South African version of Grameen Bank needed
Following my earlier Blog in response to the World Bank report that more than 1 Million black African Woman entrepreneurs still have no access to finance, this inspirational story of Professor Muhammad Yunus cam to mind. As describe this in my book, the vision and resilience showed by Prof Yunus has helped millions of woman around the world, and it is now time for South Africa to find a Grameen Bank of its own.
The Grameen story is as follows:
In 1976 when Professor Yunus and his colleagues started giving out tiny loans under a system which later become known as the Grameen Bank. One day, interviewing a woman who made bamboo stools, he Lent that, because she had no capital of her own, she had to borrow the equivalent of 30cents to buy raw bamboo for each stool made. After repaying the middleman, she kept only a 2p profit margin. With the help of his graduate students, he discovered 42 other villagers in the same predicament.
"Their poverty was not a personal problem due to laziness or lack of intelligence, but a structural one: lack of capital. The existing system made it certain that the poor could not save a penny and could not invest in bettering themselves. Some money-lenders set interest rates as high as 10 per cent a month, some 10 per cent a week. So, no matter how hard these people worked, they would never raise themselves above subsistence level. What was needed was to link their work to capital to allow them to amass an economic cushion and earn a ready income."
And so the idea of credit for the landless was born. Yunus's first approach was to reach into his pocket and lend each of the 42 women the equivalent of $27. He set no interest rate and no repayment date: "I didn't think of myself as a banker, but as the liberator of 42 families."
Immediately, Yunus saw the impracticality of carrying on in this way, and tried to interest banks in institutionalizing his gesture by lending to the poorest, with no collateral -- Bankers laughed at him, insisting that the poor are not "creditworthy". Yunus answered, "How do you know they are not creditworthy, if you've never tried? Perhaps it is the banks that are not people-worthy?"
Undeterred, he started an experimental project in Jobra, the village he and his students had been studying, and staffed it with his graduate students. Between 1976 and 1979, his micro loans successfully changed the lives of around 500 borrowers. But it was hard work combining the project with his full-time job as a Professor, and he continued to lobby the state-owned Central Bank and the commercial banks to adopt his experiment.
Today Garmeen Bank is jointly owned by 2.4milion of its borrowers, most of whom are woman. When asked about the secret of his success, Yunus said that the two foundations of Garmeen Bank is that the poor is as trustworthy as anyone and dreams are the seeds of success. More on this organisation here - www.grameen-info.org