loan business), but I particularly enjoyed his discussion on trainings funded and run by large (or small) international development organizations. He argues that the trainings that are carried out create "more jobs for themselves (the agencies) without the responsibility of having to produce any concrete results." (pg.141) In other words, it is very easy to spend a donors money conducting trainings, providing meals and per diems for participates, and report back to the funding agency that a certain number of people were trained. Does this actually prove that capacity has increased? It is commonplace in development for "trainings" to be synonymous with "capacity building", but little effort (if any at all) is made to follow up with the participants, assess if anything was actually learned.

Yunus suggests that the poor are not poor because they are "untrained or illiterate", but because they "have no control over capital, and it is the ability to control capital that gives people the power to rise out of poverty." (pg. 141) This is the foundation of the Grameen Bank - that people will know what to do with money they are given if the opportunity arises. While he says that not all trainings are bad, they "should be offered only when they (the participants) actually seek it out and are willing to pay in kind or cash to obtain it." (pg. 142) Huge sums of money are spent in training programs on per diems. This is one of the most frustrating parts of development for me - people have been trained to not attend meetings and program meetings unless they are compensated. And it's not just food: they are given money, physical money, for transportation, for attendance (thanks for coming! here's $10!). And in the case of government workers, this is on top of their salary. So as a government worker, wouldn't you rather spend most of your days not working and instead getting free lunch and cash handouts?

I became increasingly frustrated with per diems in Uganda. A long history of violence had pushed a huge porportion of the population into settlement camps (for internally displaced peoples). In order to encourage participation in community meetings, NGOs provided per diems to participants. With the war over and families resettled back in their home communities, the expectation has been set, and NGOs are stuck: if they don't provide a handout, no one will come. Unfortunately, few are trying to stop this cycle, and the money that is spent to compensate local government for their participation is taken away from potentially poverty-reducing programs.

Yunus goes on to argue that a new objective for development is needed: direct reduction of poverty. He suggests that development of a country should not just be measured as an increase of the gross national product, but redefined as a "positive measurable change in per capita income of the bottom 50 percent of the population. (pg. 146) This may sound straightforward, or even silly, but often increased income of the top of the pyramid that equates to an increase in GNP does not necessarily correlate to an increase at the bottom.

He concludes the book with a noble, and I think achievable, goal, that by 2050 "there will not be a single human being on this planet that may be described as a poor person or who is unable to meet his or her basic needs." (pg. 248) He makes a strong case for why and how poverty should be eliminated. He has seen successful replications of his model outside Bangladesh, all over the world, and even in the United States. He has gained momentum as an advocate for micro-lending, although until we are able to get all development agencies on the same page, there will continue to be a struggle between handouts and self-help style development.

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