[Marxism] Microcredit, microresults

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times, October 13, 2006
Microloan Pioneer and His Bank Win Nobel Peace Prize
By THE ASSOCIATED PRESS

Filed at 10:42 a.m. ET

OSLO, Norway (AP) -- Bangladeshi economist Muhammad Yunus and the Grameen 
Bank he founded won the Nobel Peace Prize on Friday for their pioneering 
use of tiny, seemingly insignificant loans -- microcredit -- to lift 
millions out of poverty.

Through Yunus's efforts and those of the bank he founded, poor people 
around the world, especially women, have been able to buy cows, a few 
chickens or the cell phone they desperately needed to get ahead.

The 65-year-old economist said he would use part of his share of the $1.4 
million award money to create a company to make low-cost, high-nutrition 
food for the poor. The rest would go toward setting up an eye hospital for 
the poor in Bangladesh, he said.

The food company, to be known as Social Business Enterprise, will sell food 
for a nominal price, he said.

''Lasting peace cannot be achieved unless large population groups find ways 
in which to break out of poverty,'' the Nobel Committee said in its 
citation. ''Microcredit is one such means. Development from below also 
serves to advance democracy and human rights.''

Yunus is the first Noble Prize winner from Bangladesh, a poverty-stricken 
nation of about 141 million people located on the Bay on Bengal.

''I am so, so happy, it's really a great news for the whole nation,'' Yunus 
told The Associated Press shortly after the prize was announced. He was 
reached by telephone at his home in the Bangladeshi capital Dhaka.

Grameen Bank was the first lender to hand out microcredit, giving very 
small loans to poor Bangladeshis who did not qualify for loans from 
conventional banks. No collateral is needed and repayment is based on an 
honor system.

Anyone can qualify for a loan -- the average is about $200 -- but 
recipients are put in groups of five. Once two members of the group have 
borrowed money, the other three must wait for the funds to be repaid before 
they get a loan.

Grameen, which means rural in the Bengali language, says the method 
encourages social responsibility. The results are hard to argue with -- the 
bank says it has a 99 percent repayment rate.

Since Yunus gave out his first loans in 1974, microcredit schemes have 
spread throughout the developing world and are now considered a key to 
alleviating poverty and spurring development.

Yunus told The Associated Press in a 2004 interview that his ''eureka 
moment'' came while chatting to a shy woman weaving bamboo stools with 
calloused fingers.

Sufia Begum was a 21-year-old villager and a mother of three when the 
economics professor met her in 1974 and asked her how much she earned. She 
replied that she borrowed about five taka (nine cents) from a middleman for 
the bamboo for each stool.

All but two cents of that went back to the lender.

''I thought to myself, my God, for five takas she has become a slave,'' 
Yunus said in the interview.

''I couldn't understand how she could be so poor when she was making such 
beautiful things,'' he said.

The following day, he and his students did a survey in the woman's village, 
Jobra, and discovered that 43 of the villagers owed a total of 856 taka 
(about $27).

''I couldn't take it anymore. I put the $27 out there and told them they 
could liberate themselves,'' he said, and pay him back whenever they could. 
The idea was to buy their own materials and cut out the middleman.

They all paid him back, day by day, over a year, and his spur-of-the-moment 
generosity grew into a full-fledged business concept that came to fruition 
with the founding of Grameen Bank in 1983.

In the years since, the bank says it has lent $5.72 billion to more than 6 
million Bangladeshis.

Worldwide, microcredit financing is estimated to have helped some 17 
million people.

''Yunus and Grameen Bank have shown that even the poorest of the poor can 
work to bring about their own development,'' the Nobel citation said.

Today, the bank claims to have 6.6 million borrowers, 97 percent of whom 
are women, and provides services in more than 70,000 villages in 
Bangladesh. Its model of micro-financing has inspired similar efforts 
around the world.

The success has allowed Grameen Bank to expand its credit to include 
housing loans, financing for irrigation and fisheries as well as 
traditional savings accounts.

One of Yunus' aides, Dipal Barua, said the award was an ''honor for 
millions of poor women who have made this possible.''

Ole Danbolt Mjoes, chairman of the Nobel committee that awarded the prize, 
told The AP that Yunus's efforts have had visible results: ''We are saying 
microcredit is an important contribution that cannot fix everything, but is 
a big help.''

Mjoes said at least three previous prizes have recognized the need to 
alleviate poverty and hunger.

Those were the 1970 prize to American agriculturalist Norman Borlaug for 
his program in Mexico to feed the hungry by improving wheat yields; the 
1969 award to the Geneva-based International Labor Organization for its 
efforts to ease poverty; and the 1949 award to Baron John Boyd Orr, as head 
of the U.N. Food and Agricultural Organization who worked to persuade 
nations to make it a public policy to feed the poor.

The peace prize was the sixth and last Nobel prize announced this year. The 
others, for physics, chemistry, medicine, literature and economics, were 
announced in Stockholm, Sweden.

Microcredit, microresults
by Gina Neff

(clip)

But while the press and the global network of localists rave about the 
bank's lending to "landless" women, the miracle dissolves on closer 
inspection. For example, Grameen rules insist that its borrowers own their 
homes - not unlike the assumption that shoeless women have bootstraps. 
Evidently Bangladeshi homeless women don't count as the poorest of the 
poor. And unfortunately, Grameen borrowers are staying poor. After 8 years 
of borrowing, 55% of Grameen households still aren't able to meet their 
basic nutritional needs - so many women are using their loans to buy food 
rather than invest in business. That's a figure that the press fails to 
mention. Ditto the World Bank, which in its 1995 study of Grameen, focused 
mainly on the bank's financial viability, determining if the program was 
breaking even or, better yet, turning a profit. It's not; unfortunately, 
only foreign grants are keeping it afloat.

Yunus himself lustily defends his vision of for-profit lending to the poor. 
In his words, capitalism doesn't have to be the "handmaiden of the rich"; 
even poor people can benefit from the system if they are only given the 
chance to use their innate business savvy. But even though part of his 
mission is to graduate lenders into commercial banking, and the World Bank 
sees lenders' graduation a sign of the program's viability, that's just not 
happening. According to the World Bank report, "The [Grameen] Bank may have 
a market niche because its borrowers are dependent on the program, but over 
the long run this relationship could render the Grameen Bank vulnerable. 
Unless borrowers' graduation from low-level incomes to higher levels (if 
not from the program entirely) is encouraged or achieved many members will 
become permanently dependent on Grameen Bank credit and services." The same 
study found that Grameen had no significant impact on women's wages in 
rural villages, although it did boost men's and children's wages. And with 
all the hype about Grameen's being the largest microlending program in the 
world, one could never guess that loans to women have remained a mere 5% of 
the total amount lent in the Bangladeshi countryside since the 1980s.

full: http://www.leftbusinessobserver.com/Micro.html

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