23 March 2009

Micro-finance Week

Today kicks off Micro-finance Week. This week we'll be featuring a variety of organizations that use micro-credit and venture philanthropy to help the world's poorest citizens move towards a life of self-sufficiency. On a broader scale, micro-finance helps communities to get out of what economist Jeffrey Sachs calls the 'poverty trap,' by providing the assistance necessary to overcome poverty and create sustainable communities.  The organizations this week will should the wide range of projects you can support, regardless of how much you actually have invest. As you'll see, even an investment of $20 can make a world of difference to those who have nothing.

As an introduction to Micro-Finance week, what better place to start than where it began: Grameen Bank.

Grameen Bank first began in Jobra Bangladesh in 1976 as the Grameen Bank Project. In the Bangla language Grameen means 'rural' or 'village.' The project provided microcredit, (small loans to very poor people for self-employment projects that generate income, allowing them to care for themselves and their families), to the individuals in Jobra Bangladesh. By 1983 the success of Muhammad Yunus' project was evident. The project transformed to become a formal bank under a special law passed for its creation. 

Grameen Bank came into operation with the following objectives:
  • 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.
  • Bring the disadvantaged, mostly the women from the poorest households, within the fold of an organizational format which they can understand and manage by themselves
  • Reverse the age-old vicious cycle of "low income, low savings and low investment," into virtuous cycle of "low income, injection of credit, investment, more income, more savings, more investment, more income"
GB's is a banking system based on mutual trust, accountability, participation, and creativity. The bank provides credit to the poorest of the poor in rural Bangladesh, without collateral. 'At GB, credit is a cost effective weapon to fight poverty and it serves as a catalyst in the over all development of socio-economic conditions of the poor who have been kept outside the banking orbit on the grounds that they are poor and hence not bankable. Professor Yunus, founder and Managing Director of GB, reasoned that  if financial resources can be made available to the poor people on terms and conditions that are appropriate and reasonable, "these millions of small people with their millions of small pursuits can add up to create the biggest development wonder.""

Yunus' theory proved correct. To date the total amount loaned since its inception is $7.68 billion, with $6.83 billion having been repaid. Grameen Bank can boast a loan recovery rate of 97.82%. It shows just how far trust and accountability can go.

In 1995, Grameen Bank decided is no longer would receive donor funds. In fact they had the money necessary to continue their work independently. Since 1998 the bank has been without donor funds or loans from local or external sources. Grameen Bank is owned by the poor borrowers (95%) and the government (5%).

In 2006, Professor Muhammad Yunus received the Noble Prize for his work with Grameen Bank.

As of February 2009, GB has 7.75 million borrowers, 97% of whom are women, with 2,545 branches. The bank provides services in 83,967 villages, covering more than 100% of the total villages in Bangladesh. 

Grameen Bank's website offers plenty of information on their initiatives, borrowers' successes, and a wonderful introduction into the world of micro-lending. I urge you all to visit Grameen Bank's website.

Also, if you are interested in learning more about Muhammad Yunus and Grameen Bank the following books are available:

Banker to the Poor: Micro-Lend... Banker to the Poor: Micro-Lending and the Battle Against World Poverty by Muhammad Yunus

Creating a World Without Pover... Creating a World Without Poverty: Social Business and the Future of Capitalism by Muhammad Yunus

The Price of a Dream: The Stor... The Price of a Dream: The Story of Grameen Bank by David Bornstein

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