Saturday, February 22, 2014

Review of "Banker to the Poor" and Micro-Lending/Grameen Bank

            “Credit is a human right.” This is the belief that drives Mohammad Yunus into creating the Nobel Peace Prize-winning, billion-dollar Grameen Bank. Yunus writes the novel Banker to the Poor: Micro-Lending and the Battle Against World Poverty to tell the story of how he went from being an economics professor to an in-the-trenches, practical poverty fighter. He believes that charity does no good, only taking away the work ethic of the poor by providing them handouts; foreign aid he says only benefits the well-off by going to infrastructure or similar projects. Yunus states that every poor person has skills, and can lift themselves out of poverty, if they simply have access to small, low-rate loans free from the stipulation of collateral. He claims, with years of banking now to back him up, that they will repay because it is their only real chance to lift themselves up to a better life. The poor can then become small entrepreneurs and sell the skills they have for higher profits. Through this method and similar others outlined, Yunus is not only convinced, but burdened, that poverty can become a thing of the past.
Yunus begins the book by introducing his position as an economics professor at Chittagong University in his native Bangladesh. His country has fallen into famine, and though Yunus is part of the “well-fed” society, he can still plainly see the effects of it. Field Marshall Ayub Khan has taken power in a military coup, and for fear of rebellious students in the city has moved Chittagong to a rural area near the Jobra village. It is in Jobra that Yunus decides that he and his students will be taught true economics by the poorest of society, and where he first attempts his micro-lending experiment (Introduction).
            In chapter one, Yunus tells of his experience growing up in the large port city of Chittagong. It was here that he is educated all the way through college and develops a thirst for reading, which he and his closest brother, Salam, quench through any creative means, legal or illegal. At his house on 20 Boxirhat Road, Muhammad grows up observing his devout Muslim father work in his jewelry shop, watches his loving mother develop a mental illness, and lives in five rooms above the shop with as many as nine of his siblings. Before the age of 25, Yunus sees World War II (a Japanese bomb destroys a wall of the shop), India gain its independence as Pakistan (India’s Muslim-majority areas) still is vocal about theirs, and finally lives through Bangladesh’s War of Liberation (Chapter 1).
            Upon his graduation from college in 1961, Yunus is brought on to teach at Chittagong, as well as gains a loan to begin what will become a very successful packaging and printing plant. But in four years, he earns a scholarship to study in America, first at the University of Colorado, where his acclamation to 1960s young adult society is incomplete but still very enjoyable, and then to Vanderbilt, where he meets his wife Vera, a USSR native. When the Bangladesh War of Liberation breaks out in 1971, Yunus immediately pledges his support for the state that does not even exist yet, and all between his home in Nashville and Washington, D.C. raises support, money, and awareness for Bengali independence and the massacre via the Pakistani army. He creates a Bangladeshi government to interact with neighboring countries, and after the devastating war comes to a victorious close, he knows he must go back to build a decimated Bangladesh (Chapter 2).
            Yunus goes back to Bangladesh and is giving a self-dubbed “boring” government position; he soon resigns this and takes a position as head of the Economics Department at Chittagong University, which is facing rough times along with the rest of the country. Thinking something should be done about the famine that continues to plague Bangladesh, Yunus gains permission to release a “call to action” to the press and through the classroom sets to experimenting with solutions. He focuses his attention on the nearby village of Jobra, where he develops a “Three Share System” in which Yunus opens up the irrigation and pays for a higher-yielding crop, as well as volunteers his and his students’ time to help the farmers and sharecroppers as part of their research, and in return is given a third of their crops (though not all deliver on the deal). Yunus notices greater problems with the poor, however: there is not a clear definition of who the poor are (until he defines them), there are many poorer than farmers and sharecroppers in Bangladesh and even in Jobra, and programs that are not narrowly tailored to the poor end up helping the better off (Chapter 3).
            Yunus begins to go around, with either a student or fellow faculty member, to the poorest of Jobra to find out why they are in such terrible states. Upon talking with a Muslim lady, he finds that they are caught in a system of being lent money by moneylenders to do a difficult trade, and then are forced to sell their goods back to the same moneylenders at minimal profit, thus keeping them poor. Yunus and one of his students are further sickened when they find out that all the poor in Jobra are stuck in poverty for a combined lack of $27, which Yunus decides to personally lend out to them so they will be able to sell their goods to anyone. Beyond this, Yunus knows that a larger enterprise must be undertaken, one that will be very difficult due to the banking rule of collateral that he takes issue with; Yunus himself decides to be a guarantor for the poor of Jobra, and eventually six months a slightly larger loan is approved, which is paid back at a much higher rate than other loans, as these loans are the only things that can bring the underclass out of poverty (Chapter 4).
            As the Grameen Bank project progresses, Yunus by trial and error tries many things that are contrary to normal banking. He runs his bank based on trust instead of legal documents and allows loans to be paid off in increments instead of in lump sums, as well as setting interest rates lower. Seeing the oppression of women in Bangladeshi society, he makes a goal of having at least half of loans go to them, a goal which is eventually reached and well surpassed. (Yunus hires many women as well, and uses them in the field, as seen in the example of Nurjahan Begum, who breaks the tradition of purdah by leaving her house, handling money, and holding a job.) Loans are given to women in groups of five, only after going through classes and testing, ensuring support, accountability, and that only those who truly need the money will pursue it (Chapter 5).
            Grameen experiences exponential growth in the early 1980s, increasing to 25 branches in five districts, around 28,000 clients, and over $13 million in loans. This success can be owed to the cooperation of several large banks and loaners, the first and most crucial being the Bangladesh Krishi Bank that starts branches of Grameen itself and pays Grameen employees. The success is also due to the sacrifices of the Grameen family, including Yunus, who loses his wife (who does not want to live in Bangladesh anymore) and leaves his job to silence criticism, the bank managers, who go with their passion over the money they could make with their master’s degrees, and the workers, who work 12 hour days that involve walking all over sometimes dangerous villages (the women endure special criticism). All this is being accomplished despite harsh criticism from politicians and Islamic religious leaders, who attempt to scare the determined women from the bank, and from national and international banks who either dislike what Yunus is doing or are determined that micro-lending will not work on a large scale (Chapter 6).
            A coup d’√©tat leaves Yunus talking to an old friend, who is then named Finance Minister by the new regime, and promises to slowly help Yunus get past the criticism of established bankers to make Grameen an independent bank. Yunus wants Grameen to be completely owned by the borrowers, but an advisor he approaches suggests that it be partially owned by the government so that it will have an easier time getting through a vote; in the original document 60% of the bank ends up being owned by the government. A bit disappointed, Yunus still finds the inspiration to create a logo for his bank, which is presented at the grand opening celebration in, naturally, a rural area of Bangladesh. After this it is back to work for him, as he must fight to get more of Grameen owned by borrowers (it creeps to 75% borrower ownership), to prevent possible devastating turnover by fighting through governmental red tape to make his position and the position of chairperson out of control of the government, and to create a home loan program (Chapter 7).
            Looking at the problems Bangladesh faces, such as some attempts to force population control and an in some cases an unfair amount of natural disasters, Yunus and Grameen look to combat them. At a workshop, they create Sixteen Decisions to follow to be a helpful and moral institution; as part of being helpful, they supply immediate aid to natural disaster victims while still making sure they pay back loans (feeling the alternative would make them lose what they have worked for). Yunus is also openly critical of the World Bank and its strategies, even denying a large loan from it, as well as the financial training of borrowers and foreign aid (which he claims only serves to help those who are already wealthy). In part due to this criticism and also due to its general growth, Grameen is able to cooperate with several other positive organizations and gains the attentions of news organizations all over the world, including CBS’s Sixty Minutes (Chapter 8).
            By the mid-1980s, projects similar to Grameen begin to get started in other poor countries across Southeast Asia and the world, with some of the most successful being in Malaysia and the Philippines. Yunus looks to directly support these efforts through both money and his time, which he finds hard to split between those he has already visited and wants to see progress and those he has yet to see. Hundreds of millions of dollars are raised to fund various efforts, though the goal is in the billions; even the World Bank steps in to help. Most works find similar return rates, similar workers, and similar stories of borrowers who are happy to find an institution to help them (Chapter 9).
            Convinced that his program will work wherever there is poverty, Yunus is ready to take the idea to wealthy countries. However, capitalist nations seem skeptical of micro-lending, and the social welfare systems, especially those in Europe, make it difficult if not illegal for the poor to have an incentive to pull themselves out of poverty. Around the mid-1980s, two people convince the Clintons, then governing Arkansas, to quickly try micro-credit on a small scale. As Yunus himself goes from place to place fanning people’s creativity, Grameen-style lending slowly takes hold in some of the poorest areas of the United States (Chapter 10).
            When an uprising turns Bangladesh into a democracy in 1991, Yunus tells branches to collectively decide who they will vote for and to vote in groups, to bring political legitimacy to his borrowers; in a short period many borrowers and borrowers’ family members hold political office. This same year, the new government causes a loan crisis for Grameen and the country has to recover from a devastating cyclone. Yet Grameen does move on, forming several new loan programs and making specific goals to create a “poverty-free” Bangladesh. Yunus then outlines the complicated new sphere for projects such as Grameen: the “social-consciousness private sector”, one that leans politically left but in which the government largely stays out of (Chapter 11).
            After debating an offer from a government secretary, Yunus decides to take ownership of fishing ponds in two different provinces; the venture is an uncharted experience and one which is stressful and not very profitable, but it is helpful to the poor Grameen deals with. This is not the only venture Grameen branches into, as it also creates several companies to utilize and market the skills of weavers around Bangladesh. Grameen also takes on modernization projects, helping to bring electricity, telephones, and even internet connections to new areas, despite protests that this technology is wasted on the third world country. Despite such innovation, setbacks are still seen with the poor, and Yunus realizes that the work of his bank must continue solving problems such as providing for medical and retirement plans, realizing it can never be perfect but is the best option available (Chapter 12).
            Yunus provides statistics for how much Grameen has grown since it began, all while staying a profitable institution; among its more rewarding projects include helping provide for studentss (especially girls’) education. In 2001, all of Grameen’s 1,175 branches switched over to Grameen II, or the Grameen Generalised System. This new bank is tailored more to the borrowers, allowing for “flexi-loans” to give more time to pay back loans in times of financial struggle, as well as providing a system that puts money aside for retirement and to pay loans and family members in case of death. There are also incentives for the staff with the creation of a five star system they can strive for; Yunus notes an extra amount of enthusiasm and energy in all his employees (Chapter 13).
            Yunus gives his vision for a future that he believes should not have poverty, saying that it belongs in a museum and not in a civilized world, and says that it is possible to achieve this. He believes that social-objective based entrepreneurs can crowd out both greed-based entrepreneurs and the governments that attempt to regulate them, leading to a Europe-esque world with a single authority working together to solve problems. People must take control themselves and not be given handouts, he states, and using the example of flight, says that micro-credit is just taking off but will soon be headed to new heights. This is evident in a Microcredit Summit organized in 1997 that attracted world leaders and many speakers, attempting to reach the 100 million poorest people in the world (at the time of publication this goal was not far behind schedule) (Chapter 14).
            In closing his book, Yunus provides an outlook for a future without poverty by giving an explanation for his idea of a “social business”. He claims that human beings are more complex with more desires, and are in need of something more than profit-maximizing businesses whose sole goal is getting as far above the red as possible. These are not charities, as they make profits, but the profits are invested back into the business instead of distributed to investors. Social businesses are expected to compete on the same market as profit-maximizing businesses, Yunus states, but should be measured in a different stock market. Any type of business could get into this state of mind, whether it be those directly aimed at helping the poor or those that provides goods and services that can offer discounts to the poor (A Preview of Creating a World Without Poverty).
            When hearing of a “solution to poverty”, immediate skepticism set in. Who has not heard a myriad of ideas to combat this long-standing issue? Upon getting into Yunus’s argument for micro-lending, it has much more credibility than any other “solutions” presented before. Yunus hits the nail on the head when he gives the explanation that welfare programs and charities are counterproductive to the poor, leading them to rely on handouts rather than rely on their work ethics. Such programs may be necessary for a short time or for a select few, but for most, they must be given a chance. With a loan, a return is expected, and an entrepreneurial spirit is ignited (Richards). As numerous critiques state in various ways, “Yunus's theories work” (“Book Summary”). This truly brings to life the clich√©, “Give a man a fish, feed him for a day. Teach a man to fish, feed him for a lifetime.”
            Another self-interested implication of micro-lending is that of slowed immigration (Walker). Walker states in The Social Contract Journal that many in the United States, especially liberals, see America as a place that everyone wants to move to in order to find better economic success. While it used to be a goal to civilize “lesser peoples”, they are now just brought to our soil. This is not only an egocentric line of thinking, but also one that is impossible to realize. Even those who do not consider other nations less still believe that they should come to America; it is why people put up with illegal immigration. What is wrong with an economic refugee’s country that they cannot succeed there? Rather than look at the issue, they are told to go to America. America cannot hold the world’s population. Walker likens it to sinking the lifeboat due to overcrowding. A better way to handle things is to make a way for people to have better lives in their own countries, rather than come to the United States, where they will experience an intergenerational culture shock and may still not find good work. Micro-credit can do this, and has done this in nearly 100 nations across the world.
            But before it appears that I am too much a supporter of Yunus and his theories, let me be clear: There will always be poverty. Micro-lending is the best option I have heard yet for helping those in poverty, but nonetheless, there will always be poverty. There were few critiques found that matched my level of cynicism on this subject. Most were caught up in the mysticism and glamour of Yunus’s vision. One blogger says she loves the personal stories and twice calls the book “inspiring” (“Book Nest”). Get Rich Slowly likewise uses that exact adjective (Dykman). But while the traditional problem is that one cannot see the forest for the trees, by the end of the book Yunus cannot see the trees for the forest. He has made micro-lending work, and has expanded it to a large scale. But Yunus is much too idealistic, and not enough realistic. A blogger who goes by the alias Varunshukla does a very good job of describing this. Yunus describes a future world where poverty is only in museums. Such Utopian societies have been attempted before on community scales, and have quickly failed every time. Varunshukla points to Brooks Farm and Robert Owen’s experiments as examples, the latter of which failed because the people themselves were not willing to cooperate. In addition to this, Yunus blatantly lies when he claims that “we have created a slavery-free world, a polio-free world, an apartheid-free world”, and compared ending poverty to these. Mauritania and Brazil have reported slavery in their nations; this is apart from sex-trafficking that is an issue even in the United States. India, the nation that Yunus’s native Bangladesh won independence from, as well as Africa, continue to report cases of polio. Racism and discrimination are still documented issues around the world (Varunshukla). So no, these problems have not been solved, just has poverty has not been solved. Can it be bettered? Yes, and it has. Will it be ended? Doubtful.
            There are further reasons why poverty will remain. Some in the underclass, who are able to feed themselves but are and should be considered poor, do not want to climb from poverty. Yunus’s theory is based on the assumption that poor people want better lives. This is likely true in third world countries, and it is much easier to give out loans when the cost of living is lower. But in first world countries, social welfare systems have created, dare I say it, a class of people that learn to live off their government. Food, housing, utilities- many expenses are paid for. With the food stamp system in America, luxury items can be bought. The systems are easy to manipulate. What incentive does one have to leave this lifestyle? It would take cooperation from governments to take people off such systems and put them on a path to self-sufficiency. This would take a great deal of string pulling in some of the most powerful nations in the world.
            This leads to a final problem. Many governments- perhaps most governments even- do not want to end poverty within their borders. With totalitarian states, this seems more obvious. If a citizen is worrying about food, they aren’t worrying about oppression. Dictators want their citizens to have to rely on them. But even in democracies, some leaders do not want to leave the social welfare system. Consider Hyperpluralism in politics. The government funds more projects and businesses than its budget can handle, politicians take credit, and politicians get campaigns financed. It’s why the U.S. government subsidizes tobacco farmers, yet taxes tobacco products heavily for being unsafe. The same principle happens with the underclass, a large voting bloc in any given first world democracy. Politicians promise that they will continue to receive their handouts if they are voted into office; the underclass turns out in mass to support those politicians, and their cycle of living near or in poverty continues. Such a pattern can be seen with the largest political machine in American history, the Democratic Party, where in the 2012 election Barack Obama was able to gain a 32% advantage over his opponent with those making under $30,000 ("2012 Presidential Voter Support by Demographic"), who composed a fifth of all voters.
            There is something greater that worries me specifically with Grameen Bank. Yunus has created a sort of “Private-Sector Communism”. You’re saying that I just made that up. I did, but Yunus creates many of his own terms in his novel and explains them, so allow me the liberty. As Grameen moves into more areas- fishing, communication, electricity, health care- and as its founder pushes for other “social businesses” to find other areas still, Grameen is reaching deeper and deeper into its borrowers lives. It is becoming inseparable. Instead of getting rid of poverty, it is replacing it with another nuisance- one that is always around, giving them directions, in some ways acting as if they are incapable of making their own decisions. On top of this, Grameen expects its borrowers, upon getting out of poverty, to continue borrowing from it instead of becoming self-sustaining. Yet Grameen became self-sustaining. Is this not a double-standard (Jov)? Is this about the poor, or are they simply being used with a sort of false humility. Even if Yunus’s motives are pure, what if the next person’s motives that comes along aren’t? The borrowers are so reliant on Grameen; they have nowhere else to turn. This is not the only double-standard Yunus has; he expects social businesses to compete with profit-maximizing businesses, but wants them judged on a different stock market. He can’t have it both ways. He expects investors to flock to social businesses, knowing they won’t make a profit. This system will only attract philanthropists, not the thousands of other investors looking to make a living. I also disagree with credit being a human right. Credit is not a need, nor is necessary for protection, nor should stop to prevent harm. Human rights lose their meaning and their intentions when any person can broaden their definition to include his passion.
Though I only have the “bird’s-eye-view” unlike Yunus, I see something with as much power like Grameen over people’s lives as as much a danger to them as an oppressive government. What is needed is competition between Grameen-like banks in all corners of the world. It is the only sound way yet to truly bring large numbers of people out of poverty. With some nations, it will take the right leadership, maybe decades of legislation, to bring them from a welfare system to one in which micro-credit can have success on a large scale. Poverty will never disappear, just as genocide is in museums but still occurs, just as war has never disappeared. It will always be an issue that must be combated. But with micro-credit, the warfare in play is much more effective.



Works Cited

"2012 Presidential Voter Support by Demographic." Statistic Brain: Percentages | Numbers | Financials |             Rankings. Edison Research for the National Election Pool, 7 Nov 2012. Web. 25 Oct 2013.             <http://www.statisticbrain.com/2012-presidential-voter-support-by-demographic/>.
"Book Summary." Book Browse: Your Guide to Exceptional Books. BookBrowse.com. Web. 20 Oct                2013. <http://www.bookbrowse.com/reviews/index.cfm/book_number/1886/banker-to-the-                poor>.
Dykman, April. "Book Review: Banker to the Poor." Get Rich Slowly: Personal Finance that makes             Cents. GetRichSlowly.org, 9 Sept 2010. Web. 28 Oct. 2013.                           
            <http://www.getrichslowly.org/blog/2010/09/09/book-review-banker-to-the-poor/>.
Jov, . "Banker to the Poor by Mohammed Yunus." Jov's Book Pyriamis: Books Is My Addiction, I Seek No Cure. Wordpress, 22 Feb 2012. Web. 28 Oct. 2013. <http://bibliojunkie.wordpress.com/2012/02/22/banker-to-the-poor-by-muhammad-yunus/>.
"Review: Banker to the Poor by Muhammad Yunus." The Book Nest. Blogspot, 15 Mar 2009. Web. 20   Oct. 2013. <http://corinnesbookreviews.blogspot.com/2009/03/review-banker-to-poor-     
             by-         muhammad-yunus.html>.
Richards, Donovan. "Book Review: Banker to the Poor." Where the Pen Meets Paper: Music, Book, and             Movie Reviews. Blogspot, 8 Apr 2011. Web. 20 Oct. 2013.                     
            <http://wherepenmeetspaper.blogspot.com/2011/04/book-review-banker-to-poor.html>.
Varunshukla, . "h1Book Review & Critique of “Banker to the Poor” by Muhammad Yunus."             
            Wordpress,             3 Nov 2009. Web. 28 Oct. 2013.
            <http://varunshukla.wordpress.com/2009/11/03/critique-            bankertothepoor/>.
Walker, Brenda. "Book Review of "Banker to the Poor" by Muhammad Yunus." Social Contract
            Journal. 11.3 (Spring 2001): n. page. Web. 28 Oct. 2013.                         
            <http://www.thesocialcontract.com/artman2/publish/tsc1103/article_964.shtml>.

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