Microcredit : Most Powerful Weapon to Fight Poverty
Twenty-two years back when we began our journey, the word “microcredit” did not exist. Today this is a much discussed, much inspiring word across the globe. Micro-credit is a new technology in the financial world. Like any technology this can be used for the purpose intended by the user.
One institution may use this as a vehicle to enter into the vast untapped market to sell his product, another may see this as a business to make money. Another institution can look at it as an opportunity to create a life-line for the people who never could get on board the mainstream economy, or as a can-opener to open the potentials lying hidden among poor individuals, men and women. Once a technology is made available, users can give it the shape they want, to suit their objectives.
In Grameen we decided to use the micro-credit technology to get the poorest out of poverty. We have exciting successes to report, and we have failures to grapple with. But the essential fact remains : we don’t give up. We don’t give up particularly because we don’t see anything more promising than micro-credit in addressing the issue of poverty. The Microcredit Summit has inspired us to work harder. My colleagues and I thought long and hard about what we could contribute towards meeting the Summit’s goal, and how we could use our experience over the last 22 years to guide us. We finally came up with a Plan of Action that we were happy with.
- To expand our outreach in Bangladesh to 3 million borrowers by 2005;
- To ensure that 70% of Grameen Bank’s borrowers are above the poverty line by 2005;
- To maintain our focus on women, the poorest, and being financially self-sufficient; and
- To reach 10 million borrowers one-tenth of the Summit’s goal through Grameen Trust’s Grameen Bank Replication Program.
I would like to share with you my thoughts on what it will take to reach these goals, and what it will take all of us to reach our collective goals.
As you can see in our Action Plan, we have added 200,000 borrowers since the Microcredit Summit was held, and will add another 700,000 between now and the year 2005. While this may seem like a large number, in percentage terms it is one of the slowest rates of growth in our history. Instead of focusing the bulk of our energies on horizontal expansion in Bangladesh, we are concentrating on getting our existing borrowers above the poverty line. One goal is to have at least 2 million families among the 3 million who are members of Grameen in 2005 to be living a poverty-free life.
How do we measure success?
How do we define “poverty-free life”? We have talked to our borrowers about what a poverty-free life means to them, and then operationalized it in a rigorous test that our staff and outside evaluators can measure quickly and easily.
We settled on ten indicators of living a poverty-free life. They are having: (1) a tin-roof house, (2) beds or cots for all members of the family, (3) access to safe drinking water, (4) access to a sanitary latrine, (5) all school-age children attending school, (6) sufficient warm clothing for the winter, (7) mosquito-nets, (8) a home vegetable garden, (9) not having a food shortage even during the most difficult time of a very difficult year, (10) and having sufficient income-earning opportunities for all adult members of the family. We will be monitoring this on our own and are inviting local and international researchers to help us track our successes, and setbacks, as we head towards this goal.
Ensuring that more than two-thirds of our borrowers are poverty-free will require that we do our banking business more efficiently and that we undertake an aggressive vertical expansion.
We commit ourselves to come up with innovative programs through creative use of newly available technology in all areas of knowledge, in order to expedite the process of getting Grameen borrowers out of poverty and to make sure that they can stay out of poverty for the rest of their lives.
We have been introducing new loan and savings products. Our present loan products include general loans, housing loans, seasonal loans, equipment leasing, and loans to finance the entire cost of higher education for children of Grameen families.
We are collaborating with world leaders in many fields in order to bring the latest technologies to serve the interests of the poor.
Grameen Phone is an example. This one-year-old cellular telephone company brings income generating opportunities to the telephone ladies in Grameen villages who sell telephone services to the rural population. This company was created in partnership with Telenor of Norway. We intend to set up 50,000 Grameen Bank borrowers with cellular phones over the next 6 years. We see that a woman who becomes a telephone lady of her village can easily earn a net profit of $2 per day, or $700 per year. That is triple the average per capita income in Bangladesh. We are exploring new partnerships as well. All of the companies we are establishing will in some direct way be helpful to our borrowers’ efforts to cross the poverty line faster. Most of these companies will ultimately be owned by Grameen borrowers, as Grameen Bank is today. We are mobilizing funds to finance these companies from commercial sources as well as through a new program called Grameen Investments, through which individuals can invest funds for 1 to 5 years to finance new and existing Grameen programs. We will be paying interest on these funds.
For any of this to have meaning, Grameen Bank must maintain, and even strengthen, its focus on the poorest women, and also continue to be financially viable. We will continue to instruct our staff to search out the women in new Grameen villages who do not approach us, but instead shy away from us, because they think our program is not for them. We try many kinds of techniques to convince them that Grameen Bank is for them, and sometimes it takes a long time. But we tell our staff, “We have all the time in the world. Wait for the poorest. Your motivation work will pay off.”