Banker To The Poor: Micro-Lending and the Battle Against World Poverty

After earning a Ph.D. in economics at Vanderbilt University, Dr. Yunus returned to Bangladesh to settle into a life as a professor. But a famine in 1974 ravaged the country, leading Dr. Yunus to alter his thinking and his life profoundly: "What good were all my complex theories when people were dying of starvation on the sidewalks and porches across from my lecture hall?.... Nothing in the economic theories I taught reflected the life around me." Armed with little more than a lofty dream to end the suffering around him, he started an experimental microcredit enterprise in 1977; by 1983 the Grameen Bank was officially formed.

The idea behind the Grameen Bank is ingeniously simple: extend credit to poor people and they will help themselves. This concept strikes at the root of poverty by specifically targeting the poorest of the poor, providing small loans (usually less than $300) to those unable to obtain credit from traditional banks. At Grameen, loans are administered to groups of five people, with only two receiving their money up front. As soon as these two make a few regular payments, loans are gradually extended to the rest of the group. In this way, the program builds a sense of community as well as individual self-reliance. Most of the Grameen Bank's loans are to women, and since its inception, there has been an astonishing loan repayment rate of over 98 percent.

Banker to the Poor is an inspiring memoir of the birth of microcredit, written in a conversational tone that makes it both moving and enjoyable to read. The Grameen Bank is now a $2.5 billion banking enterprise in Bangladesh, while the microcredit model has spread to over 50 countries worldwide, from the U.S. to Papua New Guinea, Norway to Nepal. Ever optimistic, Yunus travels the globe spreading the belief that poverty can be eliminated: "...the poor, once economically empowered, are the most determined fighters in the battle to solve the population problem; end illiteracy; and live healthier, better lives. When policy makers finally realize that the poor are their partners, rather than bystanders or enemies, we will progress much faster that we do today." Dr. Yunus's efforts prove that hope is a global currency. --Shawn Carkonen

Product Description
A new edition of the New York Times Bestseller by the Nobel Peace Prize-winner.

This autobiography of Nobel Peace Prizewinner Muhammad Yunus spent ten weeks on the New York Times bestseller list, and was also a Wall Street Journal bestseller. Now repackaged in the spirit of his new book, Creating a World Without Poverty, this classic work on the birth of microfinance will contain excerpts from the new book.

If you haven't heard of Grameen, prepare yourself to learn about a bank which has overturned the conventional wisdom about helping people who live in poverty.

Yunus' big idea can be put very simply: people who live on less than $1 per day (3 billion people) don't need to be tought how to feed themselves and survive - the very fact that they are alive is testament to their abilities.

His approach rests upon that faith in people's ability to help themselves, if given access to the very small amounts of loan capital they need to start a profitable venture - whether that is weaving cloth or repairing bicycles.

The road to reaching more than 2 million people in Bangladesh, and many other millions worldwide, wasn't smooth. What you get from reading this book is a sense that sometimes the 'homegrown' solution beats the 'imposed' ideas from the developed world.

A challenging book for liberals and conservatives alike!


Book Summary -- Banker to the Poor   November 26, 2004
Justin Belkin (NY United States)
25 out of 26 found this review helpful

Founded in Bangladesh by Muhammad Yunus in 1976, the Grameen Bank is one of the most successful attempts ever to employ capitalist principles to achieve social goals. By approaching poverty from a different tact, Grameen seeks to reconcile the inequalities inherent in capitalism by mobilizing the "informal sector" of society-the self-employed poor. By addressing the root cause of poverty (i.e. lack of access to capital) Yunus has succeeded where many others have failed. Often, well-intentioned governments fail to solve the issue of poverty because of "misguided development" policies and bloated bureaucracies. Similarly, many international financial institutions, such as the World Bank, have failed because their heavy-handed top-down approach excludes those most in need of aid. Yunus writes, "I have always believed that the elimination of poverty from the world is a matter of will" (248). Grameen succeeds where others fail because they appeal to the most downtrodden, the poorest of the poor-the bottom 50% of those already below the poverty line.

A precocious child and avid reader-especially of comicbooks-Yunus was one of fourteen children born to devout Muslim parents. The family lived on the second floor located above the jewelry store that his father owned and operated in Chittagong, the largest port-city in Bangladesh. His mother, despite her later mental illness, instilled a sense of charity early on in her son that would last a lifetime. While the seeds of the Grameen Bank were planted when Yunus was a child, they were certainly nurtured while studying under the tutelage of professor Nicholas Georgescu-Roegen in America. Yunus left to attend Vanderbilt University as a Fulbright scholar in 1965 after opening a successful packaging business in Bangladesh. The professor encouraged Yunus to question traditional economic theory, and to adopt a more pragmatic and social perspective. These influences resurfaced when Yunus returned to Bangladesh in 1972 to chair the economics department at Chittagong University.

Yunus experienced an epiphany one day while lecturing to his students. Amidst his moribund surroundings, Yunus became compelled to confront the obvious incongruence between the high theory he was espousing and the omnipresent reality of daily-life, "What good were all my complex theories when people were dying of starvation on the sidewalks and porches across from my lecture hall? Nothing in the economic theories I taught reflected the life around me" (viii). Yunus at once realized that he had an obligation as both a Bengali and a college professor to help alleviate the rampant starvation that wracked Bangladesh at the time.

After much contemplation Yunus decided that the best way to improve the material condition of the poor was to offer them a hand-up, rather than a handout. Yunus concluded that the poor were quite capable of prospering if only they were given the credit necessary to break out of poverty. He writes:

"But if you go out into the real world, you cannot miss seeing that the poor are poor not because they are untrained or illiterate but because they cannot retain the returns of their labor. They have no control over capital, and it is the ability to control capital that gives people the power to rise out of poverty (141)."

The limited access to capital kept the poorest of the poor enslaved to usurious rates charged by moneylenders whose strict terms affected the ability of the poor to ever repay. However, the very fact that the poor had managed somehow to survive is proof-positive that they too could become successful entrepreneurs if given the opportunity. With access to capital the poor can compete and retain control over profits.

In fulfilling its promise to raise the rural poor out of poverty Grameen has expanded its original income-generating loans to now include housing and education loans. The interest rates for each of the aforementioned loans are calculated based on simple interest and are 20%, 8%, and 5%, respectively. Proof of the strength of the Grameen project lies in its 98% recovery rate. Yunus attributes this success to making 95% of its loans to women. He believes that women are more likely to share the benefits of the opportunity with their family than are men. Unfortunately, this approach continues to meet strong opposition from conservative forces that view Grameen as a threat to their religious and traditional values. Nonetheless, the passion and commitment shared by villagers over the opportunity offered by Grameen eventually overcomes all local resistance.

The program requires a group of five to operate. As required by Grameen, an interested borrower must first pass an exam and also enlist others by explaining the program to them. Once they form a group, a chairman and secretary are elected. Then, two of its members requests a loan, typically for $25 each. Grameen encourages these groups to deposit 5% of each loan in a group-fund that can later be loaned out to members interest-free. After six weeks of successful repayment two more members may request a loan. Yunus writes:

"This is the beginning for almost every Grameen borrower. All her life she has been told that she is no good, that she brings only misery to her family, and that they cannot afford to pay her dowry. Many times she hears her mother or her father tell her she should have been killed at birth, aborted, or starved. But today, for the first time in her life, an institution has trusted her with a great sum of money. She promises that she will never let down the institution or herself. She will struggle to make sure that every penny is paid back (65)."

Despite all the good accomplished by Grameen, its micro-credit program represents only one element of a multi-pronged strategy needed to one day eradicate poverty from the surface of the earth, relegating it once and for all as an artifact of an unenlightened past.

Yunus envisions a more comprehensive program that would expand the notion of economic development to include "improving the general standard of living, reducing poverty, creating dignified employment opportunities, and reducing inequality" (72). He argues that the goal of such development should be measured by a new set of objective criteria, such as the "per capita income of the bottom 50% of the population" (146). The efforts of Grameen and others committed to fighting poverty culminated in the first ever "Micro-credit Summit of 1997" co-chaired by Hillary Clinton. Yunus believes that future success will require a new breed of "social entrepreneurs" who are driven by social goals rather than maximizing profit. The Grameen Bank's success has created an abundance of opportunities for social entrepreneurs to serve the needs of this emerging market.

Despite its demonstrated successes, Grameen still suffers attacks from its critics. Undeterred, Yunus embraces this criticism, "innovation can only sprout in an atmosphere of tolerance, diversity, and curiosity" (102). Pejoratively referred to by some as "poverty banking," Grameen has proven that its success is no fluke. Since making its first micro-loan of $27 to a Bengali basket weaver the Grameen Bank has grown to over 11,000 employees committed to ending world poverty. Grameen now operates in nearly 100 countries, originating over $4 billion in loans made to approximately 2.6 million borrowers worldwide. Much like its founder, Grameen continues to grow and meet the constantly evolving needs of its borrowers.


Economics from the Bird's-Eye View to the Worm's-Eye View   August 5, 2001
10 out of 10 found this review helpful

One of the more fascinating life histories I've read in a long time, Muhammad Yunus' autobiography enlightens more than entertains. And what enlightenment!

Born in 1940 in British-ruled India, Yunus recounts India's and his native East Pakistan's independence through the eyes of the seven-year-old he was. Replete with juvenile impressions of contemporary political and religious prejudices with their accompanying tensions, Yunus' account of independence and partition of the Indian subcontinent opened my eyes to a much different view of that history than I had ever read in adult-centric volumes.

The watershed event for Muhammad Yunus was Bangladesh's 1974 famine that killed thousands. As a faculty member of Chittagong University, he petitioned government to wake up and do something. Instead of waiting for a bureaucracy to emerge, though, he began to organize farming projects and sought other ways to alleviate suffering.

By 1976, Yunus had stumbled onto micro-lending. Realizing that local stool makers were not much more than slave laborers due their complete and total dependence on wholesalers for both daily credit for raw materials and a monopolistic market over which they had no price control, Yunus broke the cycle by lending 42 stoolmakers the total equivalent of US$27 from his own pocket.

From those unplanned and humble beginnings, the Grameen Bank was founded by an economics professor who had no intention of becoming a banker-much less a banker to the poor.

Today, Grameen Bank ("grameen" is an adjective meaning "village" or "rural" in the Bangla language) serves over two million micro-borrowers in nearly 40,000 Bangladeshi villages. It leads the way as a model for similar micro-lending movements in dozens of other countries, including the United States.

Professor Yunus' vision of eliminating poverty (defined as a situation where one cannot provide for his/her own basic needs) by 2050 is a challenge for our generation. Are we up to the task? I believe I know the answer. After reading Banker to the Poor, you can also know.


Trust in the poor enough to help them.   August 12, 1999
Lloyd J. Klapperich (Roanoke, VA (USA))
9 out of 9 found this review helpful

This is the story of one man who extracted himself from economic theory long enough to see poverty in human terms, to trust in human beings, to form them into self-help units, to express that "trust" in economic terms and watch the seeds of faith grow into an international garden of success. In this garden today, grow the solutions to the world's most pressing problems. Now it is up to the rest of us to harvest crop.