Monday, June 07, 2004
Micro Credit
I have not blogged for a considerable period of time now and happy to note that some closest friends and family have been complaining. Good to know that atleast *someone* actually reads this stuff..
I guess one of the reasons I didnt write is nothing really "shook me up" enough to take out the finger (so to speak) and start typing away. I recently heard from a blogger that the person actually writes out something during the night and then finalizes it in the morning. I can almost never do that. My writing is a steady flow of consciousness. I dont think much during writing , it works best when its just a flow of awareness , a train of crystal clear realization, a rapid procession of ideas that are waiting ,bound in chains of thought, peeking out, waiting expectantly to leap out at the at the first opportunity when they are set free, on to the screen.That is why by necessity something should be sufficiently interesting and get me excited and worked up enough to actually blog !
There was such an idea which I hapenned to see on television a few days back which actually forced me to say that I have to blog this ! I was watching Charlie Rose ( a great show btw, just a no frills round oak table, and sublime, engaging, literate,intelligent conversation between Rose and a wide variety of the most interesting and talented people in the world ) on PBS on Friday night. The guest this night was a man names Mohammed Yunus. He is the founder of the Grameen Bank in Bangladesh. Basically this person was the pioneer of a concept called "micro credit". Yunus a PhD in economics and a professor of economics in Bangladesh approached all the major banks in Bangladesh in 1977 asking them a simple question. Why dont you give credit to the poor ? The bank managers baulked at the idea. They told him they dont have any collateral to provide, if there is a bad debt then we have no way of getting our money back and so on.He then started personally providing his name as the guranteer for the loans.Eventually he realized that it would be better if they opened their own bank which they did in 1983, the Grameen bank.Today the Grameen bank provides micro-credit loans without a collateral to more than 3 million people in Bangladesh.
Several absolutely fascinating things came out of this discussion. The professor said that he believed that as, the right to live, right to work etc are basic human rights in most countries of the world so should a right to credit. He said that about 3 billion people in the world (about half the population of the world) still lives under 2$ a day. The biggest challenge facing mankind today is to raise their level of living, to eradicate this scourge of poverty.The promise of science and technology in making our lives "easier" cannot be fully realized if half the world is still living even without any basic means to sustain themselves.So what to do ?
To add to that (my comments) it is not possible that you can expect everyone to have an advanced education like some of us have had the good fortune of having. You cannot reasonably expect every villager in a third world country to have the one thing which would take him out of the poverty trap,education. However and this is key, if provided the bed rock , the seed , the very fundamental starting point of a business , i.e capital they can perhaps atleast build a small business and can lead a better life. For that they need credit. But no bank in the world today would give them this accutely needed resource. So basically this half of the world is denied even an opportunity to "do something with their life" ..actually forget about that (to worry about that is the perogative of brooding arm chair pseudo intellectuals like us), they are not being even an opportunity to live a life in which they have enough to eat and a decent place to stay ! The Grameen bank seeks to rectify that..and as mentioned above it provides small loans to those people who want to start their own businesses and its been a very big success with a staggering 95% repayment rate.
I like this idea , it appeals to me in the "Give a person a fish, you can feed him for a day, teach him to fish you can feed him forever" kind of way...
He also mentioned one more very interesting fact. He said that 95% of those loans were made to woman, because they realized over time that they were the ones which had a much higher promise of return. He said that in third world countries poor women become experts at money management, they become true masters of stretching the dollar as far as it can go. Over a period of time, it becomes ingrained in their genes how to make do with the meagre money their husbands provide, how to make the most of it. That is why they found that woman tend to use their earnings wisely, investing it prudently for the children's education and procuring healthy food etc..Moreover they are the ones who use their traditional house hold skills to run sucessful businesses (like selling milk, thrashing out paddy, making traditional food items and handicrafts ).
Overall I think its a fantastic and potentially "changing the face of the world" idea. It is something which has the potential of providing everyone in the world a chance, an opportunity , atleast a faint beacon of hope to lead a somewhat more comfortable existence :) ¶ permalink
I guess one of the reasons I didnt write is nothing really "shook me up" enough to take out the finger (so to speak) and start typing away. I recently heard from a blogger that the person actually writes out something during the night and then finalizes it in the morning. I can almost never do that. My writing is a steady flow of consciousness. I dont think much during writing , it works best when its just a flow of awareness , a train of crystal clear realization, a rapid procession of ideas that are waiting ,bound in chains of thought, peeking out, waiting expectantly to leap out at the at the first opportunity when they are set free, on to the screen.That is why by necessity something should be sufficiently interesting and get me excited and worked up enough to actually blog !
There was such an idea which I hapenned to see on television a few days back which actually forced me to say that I have to blog this ! I was watching Charlie Rose ( a great show btw, just a no frills round oak table, and sublime, engaging, literate,intelligent conversation between Rose and a wide variety of the most interesting and talented people in the world ) on PBS on Friday night. The guest this night was a man names Mohammed Yunus. He is the founder of the Grameen Bank in Bangladesh. Basically this person was the pioneer of a concept called "micro credit". Yunus a PhD in economics and a professor of economics in Bangladesh approached all the major banks in Bangladesh in 1977 asking them a simple question. Why dont you give credit to the poor ? The bank managers baulked at the idea. They told him they dont have any collateral to provide, if there is a bad debt then we have no way of getting our money back and so on.He then started personally providing his name as the guranteer for the loans.Eventually he realized that it would be better if they opened their own bank which they did in 1983, the Grameen bank.Today the Grameen bank provides micro-credit loans without a collateral to more than 3 million people in Bangladesh.
Several absolutely fascinating things came out of this discussion. The professor said that he believed that as, the right to live, right to work etc are basic human rights in most countries of the world so should a right to credit. He said that about 3 billion people in the world (about half the population of the world) still lives under 2$ a day. The biggest challenge facing mankind today is to raise their level of living, to eradicate this scourge of poverty.The promise of science and technology in making our lives "easier" cannot be fully realized if half the world is still living even without any basic means to sustain themselves.So what to do ?
To add to that (my comments) it is not possible that you can expect everyone to have an advanced education like some of us have had the good fortune of having. You cannot reasonably expect every villager in a third world country to have the one thing which would take him out of the poverty trap,education. However and this is key, if provided the bed rock , the seed , the very fundamental starting point of a business , i.e capital they can perhaps atleast build a small business and can lead a better life. For that they need credit. But no bank in the world today would give them this accutely needed resource. So basically this half of the world is denied even an opportunity to "do something with their life" ..actually forget about that (to worry about that is the perogative of brooding arm chair pseudo intellectuals like us), they are not being even an opportunity to live a life in which they have enough to eat and a decent place to stay ! The Grameen bank seeks to rectify that..and as mentioned above it provides small loans to those people who want to start their own businesses and its been a very big success with a staggering 95% repayment rate.
I like this idea , it appeals to me in the "Give a person a fish, you can feed him for a day, teach him to fish you can feed him forever" kind of way...
He also mentioned one more very interesting fact. He said that 95% of those loans were made to woman, because they realized over time that they were the ones which had a much higher promise of return. He said that in third world countries poor women become experts at money management, they become true masters of stretching the dollar as far as it can go. Over a period of time, it becomes ingrained in their genes how to make do with the meagre money their husbands provide, how to make the most of it. That is why they found that woman tend to use their earnings wisely, investing it prudently for the children's education and procuring healthy food etc..Moreover they are the ones who use their traditional house hold skills to run sucessful businesses (like selling milk, thrashing out paddy, making traditional food items and handicrafts ).
Overall I think its a fantastic and potentially "changing the face of the world" idea. It is something which has the potential of providing everyone in the world a chance, an opportunity , atleast a faint beacon of hope to lead a somewhat more comfortable existence :) ¶ permalink
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And since you're so excited by the concept of parallel comments, I shall do the needful cut-paste and fill up your comment space here as well :)
It is indeed a revolutionary idea! To draw a sort of parallel, this is akin to the expectation of work experience in the job market today. If every position requires work experience, then where are the entry-level jobs that give you the experience needed to get these 'better' jobs? The first step has to be taken at some point to break out of the chicken-egg cycle.
I see what 'xyz' is trying to say too though. Money-lenders have traditionally played a big part in offering credit to the poor. Some thoughts do come to mind in that regard --- The 95% repayment rate is impressive indeed, but I naturally wonder if that is the result of cautious and careful picking of loan applicants on their part.. the 'sure bets' basically? (Am curious to see their loan acceptance/rejection rate) Or is just giving credit enough to make even the most clueless yokel be a good businessman? Also how does Grameen Bank handle the defaulters? Once a villager cannot pay up, does the bank essentially transform into the quintessential movie-villain bania (although in a nice business suit), slapping high interest rates and taking control of assets?
I don't question the nobility of the system. Being given credit is one of the very basic dignities one should be afforded. Assure a man you have faith in him, and he can often conquer the world. And if that faith can translate into an actual monetary amount, then more power to him!
It is indeed a revolutionary idea! To draw a sort of parallel, this is akin to the expectation of work experience in the job market today. If every position requires work experience, then where are the entry-level jobs that give you the experience needed to get these 'better' jobs? The first step has to be taken at some point to break out of the chicken-egg cycle.
I see what 'xyz' is trying to say too though. Money-lenders have traditionally played a big part in offering credit to the poor. Some thoughts do come to mind in that regard --- The 95% repayment rate is impressive indeed, but I naturally wonder if that is the result of cautious and careful picking of loan applicants on their part.. the 'sure bets' basically? (Am curious to see their loan acceptance/rejection rate) Or is just giving credit enough to make even the most clueless yokel be a good businessman? Also how does Grameen Bank handle the defaulters? Once a villager cannot pay up, does the bank essentially transform into the quintessential movie-villain bania (although in a nice business suit), slapping high interest rates and taking control of assets?
I don't question the nobility of the system. Being given credit is one of the very basic dignities one should be afforded. Assure a man you have faith in him, and he can often conquer the world. And if that faith can translate into an actual monetary amount, then more power to him!
(transferred comment from Squawkbox)
Posted Thu 17 Jun 8:32 AM GMT by Ekta
hey..neat blog...especially interesting was the woman getting 95% of part!...What a change over a period of time!
And yup..people are reading your blogs!
Posted Thu 17 Jun 8:32 AM GMT by Ekta
hey..neat blog...especially interesting was the woman getting 95% of part!...What a change over a period of time!
And yup..people are reading your blogs!
# posted by 
: 10:31 PM, July 01, 2004
: 10:31 PM, July 01, 2004
(transferred comment from Squawkbox)
Posted Sat 19 Jun 8:43 AM GMT by xyz
There is nothing new in the concept , although calling it a bank is maybe new , and definitely ‘ micro credit ‘ is no pioneering concept , every time u take out ur credit card to buy a loaf of bread u r getting a “ micro credit ‘ u must realize that the credit card companies do not keep any collateral ,while extending credit to u , but just depend upon the hope that u will return ,and also on there retinue of ‘ gondas ‘ ( to recover the money if there r any defaulters )
Moneylenders all over the world have been doing this for centuries , providing credit to the poor is a centuries old concept . in fact the whole concept of banks has been derived off them ,
Fed by a constant diet of Hindi cinema one has grown up believing that the moneylenders are basically evil people , There r basically two types of moneylenders , one who keeps something ‘ girvi ‘ be it land , jewelry , property(house) etc . And the second type who has a entourage of ‘ gundas ‘ who threatens the defaulters . In both the cases the money lender is seen in bad light . Now , one has to have a business model if one has to operate , I do not believe that the said gentleman does not have any such formula to recover the money .
It is not that I do not appreciate your thoughts and intentions , my point here is that the whole concept is not new, What is new is perhaps that this particular gentleman has a P.H.D degree in economics ,and appears in shows with round oak tables and rose’s etc .
All your ancestors ‘ Banyas ‘ have been doing the same thing for centuries ,so feel proud , maybe you too can join there bandwagon after gaining a couple of P.H.D ‘s. And then converse with roses sitting on oak tables.
PS : I appreciate the noble thoughts though.
Posted Sat 19 Jun 8:43 AM GMT by xyz
There is nothing new in the concept , although calling it a bank is maybe new , and definitely ‘ micro credit ‘ is no pioneering concept , every time u take out ur credit card to buy a loaf of bread u r getting a “ micro credit ‘ u must realize that the credit card companies do not keep any collateral ,while extending credit to u , but just depend upon the hope that u will return ,and also on there retinue of ‘ gondas ‘ ( to recover the money if there r any defaulters )
Moneylenders all over the world have been doing this for centuries , providing credit to the poor is a centuries old concept . in fact the whole concept of banks has been derived off them ,
Fed by a constant diet of Hindi cinema one has grown up believing that the moneylenders are basically evil people , There r basically two types of moneylenders , one who keeps something ‘ girvi ‘ be it land , jewelry , property(house) etc . And the second type who has a entourage of ‘ gundas ‘ who threatens the defaulters . In both the cases the money lender is seen in bad light . Now , one has to have a business model if one has to operate , I do not believe that the said gentleman does not have any such formula to recover the money .
It is not that I do not appreciate your thoughts and intentions , my point here is that the whole concept is not new, What is new is perhaps that this particular gentleman has a P.H.D degree in economics ,and appears in shows with round oak tables and rose’s etc .
All your ancestors ‘ Banyas ‘ have been doing the same thing for centuries ,so feel proud , maybe you too can join there bandwagon after gaining a couple of P.H.D ‘s. And then converse with roses sitting on oak tables.
PS : I appreciate the noble thoughts though.
# posted by : 10:33 PM, July 01, 2004
: 10:33 PM, July 01, 2004
(transferred comment from Squawkbox)
Posted Wed 23 Jun 9:17 PM GMT by obviousmuse
xyz well said ! Ofcourse the concept is not new . you are right about that.
Lets tackle the ground realities though, credit cards ? Do people in India's villages have access to credit cards ? even if they have credit cards I am not sure they would have enough of a credit limit to actually start a business..
I totally agree to what you say about the fact that its a business, and there has to be business model. Perhaps the one thing that I did not mention in the post was that difference between a conventional "lending" enviornment and this one. This is also a more social, collective sort of thing. In many cases a person is assigned to a group of seven people who would include mentors who in addition to providing business know-how also exert the necessary pressure to ensure that the individual does not slack off but works towards his business. So its not only a model of micro-credit, but combined with "community support" really leads to a different way of doing business.
But you are right I have not researched this enough and I should find out what kind of gurantees the grameen bank actually requires!
Thanks for your comments again !
ps: would be nice if I would know who xyz is ? :)
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Posted Wed 23 Jun 9:17 PM GMT by obviousmuse
xyz well said ! Ofcourse the concept is not new . you are right about that.
Lets tackle the ground realities though, credit cards ? Do people in India's villages have access to credit cards ? even if they have credit cards I am not sure they would have enough of a credit limit to actually start a business..
I totally agree to what you say about the fact that its a business, and there has to be business model. Perhaps the one thing that I did not mention in the post was that difference between a conventional "lending" enviornment and this one. This is also a more social, collective sort of thing. In many cases a person is assigned to a group of seven people who would include mentors who in addition to providing business know-how also exert the necessary pressure to ensure that the individual does not slack off but works towards his business. So its not only a model of micro-credit, but combined with "community support" really leads to a different way of doing business.
But you are right I have not researched this enough and I should find out what kind of gurantees the grameen bank actually requires!
Thanks for your comments again !
ps: would be nice if I would know who xyz is ? :)
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