Bank on them!

Courtesy: Santa Clara University

Once, on my way back home, I struck up a conversation with an auto driver about his job.

He did not own the auto he was driving. He had taken it on rent for INR 150.00 for half a day, from 6:00 am to 6:00 pm. For the other half, it was rented out to another driver. I wondered if it would not make sense to give that money as installment, and buy an auto.

“The bank will not give me loan”, he said.

Bangladesh witnessed a severe famine in 1974. At that time, Muhammad Yunus was working as Professor and Head of Department, Economics, in Chittagong University. The acute poverty he saw all around made him question the applicability of what he taught in the classroom to the real world.

To understand of what made people poor, he started visiting a nearby village, Jobra. His quest led him to a simple discovery – poor people continue to remain poor primarily because they do not have access to capital. A bank normally gave loan only to a person who had enough money, a person who could give it a collateral. And so, there was little chance of escaping the cycle of poverty.

His first loan, consisting of USD 27.00 from his own pocket, was made to 42 women in the village, who made a net profit of USD 0.02 each on the loan. This led to the idea of microcredit through an institution, and eventually took the form of Grameen Bank.

Grameen has come a long way since that simple lending experiment of Professor Yunus. Over seven million have borrowed from Grameen till date. Muhammad Yunus and Grameen Bank won the Nobel Prize in 2006 “for their efforts to create economic and social development from below“.

“It’s not people who aren’t credit-worthy. It’s banks that aren’t people worthy.”

- Muhammad Yunus

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