Lending a helping hand

The bank that likes to say yes to poor women was started by Muhammad Yunus in Bangladesh 20 years ago. The concept has now spread all over the world. Chris Johnston reports

Only a few conferences have changed the course of history, but The Microcredit Summit in Washington DC next week holds that promise for millions of the world's poorest people.

The goal is to launch a global movement to lend money to start small businesses to 100 million families, in particular women, by the year 2005. The summit's draft declaration asserts that "the time has come to recognise microcredit as a powerful tool in the struggle to end poverty and economic dependence". Defying conventional lending principles, microcredit allows the world's poorest people to borrow despite their lack of collateral.

The story begins in Bangladesh in 1976, when Muhammad Yunus, then professor of economics at Chittagong University, founded the Grameen (village) Bank. The move was in response to what he regarded as a serious injustice - the inability of the poor to obtain affordable credit. Yunus began by lending his own money, but wanted to be able to give more than one-off loans.

Bangladeshi banks did not react favourably to the suggestion that they lend to people with no money and no assets. But, undeterred, Yunus, along with graduate economics students, progressed from helping one village to aiding an entire district.

In 1983 Grameen was granted permission to become a bank. It now operates 1,057 branches in Bangladesh, serves 36,000 villages and has 2.1 million borrowers.

To counter the anti-female, as well as anti-poor, bias of conventional Bangladeshi banks, Yunus ensured at least half the borrowers were women. That target took six years to reach, in which time the bank began to notice that funds loaned to women brought more benefit to families than the same amount loaned to men. "(Women) are better investors - they're very cautious with their money," Yunus explains. "They have a longer horizon and see in the long term. Men want to enjoy right now and pay more attention to themselves; mothers pay more attention to children and their well-being in the future."

In just two decades, the Grameen Bank has had a significant effect. In the last Bangladesh election, voter turnout was up 15 per cent and for the first time female voters outnumbered males. Yunus believes this was due to women becoming more aware of social issues.

Rising literacy is another consequence of the bank. "Now they are interested in education because they are earning money and want to keep records," Yunus explains.

The "father" of microcredit asserts that poverty is caused by government policy. "If you can change one institution, like banking, and establish credit as a human right, build an institution to make it happen that anybody can access credit ... then people can work themselves out of poverty," Yunus says.

The concept has now been embraced in 52 countries. Malaysia was the first, in 1985, but it has not been restricted to the developing world - there are more than 500 such schemes in the US alone.

Of the topics on the agenda at the three-day forum in Washington next week, the issue of foreign aid will be one of the most significant. Yunus says there is tremendous scope for changing the way aid funds are used.

Scandinavian nations are very conscious of how their foreign aid is used and are receptive to the microcredit idea. Germany is also interested and will send MPs and journalists to Bangladesh after the summit to live in a village for eight days. The party will see how the Grameen Bank has spawned companies - both profit- and nonprofit-making - to create employment and help to address health, education and energy problems. Many, such as Grameen Telecom, are using technology in creative ways. "The idea is to bring cellular telephones to poor women in rural Bangladesh - they will be selling the service of the telephones to neighbours and villagers and become a mobile telephone booth," Yunus explains.

Electricity is needed to recharge mobile phone batteries, so Grameen is using solar energy to overcome the lack of power in villages. He predicts Grameen Shakti (energy) could easily become the biggest solar energy company in the world. With a cellular phone network and solar power available, Bangladeshi villages are also being connected to the Internet. Yunus hopes these links will create data entry, software development or even answering service and transcription jobs.

Rather than being a threat to capitalism, Yunus says microcredit has the potential to create a system where everybody can buy, sell and produce freely. "Capitalism has been misinterpreted - the assumption is that the fuel of capitalism is greed. We are so convinced about it we let only the greedy people play in the market." He contends that social consciousness can be as powerful a driving force as the desire for profit.