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The premise of this book seemed too good to be true. A bank based on trust. A bank focused on serving women in a country rampant with gender inequality. A bank that refused donor funds because they didn’t need it anymore. I was very curious about how all this worked and wanted to learn more about global development. Reading “Banker to the Poor” felt like a breath of fresh air. It was nice to see how much good this company brought into the world. While it offers a biased look at global development, I was very impressed with how huge the company expanded.
Grameen Bank started when Yunus, an economics professor, met the poor women of Jobra village. After interviewing them, he learned that many of them sold their own goods but were indebted to the traders they bought raw materials from since they couldn’t afford to buy their own. After selling their goods, they had to pay the traders back at an extremely high rate and only made enough to continue this slave-like cycle the next day. Yunus decided to give these women money to buy the raw materials themselves allowing them to have enough money left over to expand their business. Grameen Bank was then born.
I think the key to their success was that the company’s organization created incentives that reinforced its goals. For example, Grameen wanted to attract employees with the purest intentions, so they don’t allow anyone to work in the head office until they’ve spent years in the rural branches. While the working conditions are harsh, this reduces corruption or mismanagement. The bank is organized to best serve its customers despite the extra work this creates. One aspect I liked was the process taken before opening a bank in a new village. The village manager first heavily researches the village, then gathers the community so he could hold a detailed presentation of how the bank operates, and finally asks the village if they’ll accept Grameen. I appreciated how they respected the village’s wishes first. Staff members also personally designed the loans for its customers and were very forgiving during natural disasters or when personal issues occurred. This level of customization shows how the customers needs mattered most.
While learning about the bank, I was often taken aback by the reasoning behind several of their policies. They operate on a completely different set of principles. For example, the author would rarely forgive people’s loans even during the aftermath of natural disasters. He said it would ruin the women’s self confidence, so he made the loans long term instead. In America, if I were to hear about a bank refusing to forgive someone’s loans, I’d immediately think the bank’s cruel and only cares about money. But here, villages generally treat these women as burdens, so being unable to pay a loan back would be a huge failure to them. The policy is actually meant to sustain the women’s self confidence. I had several moments like this while reading it, so the book felt very refreshing to read since it offered new global perspectives I wasn’t exposing myself to before.
The author’s work with Grameen Bank also countered several common beliefs about global development. It’s often thought that the poor stay poor because they’re illiterate or untrained, but he believes the real reason is because they only make enough to survive the next day and are thus never able to move up financially. Grameen Bank illustrated the power credit can bring them and dispelled illiteracy and the lack of training as reasons the poor remain poor. The author also highlights the bureaucratic inefficiencies of multilateral aid agencies and their neglect of the poorest communities. Projects meant to help the poor often don’t reach the poorest of the poor. That’s a community that has often been neglected by aid agencies and is precisely who Yunus intended to help. He believes the welfare of this community is a better indicator of development than the metrics we use today.
One major critique I had was that the author is TERRIBLE at expressing his critic’s viewpoints. He’d always gloss over all the bank’s shortcomings and wouldn’t explain them fully. In his defense, I do see how it’s hard to offer valid arguments of people who oppose you, but the book just feels so one-sided. It’s a bit too preachy at times, and I think this can be explained by the not so subtle air of arrogance throughout the book especially when he reproduced conversations he had with his critics. I also wish he went into more detail about his bureaucratic struggles with the government and detailed all the failures he had initially.
Overall, I’m happy that I read this book because it reminded me that global poverty isn’t something we should ignore. One line that made me really think was when he said that poverty belongs in a museum, and one day, people in the future will look back and wonder how the rest of the world let so many people die from easily preventable causes. It made me realize I want to work towards changing this. Yunus also briefly mentioned his vision for social entrepreneurship’s place in capitalism. His plan was roughly sketched and pretty far off from our current system, but it also reignited my interest in social entrepreneurship and made me feel like it’s a real and possible venture to pursue.
Grameen Bank started when Yunus, an economics professor, met the poor women of Jobra village. After interviewing them, he learned that many of them sold their own goods but were indebted to the traders they bought raw materials from since they couldn’t afford to buy their own. After selling their goods, they had to pay the traders back at an extremely high rate and only made enough to continue this slave-like cycle the next day. Yunus decided to give these women money to buy the raw materials themselves allowing them to have enough money left over to expand their business. Grameen Bank was then born.
I think the key to their success was that the company’s organization created incentives that reinforced its goals. For example, Grameen wanted to attract employees with the purest intentions, so they don’t allow anyone to work in the head office until they’ve spent years in the rural branches. While the working conditions are harsh, this reduces corruption or mismanagement. The bank is organized to best serve its customers despite the extra work this creates. One aspect I liked was the process taken before opening a bank in a new village. The village manager first heavily researches the village, then gathers the community so he could hold a detailed presentation of how the bank operates, and finally asks the village if they’ll accept Grameen. I appreciated how they respected the village’s wishes first. Staff members also personally designed the loans for its customers and were very forgiving during natural disasters or when personal issues occurred. This level of customization shows how the customers needs mattered most.
While learning about the bank, I was often taken aback by the reasoning behind several of their policies. They operate on a completely different set of principles. For example, the author would rarely forgive people’s loans even during the aftermath of natural disasters. He said it would ruin the women’s self confidence, so he made the loans long term instead. In America, if I were to hear about a bank refusing to forgive someone’s loans, I’d immediately think the bank’s cruel and only cares about money. But here, villages generally treat these women as burdens, so being unable to pay a loan back would be a huge failure to them. The policy is actually meant to sustain the women’s self confidence. I had several moments like this while reading it, so the book felt very refreshing to read since it offered new global perspectives I wasn’t exposing myself to before.
The author’s work with Grameen Bank also countered several common beliefs about global development. It’s often thought that the poor stay poor because they’re illiterate or untrained, but he believes the real reason is because they only make enough to survive the next day and are thus never able to move up financially. Grameen Bank illustrated the power credit can bring them and dispelled illiteracy and the lack of training as reasons the poor remain poor. The author also highlights the bureaucratic inefficiencies of multilateral aid agencies and their neglect of the poorest communities. Projects meant to help the poor often don’t reach the poorest of the poor. That’s a community that has often been neglected by aid agencies and is precisely who Yunus intended to help. He believes the welfare of this community is a better indicator of development than the metrics we use today.
One major critique I had was that the author is TERRIBLE at expressing his critic’s viewpoints. He’d always gloss over all the bank’s shortcomings and wouldn’t explain them fully. In his defense, I do see how it’s hard to offer valid arguments of people who oppose you, but the book just feels so one-sided. It’s a bit too preachy at times, and I think this can be explained by the not so subtle air of arrogance throughout the book especially when he reproduced conversations he had with his critics. I also wish he went into more detail about his bureaucratic struggles with the government and detailed all the failures he had initially.
Overall, I’m happy that I read this book because it reminded me that global poverty isn’t something we should ignore. One line that made me really think was when he said that poverty belongs in a museum, and one day, people in the future will look back and wonder how the rest of the world let so many people die from easily preventable causes. It made me realize I want to work towards changing this. Yunus also briefly mentioned his vision for social entrepreneurship’s place in capitalism. His plan was roughly sketched and pretty far off from our current system, but it also reignited my interest in social entrepreneurship and made me feel like it’s a real and possible venture to pursue.
challenging
inspiring
medium-paced
Before reading this book I knew next to nothing about micro-lending. I had heard a little bit about it and how those who received these micro-loans repaid at an astonishingly high rate, but that was all. After reading this book, I may not totally understand how beneficial micro-credit is, but Muhammad Yunus' example and passion makes me believe that micro-credit may be one of the biggest keys to ending poverty in our lifetime. The first half is mostly autobiographical as it follows Mr. Yunus from his time as a child in Bangladesh to his time as a student in the U.S. leading the charge for Bangladeshi independence from Pakistan to his founding of the Grameen Bank. The second half is mostly historical and analytical as it charts Grameen's steady successes and expansions as a bank for the rural poor in Bangladesh to its being used as a model for other micro-credit groups across the globe. Throughout this book Mr. Yunus' compassion for the poor and his strong desire to alleviate poverty completely through such means as micro-credit is evident. Both of these halves combine to make this book both highly readable and highly enjoyable. The only downside to this book is the lack of hard data. Most books I've read that are similar to this include lots of economic data, but few individual examples highlighting the data's real-world applications. This book has the opposite problem. There are a lot of heart-warming examples of young, poverty-stricken women who have been able to provide for themselves and their families through these micro-loans, but there is almost no data about how, or even if, micro-credit has lead to a decline in the poverty rate where micro-credit is widely available. Based on the spread of the Grameen model to other countries praised by Mr. Yunus in this book, I have no doubt that it has helped poverty-stricken people and countries, but some hard data would've been much appreciated. Still this is a fine book and I highly recommend it to anyone who is interested in international development and/or micro-credit.
I love the ideas of merging social consciousness with entrepreneurship in this book. It is truly eye-opening. I'm sold on the Grameen system.
Lovely book about Dr. Muhammad Yunus, basically the inventor of the micro finance movement. He saw a need in his community and he decided to solve the problem by giving out low-interest rate loans, especially targeting women. Yay! One of the factors I most enjoyed about this book is how Dr. Yunus candidly portrays himself as an academic stumbling along in the real-world trying to figure out how to apply his textbook theories to life. He does (continues to do) a fantastic job. This book is less a memoir and more of a story about a man creating and implanting a business plan. He briefly touches on his current personal life, reflects for a bit on his childhood but for the most part this book is solely about the birth of Grameen Bank. He also details how Grammen Bank positively impacts the lives of the poor it lends to. "In 1992, some four hundred Grameen borrowers were elected to union councils, and in 1996, Grameen borrowers led the way to an almost unthinkable feat-more women voted in the national election than men, which helped to nearly wipe out a political party that had taken positions against women's rights out of Parliament. [...] These astonishing results proved to us that once Grameen borrowers grew in self-esteem they would readily express their opinions" (pg. 196) and thus a baby civil society is born!
IQ "All I really wanted was to solve an immediate problem. Out of sheer frustration, I had questioned the most basic banking premise of collateral. I did not know if I was right. I had no idea what I was getting myself into. I was walking blind and learning as I went along. My work became a struggle to show that the financial untouchables are actually touchable, even huggable. To my great surprise, the repayment of loans by people who borrow without collateral has proven to be much better than those whose borrowings are secured by assets. Indeed, more than 98 percent of our loans are repaid. The poor know that this credit is their only opportunity to break out of poverty. they do not have any cushion whatsoever to fall back on If they fall afoul of this one own, they will have lost their one and only chance to get out of the rut" (pgs. 57-58).
Dr. Yunus makes an interesting point for helping the rural poor before the urban poor (well interesting to me. Most people probably already knew this). He says "If we alleviate suffering in the countryside, that will reduce the pressure on the poor to rush to Dhaka and clog the streets" (pg. 94), Dhaka is the capital of Bangladesh. We definitely tend to neglect the rural poor, especially in America. Another new-to-me fact I learned was about the inefficiency of foreign aid. "Most foreign aid goes to building roads, bridges and so forth, which are supposed to help the poor 'in the long run'. The only people really benefiting from most of this aid, however, are those who are already wealth. Foreign aid becomes a kind of charity for the powerful while the poor get poorer. If aid is to have some impact on the lies of the destitute, it must be rerouted so that it reaches pro households more directly. I believe that a new aid methodology has be to be designed with new objectives. In fact, the direct elimination of poverty should be the objective of all development aid. Development should be viewed as a human rights issue, not as a question of simply increasing the gross national product (GP). When the national economy picks up, the situation of the poor is not necessarily improved. Therefore development should be redefined. IT should refer only to a positive measurable change in per capita income of the bottom 50 percent of the population" (pg. 146), whew. I completely agree! Western governments really need to reevaluate their foreign aid budgets and work on educating the public about how much money is really needed to be effective (and where this money should go) especially in these trying economic times.
I hope the issues around micro finance continue to be investigated and the things are straightened out, there should be no intimidation of people in extreme poverty simply because they fall behind on their loan payments. Then micro finance begins to resemble the horrid moneylenders.
IQ "All I really wanted was to solve an immediate problem. Out of sheer frustration, I had questioned the most basic banking premise of collateral. I did not know if I was right. I had no idea what I was getting myself into. I was walking blind and learning as I went along. My work became a struggle to show that the financial untouchables are actually touchable, even huggable. To my great surprise, the repayment of loans by people who borrow without collateral has proven to be much better than those whose borrowings are secured by assets. Indeed, more than 98 percent of our loans are repaid. The poor know that this credit is their only opportunity to break out of poverty. they do not have any cushion whatsoever to fall back on If they fall afoul of this one own, they will have lost their one and only chance to get out of the rut" (pgs. 57-58).
Dr. Yunus makes an interesting point for helping the rural poor before the urban poor (well interesting to me. Most people probably already knew this). He says "If we alleviate suffering in the countryside, that will reduce the pressure on the poor to rush to Dhaka and clog the streets" (pg. 94), Dhaka is the capital of Bangladesh. We definitely tend to neglect the rural poor, especially in America. Another new-to-me fact I learned was about the inefficiency of foreign aid. "Most foreign aid goes to building roads, bridges and so forth, which are supposed to help the poor 'in the long run'. The only people really benefiting from most of this aid, however, are those who are already wealth. Foreign aid becomes a kind of charity for the powerful while the poor get poorer. If aid is to have some impact on the lies of the destitute, it must be rerouted so that it reaches pro households more directly. I believe that a new aid methodology has be to be designed with new objectives. In fact, the direct elimination of poverty should be the objective of all development aid. Development should be viewed as a human rights issue, not as a question of simply increasing the gross national product (GP). When the national economy picks up, the situation of the poor is not necessarily improved. Therefore development should be redefined. IT should refer only to a positive measurable change in per capita income of the bottom 50 percent of the population" (pg. 146), whew. I completely agree! Western governments really need to reevaluate their foreign aid budgets and work on educating the public about how much money is really needed to be effective (and where this money should go) especially in these trying economic times.
I hope the issues around micro finance continue to be investigated and the things are straightened out, there should be no intimidation of people in extreme poverty simply because they fall behind on their loan payments. Then micro finance begins to resemble the horrid moneylenders.
While building my schedule for next year, my goal was to take as few economics courses as possible. After a year of studying economics, I can't help but feel that economic theories are far from real life problems (and yeah okay, I know that real life economics is different from what we study in uni but still). Economics seems miles away from real life.
Mohammad Yunus, a Bengali Economics professor has the exact same feeling when he realizes his lectures are a world away from the poverty of Bangladesh. He walks around a village near his university and sees that the poor people of the village work incredibly hard and yet remain poor due to their dependence on others. Many of them are stuck in a poverty trap. He realizes that their lack of capital stops them from being able to earn more money and leave poverty.
And so, Yunus decides to create a bank that focuses on lending money to the poor. The idea is that through a relatively small amount of money, poor people can use their existing skills and break out of the poverty trap. With some capital, they can begin a business and start earning money independently.
This was an eye opening book for me. We read Elizabeth Anderson's work this year and discussed the way huge capitalist firms aren't liberal. When Adam Smith was writing about that pin factory, he wasn't talking about Amazon or Google. However, he very much was talking about a Bengali woman making fabric. By giving these people a loan, Yunus effectively liberates them. It's totally the division of labor, the professional specialization that Adam Smith speaks of.
And it's fascinating because who would have thought the answer to poverty could be "everyone should be a freelancer!". I'm used to thinking about self-employment as a risky move that can leave you in a very shaky financial situation but Yunus shows that for the poor of Bangladesh (and other places), self-employment allows them to use their skills and potential in the best way.
It also brings a question to the table. Elizabeth Anderson writes about the process that the West went through in order to switch from small scale liberalism to large scale capitalism. If Yunus' bank continues, will the same happen in Bangladesh? Is large scale capitalism a natural continuation of a business? A Bengali woman opens a fabric store, if she's successful, she will have to hire more people and well, with enough luck, she'll become a massive business. Is this what we want?
The alternative of working for someone like that also isn't great (as Elizabeth Anderson shows), are these our only options? When alleviating poverty, are we trying to replicate the success of the West or is there room to consider alternative economic systems?
There's a moment where Yunus says economics sees the world as employees and employers but simply ignores the self-employed. This is a problem because places like Bangladesh actually have a lot of poor people who are self-employed but lack capital to truly make a decent profit. This was another one of those aha moments because our economics focus is so Western. We can't take a theory that works mathematically and attempt to force it onto countries if they don't have the same premises at play. Our solutions have to fit the problems. As a Bengali economist, Yunus is able to make them fit.
Yunus heavily criticizes programs that attempt to teach the poor new skills. He claims the poor already have all they need in order to succeed. They don't need handouts or long training sessions. By giving them a loan, they are held accountable. It's not charity, they have a stake in returning it. This keeps their dignity and allows them to succeed on their own terms.
I loved how Yunus describes the importance of organizations that are both for profit and for social improvement. The finance world needs to make room for social enterprises that manage to make a profit but also change the world for the better. It's both. This is something I'd like to remember next year when I start studying Business.
Man, there's so much that I found inspirational in this book. Yunus' bank was a grassroots initiative. Yunus and his team of students built this alone. Unlike banks chasing for money, Yunus focused on creating a community. My bank hasn't communicated with me in months but here's Yunus and his committed team helping their loaners with everything from education to life skills.
I loved hearing how this idea worked in Western countries as well. Hearing about the application of it in the USA and in Norway was especially interesting.
To conclude, I'm still going to avoid Econ courses but I've definitely been more bitter about Econ than it deserves. I want to take these ideas with me because it's just so cool that this bank built a bridge between economic theory and economic practice, that Yunus managed to make banking sound interesting.
What I'm Taking With Me
- My mental image of banking is pretty much Mary Poppins so I might be wrong about it.
- Yunus seems like such a nice guy, I'm so glad this is working and I hope he continues to make the world a better place.
- I loved learning how they dealt with religious leaders during the establishment of the banks and how the focus is on women. Like heck yeah, it's really changing the entire society.
- Next year when I'll be staring at graphs and crying, I want to remember that economics really can make people's lives better.
- Can we all be entrepreneurs? What if some people are just bad at managing a business? Is a loan (even a small one) helpful for everyone?
---------------------------------
“Economics must show that a market economy does not necessarily have to be a playground for "bloodthirsty" capitalists; it can be a challenging field for all good people who want to pilot the world in the right direction.”
This book just singlehandedly renewed my faith in economics. Review to come!
Mohammad Yunus, a Bengali Economics professor has the exact same feeling when he realizes his lectures are a world away from the poverty of Bangladesh. He walks around a village near his university and sees that the poor people of the village work incredibly hard and yet remain poor due to their dependence on others. Many of them are stuck in a poverty trap. He realizes that their lack of capital stops them from being able to earn more money and leave poverty.
And so, Yunus decides to create a bank that focuses on lending money to the poor. The idea is that through a relatively small amount of money, poor people can use their existing skills and break out of the poverty trap. With some capital, they can begin a business and start earning money independently.
This was an eye opening book for me. We read Elizabeth Anderson's work this year and discussed the way huge capitalist firms aren't liberal. When Adam Smith was writing about that pin factory, he wasn't talking about Amazon or Google. However, he very much was talking about a Bengali woman making fabric. By giving these people a loan, Yunus effectively liberates them. It's totally the division of labor, the professional specialization that Adam Smith speaks of.
And it's fascinating because who would have thought the answer to poverty could be "everyone should be a freelancer!". I'm used to thinking about self-employment as a risky move that can leave you in a very shaky financial situation but Yunus shows that for the poor of Bangladesh (and other places), self-employment allows them to use their skills and potential in the best way.
It also brings a question to the table. Elizabeth Anderson writes about the process that the West went through in order to switch from small scale liberalism to large scale capitalism. If Yunus' bank continues, will the same happen in Bangladesh? Is large scale capitalism a natural continuation of a business? A Bengali woman opens a fabric store, if she's successful, she will have to hire more people and well, with enough luck, she'll become a massive business. Is this what we want?
The alternative of working for someone like that also isn't great (as Elizabeth Anderson shows), are these our only options? When alleviating poverty, are we trying to replicate the success of the West or is there room to consider alternative economic systems?
There's a moment where Yunus says economics sees the world as employees and employers but simply ignores the self-employed. This is a problem because places like Bangladesh actually have a lot of poor people who are self-employed but lack capital to truly make a decent profit. This was another one of those aha moments because our economics focus is so Western. We can't take a theory that works mathematically and attempt to force it onto countries if they don't have the same premises at play. Our solutions have to fit the problems. As a Bengali economist, Yunus is able to make them fit.
Yunus heavily criticizes programs that attempt to teach the poor new skills. He claims the poor already have all they need in order to succeed. They don't need handouts or long training sessions. By giving them a loan, they are held accountable. It's not charity, they have a stake in returning it. This keeps their dignity and allows them to succeed on their own terms.
I loved how Yunus describes the importance of organizations that are both for profit and for social improvement. The finance world needs to make room for social enterprises that manage to make a profit but also change the world for the better. It's both. This is something I'd like to remember next year when I start studying Business.
Man, there's so much that I found inspirational in this book. Yunus' bank was a grassroots initiative. Yunus and his team of students built this alone. Unlike banks chasing for money, Yunus focused on creating a community. My bank hasn't communicated with me in months but here's Yunus and his committed team helping their loaners with everything from education to life skills.
I loved hearing how this idea worked in Western countries as well. Hearing about the application of it in the USA and in Norway was especially interesting.
To conclude, I'm still going to avoid Econ courses but I've definitely been more bitter about Econ than it deserves. I want to take these ideas with me because it's just so cool that this bank built a bridge between economic theory and economic practice, that Yunus managed to make banking sound interesting.
What I'm Taking With Me
- My mental image of banking is pretty much Mary Poppins so I might be wrong about it.
- Yunus seems like such a nice guy, I'm so glad this is working and I hope he continues to make the world a better place.
- I loved learning how they dealt with religious leaders during the establishment of the banks and how the focus is on women. Like heck yeah, it's really changing the entire society.
- Next year when I'll be staring at graphs and crying, I want to remember that economics really can make people's lives better.
- Can we all be entrepreneurs? What if some people are just bad at managing a business? Is a loan (even a small one) helpful for everyone?
---------------------------------
“Economics must show that a market economy does not necessarily have to be a playground for "bloodthirsty" capitalists; it can be a challenging field for all good people who want to pilot the world in the right direction.”
This book just singlehandedly renewed my faith in economics. Review to come!
Excellent book...what pushed me into the direction of studying more economic development.
I registered a book at BookCrossing.com!
http://www.BookCrossing.com/journal/13085109
http://www.BookCrossing.com/journal/13085109