DHAKA, 14 October 2006 — Nearly three decades after Nobel Prize winner Muhammad Yunus launched the pioneering Grameen Bank, giving small loans to the poor, microcredit is hailed for helping more than five million Bangladeshis.
Grameen began life in 1976 as a pilot project run by Yunus, a professor of rural economics at Chittagong University in southeastern Bangladesh.
The project set out to prove that lending to the poor was not an “impossible proposition.”
“We took our first loan to buy 20 hens and ducks and if it wasn’t for that we would be beggars now,” says Roushanara.
Roushanara used to be a manual laborer. She and her mother were left penniless after her father died, the family having earlier lost their home to river erosion.
“My mother and I used to earn 30 taka (50 cents) a day digging earth. Our life was very difficult. We were vagabonds but now we have land, a home and we earn around at least 6,000 taka ($100) a month.”
Roushanara is among the many success stories of the bank, which offers small loans to landless rural people in a bid to break the exploitation of the poor by money lenders.
Borrowers used the loans to buy their own tools and equipment, cutting out the middlemen and transforming their lives through self-employment.
Though the Grameen model has been replicated in more than 40 countries, some experts have criticized it for failing to help those who most need it by giving credit to the poor but excluding the poorest.
Critics have also said microcredit fails to tackle the root causes of poverty and traps people into petty trading in an overcrowded market.
But people like Roushanara have no doubts. After making a success selling hens and ducks, she took another loan to rent a piece of land to harvest rice crops.
She took a third loan to buy an engine, which she used to power a tractor during the dry season and a boat during the rainy season.
“Later we bought another engine and rented it out to people,” she said.
“We started to earn more money. Now we have bought two pieces of land for cultivating rice and another one for our house. I am happy now. Before I commanded no respect — now I have social identity.” Women in particular were targeted for microcredit after Grameen found them to be astute entrepreneurs. Grameen’s loans are repaid over a year with an interest of 16 percent.
Loans are typically given to help borrowers pursue activities such as raising goats or chickens, weaving, pottery, or mat-making.
Others use the loan to buy a rickshaw or piece of machinery. The purchase of mobile phones through microcredit has given rise to the now ubiquitous Bangladeshi “village phone lady,” who makes a living renting it out call by call.
“Without loans I would still be a tea boy because I had no way to change my life on my own,” said Dilip Kumar Devnat, who is in his 30s.
“I was so poor. I could only afford to eat once a day and even the money lenders would not lend to me,” he said. But after taking a loan to set up his own tea stall, he took out another to buy a refrigerator and stock cold drinks.
Gradually, the stall became a success. He took a third loan for a mobile phone and is now planning to take a fourth to set up a stationery shop.
The original pilot project was carried out in villages close to Chittagong University between 1976 and 1979 before being extended to Tangail district north of Dhaka.
Other districts followed and in 1983, the government enacted laws to turn Grameen, which means village, into an independent bank.
Today more than 800 non-governmental organizations and four banks and financial institutions operate microcredit schemes in Bangladesh. Some six million people are estimated to have taken loans.
Grameen alone has given such loans to more than six million people. Repayment rates have varied from 88 percent to 99 percent.
Half the Bangladeshi population of 130 million is estimated to live on less than a dollar a day.
Grameen has taken on some of its critics by offering interest-free loans to roadside beggars, allowing them to buy items such as sweets, pickles or toys to sell at a profit. Shops give them credit with Grameen as guarantor.
