Championing the Right to Credit for Poor Women Around the World   

An Interview with Muhammad Yunus by Nancy Yoshihara  

  
For Muhammad Yunus, it all began with a challenge in 1976, when he was an economics professor at Chittagong University in Bangladesh. "I had no intention of creating a bank" explained Yunus, founder and now managing director of Grameen Bank, which, to date, has lent a total of $2 billion to 2.3 million people, 94% of whom are poor women. He started with $27 of his own money and lent small amounts to the poorest Bangladeshi women, who used the money to raise milk cows or buy supplies for their small home–crafts businesses. As they earned money, they repaid the loans. “All I was trying to do was convince the guy who was telling me it could not be done.”

Yunus pioneered what has come to be known as micro–loans. The 57 year old professor, who earned his PhD in economics at Vanderbilt University in 1970, explained, "This had nothing to do with theory. I was caught in a situation where my personal response was to give the money from my pocket and then I thought, if so many people are so happy with such a small amount of money, how can you walk away from it? Why can’t you do more of it? So I went to the bank to arrange more loans and banks said we can’t lend money to the poor. The debate, the struggle began."

His Grameen Bank operates only in Bangladesh, but micro–loan programs are now found in 60 countries, including the United States (Grameen means  “rural” in Bengali). President Bill Clinton started a micro–lending program in Arkansas. Today, such programs exist in the city of Los Angeles and in Pomona, Pasadena and Orange County.  “The talk in the beginning was that it was good only for poor countries. People are surprised all of a sudden– why the USA? I said, anywhere anybody  is rejected by the banking system, you have room for a Grameen type program.  This is exactly what happened in the USA.”

Despite his success, Yunus is still battling the status–quo mentality of banking. Outlays to international micro–loan programs for the poor have been held up by endless studies and reviews of existing Grameen–type programs. He talked of his frustrations and hopes for micro–loans during a recent visit to Los Angeles. 

Nancy Yoshihara: You have said that credit is a human right just like food. Isn’t that a stretch?  

Muhammad Yunus: You can list everything as a human right–food, shelter, housing, health and education. How do we ensure these human rights? One way is to create an enabling environment where each of you can establish those rights for yourself. One of the best conditions of an enabling environment is access to money, credit, so one can start to earn an income. When income flow begins, then the right to food, shelter and everything else becomes a reality. So I am saying not only should it [credit] be included in the list of rights, if I was arranging them by priority, I would put credit as Number One. Credit represents the creation of self-employment, creation of income flow. This is something we have to see that everybody has equal access to. So anything which discriminates against some one getting access to credit is something, we should get rid of as soon as possible.   

NY. Are you saying we should get rid of some of the big international lending institutions?  

MY. No, no, no. I’m not getting rid of any institutions. I am saying access to credit should be ensured for everybody. It should not be based on the ownership of property or anything else. The basic requirement of financial institutions to day is collateral. Unless you have collateral you cannot have access to credit and that has created two different categories of people: one who has   
access; one who has no access. That is the discriminating factor. That has created   
what I call financial apartheid: some who got it, some who never get it.   

NY: Now you’ve had success with these programs largely overseas in third world countries. How are these micro-loan programs working in the United States?  

MY: There are now more than 200 programs working in the U.S.A. And many have helped people to come out of welfare. That is the most exciting thing to happen because the welfare system in the States is such that once you are in welfare, you spend your lifetime in welfare and then your next generation spends their lifetime in welfare. So something that helps you come out of welfare is something to be applauded. So this is what is happening with the U.S.A.   

NY: If  you could construct a way to help people in the United States off  welfare, what would your idea be?  

MY: I would offer them  a credit option. I’d say, look, there are two things you can do: you can get a free check every month, or you can take a loan which is flexible, which suits your needs, is negotiable. You can make it bigger as you go along, but welfare is fixed – this is all you get. If 10 % of all welfare recipients accept the second option, the credit option and half succeeded in getting out, that is tremendous success. Seeing their success, many others on welfare would say, "Let me try that part." The conditions are that you must not create an atmosphere of fear …… there should be a bridging arrangement so that you continue to make efforts, but you’re not losing anything [health benefits such as Medicaid] yet. Once you cross the bridge, then you are on your own; we say, goodbye. You are a full income–earning, tax-paying citizen, instead of living on someone else’s taxes.   

NY: What apparatus should do this? Should it be small non governmental  organizations, foundations or big banks?  

MY: All of the above. Why not? Banks can do it. This is banking we’re talking about. You’re not talking about  charity. But how do you address that within the banking system because banks are focused on big business credit? They are not thinking about this tiny guy who needs a little money to get out, who has nothing to offer in exchange, just because he or she doesn’t have anything to offer as collateral doesn’t mean he or she is not credit–worthy. This is what banks have been telling us: the poor are not credit-worthy?which is not true. What Grameen has to say is that this is absolutely wrong because, for the 21 years, the poor in Bangladesh have demonstrated, again and again, they are more credit-worthy than the rich in Bangladesh.   

NY: Are there any countries that do not allow Grameen – type  programs?  

MY: No. Even China has several Grameen programs operating and they have support of even the communist party and their congress talked about Grameen programs and expressed their strong support for the programs as a poverty alleviation project. I don’t see anywhere people having any reluctance.   

Theoreticians have been arguing back and forth that it is not development. Development means big investment.  They can discuss and debate, but the research on Grameen shows enormous changes have taken place among the borrowers in terms of increase in incomes.  One World Bank report said one–third of Grameen borrowers have crossed the poverty line already. About one–third are about to cross the poverty line. So, there is a distinct movement out of poverty in the Grameen system.   

Nutrition is higher in Grameen families. Recently, one international study tells us that child mortality within Grameen families has been reduced by 34 %. We are not a health program. We are not a family–planning program, but the impact it has made within the family is tremendous.  

NY: International lending institutions like the World Bank and some others are complimentary about Grameen Bank. How much money are they committing to programs like this?  Are they doing much?  

MY: After a lot of lobbying, after a lot of discussions, finally, a mechanism has been created, it`s called CGAP – Consultative Group to Assist the Poorest. This was the first time the World Bank seriously got involved in the micro–credit program.   

NY: When was this?  

MY:  In 1995. We were asking for more. We  were not asking for this CGAP type of thing.  We were asking for a third window within the World Bank. As a compromise, they created the CGAP mechanism–which is not really a World Bank mechanism. The World Bank is only one member of CGAP. At the moment there are 25 members, mostly donor countries plus international development financial institutions, such as the African Development Bank, Inter American Bank and Asian Development Bank. What CGAP is saying is, “Yes, we will commit some funds to go into microcredit programs and all of us 25 members will co-ordinate policies so we have similar standardization of the policies –so we do the same kind of things and not do things at cross purpose.” ……. After two years, they are still preparing the rules.   

NY: No actual money?  

MY: The commitment  has  been  made. The commitment comes to about  half a billion dollars right now into CGAP. But that money has not gone as loans into  the hands of the poor women yet.   

NY: What’s it mostly  been used for?  

MY:  Mostly spent on consultants. When we were debating and finally succeeded in having CGAP, we had no idea that money earmarked for microcredit would end up in the hands of consultants–not in the hands of the poor women. That was not the purpose of this, so we say, “please, …….. don’t bring all the consultants, researchers, academics to do  their brilliant  research and things at the cost of  not  giving that money to the  poor women.  So this  is the struggle we are going through right now. This is the extent of World Bank involvement in this.   
   
NY: What are they studying?  

MY: I don’t know. All kinds of consulting is going on and I’m tired of these big  consulting firms which keep the World Bank surrounded all the time. They are brilliant people. They immediately grabbed this …… and said , ' we are the ones to tell you what to do'.   

At the last meeting of CGAP, in Manila, I said, look, now, consultants are helping microcredit programs in different countries. These consultants are like football coaches, going around the world teaching everybody how to play football. Unfortunately, these football coaches never played football in their own life: not only did they not play a football game in life, they have never seen a football game in their life, and they are the coaches going around and telling everybody how to play football?   
I said : please save us from this. If you need consultants, why don’t you go to a program which has been happening the last 10 years, 15 years or even five years. They have experience. May be he doesn’t write English the way you want, may be he doesn’t speak English the way you want, but he is the guy who is doing it.  Another guy who has never seen a microcredit program in his life becomes a consultant and tells you this is the way you should do it.   

NY: If you have one thing to say to all those members of CGAP, what is it?  

MY: I try to be nice to them because they were upset when I criticized them publicly. The first phase of CGAP was a learning process. We’ve come a long way. Let’s now get everything set so we can really get into action. Enough of talk,  enough of study. Now let’s do the job. Because, after all, look at the number of poor people, 1.3 billion, and that number is increasing. So if you keep spending time in deciding what to do, that number is not stopping for us. We have enough experience around the world to keep us on track. It’s not something that we’re bringing out of the blue.
 

Extracted from The Los Angeles Times, January 25, 1998.