God of small things
The awarding of the Nobel Peace Prize to Muhammad Yunus, a Bangladeshi national, is a matter of satisfaction not only because he is a South Asian, but it recognises a pioneering contribution he has made to lifting millions of Bangladeshi women out of the morass of poverty through a capitalist method: the small loans (micro credit), but with the difference of “no guarantee, no references, no legal instrument” and still it works. The prize provides a boost to an idea that defies traditional wisdom and is already gaining ground in the anti-poverty circles around the world: that helping the poor help themselves through micro credit is more effective than the traditional practice of grant-giving. In its citation, the Norwegian Nobel Committeee singled out Yunus and his Grameen Bank for “efforts to create economic and social development from below”. In over three decades since his modest beginnings, Yunus, a professor of rural economics, has developed micro credit into a potent anti-poverty tool. So far Grameen has issued small loans amounting to US$5.72 billion to 6.61 borrowers, 97 per cent of whom are women, with a loan recovery rate of nearly flawless 98.5 per cent, as compared with the 45-55 per cent recovery rate of conventional loans that banks provide to the well-to-do.
Yunus’s concept is simple but revolutionary. It shows that poor borrowers repay loans. The only need is to rewrite the traditional rules of risk management. Under Grameen, borrowers take out loans in groups of five, each member guaranteeing the others’ dependability and the fear of being shamed by peers is reported to have minimised defaults. Well-used loans as small as a couple of thousand rupees can turn around the fortunes of a poor family. The lack of funds traps many farmers in a cycle of under-investment, antiquated techniques and low yields. Those who have no employment or not much of an income, micro credit can launch them on income-generating activities, turning them into business people with financial independence and enhanced decision-making power. Micro credit has thus really empowered many traditional Bangladeshi women beyond the rhetoric of politicians, improving the health and educational standards of their families in the process.
The concept of micro credit needs to be replicated in Nepal too in a big way. Certainly, it has been introduced here, and there are several NGOs and rural banks engaged in the field, but a thorough impact assessment of the experience has yet to be undertaken. Such a study could indeed throw up important lessons for Nepal. Exulting in the success of Yunus and his Grameen is not enough for Nepalis. It would mean a lot if they could find indigenous ways, including an adaptation of the Grameen concept, that could transform the lives of many suffering Nepalis. It is time we discarded the notion that only the grandiose plans and projects devised in foreign capitals and pushed through various multilateral agencies could make a big difference to the lives of the poor people.