(l-r) James E. Foster, professor of economics at Vanderbilt; Grameen Bank's Mohammed Yunus and Yasmeen Mohiuddin, professor of economics, Sewanee, University of the South. Photo by Steve Green.

by Joan Brasher

It was standing room only at Wilson Hall on Jan. 28, for a lecture by micro-lending pioneer Muhammad Yunus.

Yunus, who defied traditional lending paradigms to establish a bank designed to assist the poor in his native land of Bangladesh, graduated from Vanderbilt in 1970 with a Ph.D. in economics.

After graduation, he returned to Bangladesh, planning to use his education to make a difference in the economy. But faced with pervasive poverty, he felt powerless.

“Things were a nightmare because the economy was going down fast,” he said. “Arrogance makes you think you can solve any problem. But you see how incapacitated you are in the face of real problems.”

Not sure what else to do, he began visiting villagers each day in hopes of perhaps doing a kind deed, if nothing else.

“I thought I would go into a village and do something to help, even for a day,” he said. “That was my mission ever day. I did a lot of little things.”

But what he was doing was not so little. As he listened to the stories of the street vendors, pan-handlers and widows caught in a cycle of poverty, he began to see a solution after all.

One woman, who crafted bamboo stools, simply needed 25 cents to purchase bamboo each week. Because she had to borrow from a lender who demanded in return for the loan that she sell her wares to him at the price of his choice, she could not get ahead. Yunus suspected that a small loan was enough to turn this woman’s life -– and her business – around. He was right. When he loaned her the money, she was able to pay him back right away. With the profits from her sales, she was able to buy her own bamboo without a loan, and continue her business.

“When I was able to help, it made them so happy,” Yunus said. “They thought it was a miracle. I thought, if you can make so many people happy with so little money, why not do more of it?”

He soon convinced a bank to make small loans to villagers deemed by the bank uncreditworthy. The bank’s officials agreed, but only if Yunus served as the guarantor. In time, thousands of low-income Bangladeshis were getting small business loans, and defying the naysayers by repaying them. Yunus hoped the banks would now see the success of his experiment and grant the loans without his guarantee. He was wrong. They firmly held to their belief that the poor should not be given loans, particularly women.

“It dawned on me, why am I trying to convince them? Who are they to decide?” he said.

Thus, Grameen Bank was born (Grameen means “rural” in Bengali). The institution, which has 1,326 branches, provides services in almost 48,000 villages in Bangladesh, and has loaned $4.57 billion to date. Ninety-nine percent of those loans are repaid, despite the lack of collateral or signed loan documents, and the micro-lending model is being used in other impoverished lands.

“Now, when people say poor people are not creditworthy, I can scream at the top of my voice, that this is a lie,” he said.

Yunus’ detractors put forth that if loaning to the poor was risky, then loaning to the poorest of the poor was insanity. Yunus, of course, disagreed. He sought out even the street beggars, and taught them to use small loans to transform their begging into enterprise, and a sense of control over their destiny.

“The women would say to me, ‘Before, when I begged, people would not open their door, just peek out the window. Now that I have things to sell, they welcome me in, and offer me a seat.’”

Other innovative programs pioneered by Yunus include health insurance, home loans, and a cell phone sales business. Grameen Telecom provides a swift business for villagers, particularly women, whom he calls “telephone ladies.” They are trained on the use of cell phones, so that they can sell them in villages where no phone has yet existed. The women are empowered with knowledge that no one in their community had before, and through telephones, are opening up the world to those formerly isolated. And they are making money doing it. Now these women have savings accounts in Grameen Bank, and are helping others to do the same.

“Poverty is caused by the system,” said Yunus. “It is caused by the policies and the conceptual frameworks we have created. But we are changing that.”

The lecture was presented as the Georgescu-Roegen Lecture in partnership with the Department of Economics of Sewanee: The University of the South. Other sponsors were Vanderbilt’s Department of Economics through its Graduate Program in Economic Development, the Center for the Study of Religion and Culture, the Cal Turner Program for Moral Leadership in the Professions and the College of Arts and Science.

Posted 1/31/05