Grameen banking methods take seed

GAZIPUR DISTRICT, BANGLADESH -- Dilwara Begum's story used to be the stuff of disaster relief posters: one of millions fleeing famine one year, floods the next but never escaping the grinding poverty of a land Henry Kissinger once called the world's "basket case."

Today this thirtysomething mother of three runs a thriving poultry business from her rural home and she's an icon for the Grameen Bank.

Grameen (meaning "village") is easily the most successful among a myriad of poverty relief programs, a home-grown idea that's been widely copied here and exported across the world, including Minnesota.

Founded 24 years ago by a disgruntled economics professor with $27, this unlikely financial institution has loaned about $2 billion to about 2.4 million Bangladeshi borrowers.

The vast majority are women, illiterate and, at least when they applied, living in near-medieval poverty -- not exactly the risk profile to whet a banker's appetite. The typical loan amount is about $100. Yet Grameen is not a charity, according to founder and managing director Muhammad Yunus.

"It is a business," he insists, citing two salient figures: Grameen charges its borrowers a hefty 20 percent, yet 98 percent of the loans are repaid on time.

The notion that poor people can make a sound investment came to Yunus in 1974. He had returned home, eager to apply the Ph.D. in economics he'd earned at Vanderbilt University in Nashville to rebuilding a nation newly born out of Pakistan's bloody civil war. Soon after beginning his stint at Chittagong University, however, Bangladesh lapsed into a disastrous famine.

"I found myself in a very strange situation, teaching elegant theories of economics," he recalled in an interview in his Dhaka office, the capital. "I walked out of the classroom and those elegant theories of economics had no use for people who were dying. So I wanted to get away from that theoretical environment."

Yunus surveyed a nearby village and discovered that for a mere $27, he could wipe out the debts of 42 families bonded in virtual slavery to the local money lender, and help them launch new businesses. He personally bankrolled the group. Yet even after "they paid back every penny," Yunus was never able to convince local bankers of the viability of what would come to be called microlending. "So I thought that I should have my own bank."

Grameen grew rapidly to more than 1,000 branches across rural Bangladesh and, over time, acquired its trademark bias in favor of female borrowers, who now receive 95 percent of the loans.

"We started noticing that when [a] woman was the borrower, children were much better off," Yunus said. "A woman also is [a] very cautious user of the money and I thought this came from the basic skill she has kind of accumulated over so many years, being a woman in a poor family.

Female borrowers preferred

"Men were very impatient," Yunus added. "They wanted to enjoy right away, they would entertain friends, go to the movies, they wanted to enjoy."

Although she officially holds title, Dilwara Begum says her Grameen-financed enterprise has always been a partnership with her husband, Nazim Uddin. Eleven years ago, they borrowed about $50 to purchase a cow and start a milk business.

Over time, they added a few chickens, then with another Grameen loan built a poultry barn and launched into egg farming on a larger scale. Twice weekly, a small truck from Dhaka arrives to collect about 3,000 eggs.

The family homestead -- about 600 square feet of living space on a lush, soggy half-acre cultivated for the staple rice -- is at best modest. Yet the brick-and-mortar construction -- financed under a Grameen home loan program -- can better withstand the perennial flooding in this low-lying country.

They also have a latrine and clean well water, basic amenities still far beyond the grasp of most Bangladeshis, including many Grameen borrowers.

No swift ticket to rise

Amina Begum -- who is no relation to Dilwara -- is one of those. Amina, a twentysomething mother of two young sons, borrowed about $100 two years ago to set up a small poultry operation. She lives in a mud-and-thatch, one-room dwelling, tending a handful of ducks and chickens that produce barely enough income to feed her family.

For every success story like Dilwara Begum, say Grameen officials, there's another like Amina -- people who for various reasons cannot thrive as entrepreneurs. Here, many borrowers linger precariously along the poverty line, which is measured not in income but in calories (1,800 per person, per day). And so they remain one medical emergency or natural disaster away from descending once again into poverty.

Grameen's careful supervision over borrowers helps keep many afloat. The weekly borrowers meetings serve both to collect loan installments and to sniff out any potential problems -- a sick child, an unpaid bill -- that could affect business or the repayment schedule.

In addition, borrowers also are required to belong to cooperative teams of at least five. Under this "peer lending" policy, all members of the team are responsible for the loans of individual borrowers.

Also, in one of banking's most unusual methods of creating collateral for the mostly indigent borrowers, 5 percent of every loan is escrowed to create a savings account for her. Borrowers also become shareholders in Grameen, which is established as a cooperative.

That so many still struggle for years to merely become less poor is a measure of the staggering scale of poverty in Bangladesh, where 130 million people share a land area the size of Wisconsin.

It does not detract from the significant impact of Grameen or the microlending movement, according to Hussain Zillur Rahman, a scholar at the Bangladesh Institute of Development Studies, who has tracked poverty for the past decade. A resilient base has been built into Bangladesh's economy, notably in small-scale agriculture and farming, Rahman said, and that has brought self-sufficiency in basic foods despite the forbidding natural odds.

"The specter of famine has been defeated in Bangladesh. That is a fantastic achievement," Rahman said. Microlending can take a significant part of the credit for this and for far-reaching social and development consequences, he added. For example, microlending is broadening the limited skills of most borrowers. Grameen is now the largest provider of cellular telephone service in a country where telephones are scarce. In hundreds of villages "Grameen ladies" have become walking telephone booths, instantly vaulting their villages from the pre-wired age to the wireless.

"I am given respect," said Shamoli Sarkar, 25, whose pay-cell phone connects her village of Basan to expatriates in Persian Gulf emirates and livestock operators like Dilwara Begum to veterinarians in the city.

Generational turnaround

And it has become far more acceptable for women to be in the workplace in this predominantly Islamic nation, Rahman said. Although their domestic routines have not changed, the women's status as the family meal ticket gives them leverage in decision-making for their families and children, he said.

The assurance of a full stomach also has done much to inflate aspirations in the second generation of Grameen families. Dilwara Begum's 19-year-old son, Nassir, will obtain an undergraduate degree in two years and hopes to vastly expand the family's poultry business. Dilwara had four years of schooling, her husband none at all.

At 16, their daughter Nasreen typically would be a prime marriage candidate. Instead, she plans to pursue a journalism career after college. When she does marry, her mother is determined to break from the widespread practice of offering a dowry.

"Her education will be her dowry," said Dilwara Begum. Shunning the dowry system and educating their daughters are two of 16 pledges that are required of Grameen borrowers, as is a commitment to restrict the size of their families.

Despite its crushing numbers, Bangladesh has made considerable strides in curbing its population growth rate, which is now comparable to many developed nations. Grameen borrowers have an even smaller rate of childbirth: around 1.6 children per woman, according to Yunus.

Still, one of Bangladesh's biggest hurdles is the sclerotic macro economy, which has shown none of the micro-sector's dynamism. Yunus reserves his harshest criticism for conventional bankers, who continue to shun low-income borrowers, even though the banking industry's 20 largest defaulters have debts they'll never repay that exceed $4 billion -- twice the total amount lent to the poor by the Grameen in nearly a quarter-century.

Fred de Sam Lazaro, is a correspondent for PBS' ''NewsHour with Jim Lehrer'' and an executive producer at Twin Cities Public Television (TPT). He traveled to Bangladesh as part of an upcoming TPT series on population issues. His e-mail isfdslazaro@tpt.org