Banker To The Poor

PART I: BEGINNINGS

1940–76

From my village bank to the World Bank

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1

Jobra Village: From Textbook to Reality

The year 1974 was the year which shook me to the core of my being. Bangladesh fell into the grips of a famine.

Newspapers were reporting horrible stories of death and starvation in remote villages and district towns in the north. The university where I taught and served as head of the economics department was located in the south-eastern extremity of the country, and at first we did not pay too much attention to it. But skeleton-like people started showing up in the railway stations and bus stations of Dhaka. Soon a few dead bodies were reported in these places. What began as a trickle became a flood of hungry people moving to Dhaka.

They were everywhere. You couldn’t be sure who was alive and who was dead. They all looked alike: men, women, children. You couldn’t guess their age. Old people looked like children, and children looked like old people.

The government opened gruel kitchens to bring people to specified places in town. But every new gruel kitchen turned out to have much less capacity than was needed.

Newspaper reporters were trying to warn the nation of what was going on. Research institutions tried to collect information about where all the starving people were coming from. Would they ever go back, if they survived? And what was the chance of their surviving?

Religious organizations were trying to pick up the dead bodies to bury them with proper religious last rites. But soon the simple act of picking up the dead became a manifestly bigger task than they were equipped to handle.

One could not miss these starving people even if one wanted to. They were everywhere, lying very quiet.

They did not chant any slogans. They did not demand anything from us. They did not condemn us for having delicious food in our homes while they lay down quietly on our doorsteps.

There are many ways for people to die, but somehow dying of starvation is the most unacceptable of all. What a terrible way to die. It happens in slow motion. Second by second, the distance between life and death becomes smaller and smaller.

At one point, life and death are in such close proximity one can hardly see the difference, and one literally doesn’t know if the mother and child prostrate on the ground are of this world or the next. Death happens so quietly, so inexorably, you don’t even hear it.

And all this happens because a person does not have a handful of food to eat at each meal. In this world of plenty, a single human being does not have the right to a precious handful. Everybody else all around is eating, but he or she is not. The tiny baby, who does not yet understand the mystery of the world, cries and cries, and finally falls asleep, without the milk it needs so badly. The next day maybe it won’t even have the strength to cry.

I used to get excited teaching my students how economics theories provided answers to economic problems of all types. I got carried away by the beauty and elegance of these theories. Now all of a sudden I started having an empty feeling. What good were all these elegant theories when people died of starvation on pavements and on doorsteps?

My classroom now seemed to me like a cinema where you could relax because you knew that the good guy in the film would ultimately win. In the classroom I knew, right from the beginning, that each economic problem would have an elegant ending. But when I came out of the classroom I was faced with the real world. Here, good guys were mercilessly beaten and trampled. I saw daily life getting worse, and the poor getting ever poorer. For them death through starvation looked to be their only destiny.

Where was the economic theory which reflected their real life? How could I go on telling my students make-believe stories in the name of economics?

I wanted to run away from these theories, from my textbooks. I felt I had to escape from academic life. I wanted to understand the reality around a poor person’s existence and discover the real-life economics that were played out every day in the neighbouring village – Jobra.

I was lucky that Jobra was close to the campus. Field Marshal Ayub Khan, the then President of Pakistan, had taken power in a military coup in 1958 and ruled until 1969 as a military dictator; because of his strong distaste for students, whom he considered troublemakers, he decided that all universities founded during his rule had to be located away from urban areas so that students would not be able to disrupt the centres of population with their political agitation.

Chittagong University was one of the universities founded during his regime. The site chosen was in a hilly section of Chittagong District, next to Jobra village.

I decided I would become a student all over again, and Jobra would be my university. The people of Jobra would be my teachers.

I promised myself to try and learn everything about the village. I thought I would be fortunate if I could understand the life of one single poor person. This would be a big departure from traditional book learning. By attempting to equip the students with a bird’s eye view, traditional universities had created an enormous distance between students and the reality of life. When you can hold the world in your palm and see it from a bird’s eye view, you tend to become arrogant – you do not realize that when looking from such a great distance, everything becomes blurred, and that you end up imagining rather than really seeing things.

I opted for what I called the ‘worm’s eye view’. I thought I should rather look at things at close range and I would see them sharply. If I found some barrier along the way, like a worm, I would go around it, and that way I would certainly achieve my aim and accomplish something.

I started to feel useless in the face of so many starving people pouring into Dhaka. Social organizations set up feeding centres in various parts of the city. Neighbourhoods made special efforts to find food for the hungry. But how many can one feed every day? Famine was spreading before our eyes in all its ugliness.

I tried to overcome the feeling of uselessness by redefining my role. I explained to myself that I might not be able to help many people, but I certainly could make myself useful for a day, or just a few hours, to one other human being. That would be a great accomplishment for me. This idea of providing small-scale yet real help, not just theory, to at least one living person gave me enormous strength. I felt alive again. When I started visiting the poor households in Jobra, I knew very clearly what I was looking for, and why. My motivation had never been clearer.

I began visiting the poor households in Jobra to see if I could help them directly in any way. My colleague, Professor Latifee, usually accompanied me. He knew most of the families and had a natural gift for making village people feel at ease.

There were three parts to the village: a Muslim, a Hindu and a Buddhist section. When we visited the Buddhist section we used to take our student, Dipal Chandra Barua, with us. He came from a poor Buddhist family in Jobra and was always ready to volunteer for any assignment.

One day, as Latifee and I were making our rounds in Jobra, we stopped at a completely run-down house. We saw a woman working with bamboo making a stool. We did not have to strain our imaginations to guess that her family found it extremely difficult to survive.

‘I want to talk to her,’ I told Latifee.

He led the way through scavenging chickens and vegetable plants. ‘Anybody home?’ Latifee asked in a friendly voice.

She was squatting on the dirt floor of her verandah under the low rotten thatched roof of her house, totally absorbed in her work. She was holding the half-finished stool between her knees while plaiting the strands of bamboo cane.

On hearing Latifee’s voice, she immediately abandoned her work, sprang to her feet and disappeared inside the house.

‘Don’t be frightened,’ said Latifee. ‘We are not strangers. We both teach up at the university. We are neighbours. We want to ask a few questions, that is all.’

Reassured by Latifee’s manner and warmth, she said in a low voice, ‘There is nobody home.’

She meant there was no male at home. In Bangladesh, women are not supposed to talk to men who are not close relatives.

Children were running around naked in the yard. Neighbours appeared and watched us, wondering what we were doing there.

In the Muslim sections of the village, we often had to talk through a bamboo wall separating us from the women we interviewed. The Muslim custom of purdah (literally ‘curtain’ or ‘veil’), whereby married women stay in a state of virtual seclusion from the outside world, was strictly observed in Chittagong District. That is why I sometimes used a female intermediary, a student or a local schoolgirl, to run back and forth with messages.

Since I am a native Chittagonian and speak the local dialect, it was easier for me to gain their confidence than it would have been for an outsider. But, still, it was difficult.

I love children, and complimenting a mother on her baby was always a natural way for me to put her at her ease. My mother had fourteen children (nine of whom survived), and as I was the third eldest I grew up feeding and changing the nappies of my brothers and sister. Whenever I had a free moment at home I would pick a baby up in my arms and cuddle it. This experience has been invaluable to me in my fieldwork.

I now picked up a small naked baby, but he started crying and rushed over to his mother. She let him climb into her arms.

‘How many children do you have?’ said Latifee.

‘Three.’

‘He is very beautiful, this one,’ I said.

Feeling reassured, the mother appeared in the doorway holding her baby.

She was in her early twenties, thin, with dark skin, black eyes. She wore a red sari and could have been any one of a million women who labour every day from morning to night in utter destitution.

‘What is your name?’

‘Sufia Begum.’

‘How old are you?’

‘Twenty-one.’

I did not use a pen and note-pad for that would have scared her off – I let my students do that on return visits.

‘Do you own this bamboo?’ I asked her.

‘Yes.’

‘How do you get it?’

‘I buy it.’

‘How much does the bamboo cost you?’

‘Five taka.’ That was 22 US cents.

‘Do you have 5 taka?’

‘No, I borrow it from the paikars.’

‘The middlemen? What is your arrangement with them?’

‘I must sell my bamboo stools back to them at the end of the day, so as to repay my loan. That way what is left over to me is my profit.’

‘How much do you sell it for?’

‘Five taka and 50 paisa.’

‘So you make 50 paisa profit?’

She nodded. That came to a profit of just 2 US cents.

‘And could you borrow the cash and buy your own raw material?’

‘Yes, but the money-lender would demand a lot. And people who start with them only get poorer.’

‘How much do the money-lenders charge?’

‘It depends. Sometimes they charge 10 per cent per week. I even have a neighbour who is paying 10 per cent per day!’

‘And that is all you earn from making these beautiful bamboo tools, 50 paisa?’

‘Yes.’

Usurious rates have become so standardized and socially acceptable in all third world countries that not even the borrower notices how oppressive the contract is. In rural Bangladesh, a weight of unhusked rice (a maund of paddy) borrowed at the beginning of the planting season has to be repaid with two and a half weights (2.5 maunds) at harvest time.

There are many alternatives. If land is used as security, it is placed at the disposal of the creditor who enjoys ownership rights over it until the total amount is repaid. In many cases, the formal documents (such as Bawnanama) are made to establish the right of the creditor. To make repayment of the loan difficult, the creditor refuses to accept any part-repayment. After the expiry of a certain period, the creditor has a right to ‘buy’ the land at a predetermined ‘price’. Another form of security is the obligatory supply of labour on the creditor’s land.

Under the dadan system, traders advance loans against standing crops for the compulsory sale of the crops at a predetermined price which is obviously lower than the market rate. (Sufia Begum was producing her bamboo stools under a dadan arrangement with a paikar.)

Sometimes the loan is taken out for social or investment purposes (to marry off a daughter, to bribe some official, to fight a court case, for a social occasion), but sometimes for physical survival (the purchase of food or medication, or to meet some emergency situation).

But in all cases it is extremely difficult for the borrower to extricate him- or herself from the burden of the loan. Usually the borrower will have to borrow again just to repay the prior loan, and ultimately the only way out is death.

There are usurers in every society. Unless the poor can be liberated from the bondage of the money-lender, no economic programme can arrest the steady process of alienation of the poor.

Sufia Begum set to work again because she did not want to lose any time talking with us. I watched her small brown hands plaiting the strands of bamboo as they had every day for months and years on end. This was her livelihood. She squatted barefoot on the hard mud. Her fingers were callused, her nails black with grime.

How would her children break the cycle of poverty and aspire to a better life? It seemed hopeless to imagine that her babies would one day escape this misery. How could they go to school when the income she earned was barely enough to feed her, let alone shelter her family and clothe them properly?

‘That is what you earn from a whole day’s work, 50 paisa? Eight anna?’

‘Yes, on a good day.’

She earned the equivalent of 2 US cents a day and it was this knowledge which paralysed me. In my university courses, I dealt in millions and billions of dollars, but here before my eyes, the problems of life and death were posed in terms of pennies. Something was wrong. Why did the university course I taught not mirror the reality of her life? I was angry at myself, angry at the world which was so uncaring. There was no glimmer of hope anywhere, not even a hint of a possible solution.

Sufia Begum was illiterate but she was not without useful skills. The very fact that she was alive, squatting in front of me, working, breathing, struggling on in her quiet way despite such adverse conditions proved beyond a doubt that she was endowed with a useful skill – the skill of survival.

Poverty is as old as the world itself. There was no chance of Sufia improving her economic base. But why? I didn’t know why. We grow up with poor people all around us, and we never question why are they poor. It seemed to me that the existing economic system made it absolutely certain that her income would be kept perpetually at such a low level that she could never save a penny and could never invest in expanding her economic base. So her children were condemned to live a life of penury, of hand-to-mouth survival, just as she lived it before them, and as her parents did before her.

I had never heard of anyone suffering for the lack of 22 US cents. It seemed impossible to me, preposterous. Should I reach into my pocket and hand Sufia the pittance she needed for capital? That would be so simple, so easy.

Why had not my university, my economics department, all the economics departments in the world for that matter, and the thousands of intelligent economics professors, why had they not tried to understand the poor and to help those who needed help the most?

I resisted the urge to give Sufia the money she needed. She was not asking for charity. Also, it would not have solved the problem on any permanent basis.

All around, men were working, some in the fields, others fixing their rickshaws, others hammering metal. The work here in rural Bangladesh is endless. I am always overwhelmed by the physical agility and strength of my fellow Bangladeshis.

Latifee and I drove back up the hill to my house. We walked slowly around my garden in the last heat of the day.

Walking up and down this hill is good for me. I grew up with flat feet and was never a sportsman, never physically strong. I learned to swim early on, but that was for fun. I never do enough exercise, the doctor says. So I try to walk everywhere. My friends always urge me to take better care of myself, but the truth is I do not have time or interest to waste on my health.

I thought of what a huge gap there was between the high-falutin words of governments and the realities on the ground. The Universal Declaration of Human Rights states that:

The Declaration also demands that member nations secure the ‘recognition and observance’ of these rights.

It seemed to me that poverty created a social condition which negates all human rights, not just a select few. A poor person has no rights at all, no matter what his or her government signs on paper or what officials put in their big books.

I was trying to see the problem from Sufia’s point of view. I imagined I was a worm and had to overcome the obstacle facing me: how does one get around the cost of the bamboo? Do I go around? Climb the wall? Do I find a crack and go through?

I had no solution to Sufia’s problem. I simply tried to understand why she suffered: she suffered because the cost of the bamboo was 5 taka and she didn’t have the necessary cash. Her life was miserable because she could survive only in that tight cycle – borrowing from the trader and selling back to him. She could not break free of that circle. Put in those terms it was simple. All I had to do was lend her 5 taka.

Right now her labour was almost free. It was a form of bonded labour, or slavery. The trader always made certain that he paid Sufia a price that only covered the cost of the materials and just enough so that she would not die, but would need to keep on borrowing from him.

It seemed to me that Sufia’s status as virtually a bonded slave was never going to change if she could not find that 5 taka to start with. Credit could bring her that money. She could then sell her products in a free market and could get a much better spread between the cost of her materials and her sale price.

The next day I called in Maimuna, a university student who collected data for me, and I asked her to assist me in making a list of how many in Jobra, like Sufia, were borrowing from traders and missing out on what they should have been earning from the fruits of their labours.

Within a week, we had prepared a list. It named forty-two people who in total had borrowed 856 taka, a total of less than $27.

‘My God, my God, all this misery in all these forty-two families all because of the lack of $27!’ I exclaimed.

Maimuna stood there without saying a word. We were both astounded, shocked, but also sickened by the pathos of it all.

My mind wouldn’t let this problem lie. I wanted to be of help to these forty-two able-bodied, hard-working people. I kept going around and around the problem, like a dog worrying his bone. If I lent them $27, they could sell their products to anyone; they could then get the highest possible return for their labour, and would not be limited to the usurious practices of the traders and money-lenders.

I would lend them $27, and they would repay me whenever they could afford to.

Sufia needed credit because she had no cushion to tide her over the adverse conditions which too often arose in meeting her family obligations, in carrying on her bamboo weaving and for mere survival in times of total disaster.

Unfortunately, no formal financial institution was available to cater for the credit needs of the poor. This credit market, by default of the formal institutions, had been taken over by local money-lenders. It was an efficient vehicle, creating a heavy rush of one-way traffic on the road to poverty.

People were not poor because they were stupid or lazy. They worked all day long, doing complex physical tasks. They were poor because the financial structures which could help them widen their economic base simply did not exist in their country. It was a structural problem, not a personal problem.

I handed Maimuna the $27 and told her, ‘Here, lend this money out to the forty-two on our list. They can repay the traders what they owe them and sell their products wherever they get a good price.’

‘When should they repay you?’

‘Whenever they can,’ I said. ‘Whenever it is advantageous for them to sell their products. They don’t have to pay any interest. I am not in the money business.’

Maimuna left, puzzled by this turn of events.

Usually when my head touches the pillow, I fall asleep within seconds, but that night I lay in bed feeling ashamed that I was part of a society which could not provide $27 to forty-two able-bodied, hard-working skilled persons to make a living for themselves.

Over the next week, it struck me that what I had done was not sufficient because it was only a personal and emotional solution. I had simply lent $27, but what I had to do was to provide an institutional solution. If anyone else needed capital, they would have to be able to find an easier source of money than chasing down the head of the economics department of the University. My thinking up until then had been ad hoc and emotional. I needed to create an institutional response on which they could rely.

A poor person cannot walk up the hill and seek out some department head. For one thing, the campus police would not let the poor through the front gates; they would think they were coming on campus to steal.

Something had to be done. But what?

I decided to approach the local bank manager and request that his bank lend to the poor. What was required was an institution that would lend to those who had nothing. It seemed so simple, so straightforward.

That was the beginning of it all. I was not trying to become a money-lender, I had no intention of lending money to anyone; all I really wanted was to solve an immediate problem. Even to this day I still view myself, my work and that of my colleagues in Grameen, as devoted to solving the same immediate problem: the problem of poverty which humiliates and denigrates everything that a human being stands for.

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2

The World Bank, Washington, DC, November 1993

We have come a long way: from $27 lent to forty-two people in 1976 to $2.3 billion lent to 2.3 million families by 1998. A Micro-credit Summit was held in 1997 to launch a worldwide campaign to reach 100 million families by the year 2005, and Grameen programmes stretch all over the world, from Equador to Eritrea, from the Norwegian polar circle to Papua New Guinea, from Chicago’s inner-city ghettos to remote mountain communities in Nepal – by 1998 fifty-eight countries have Grameen clones.

November 1993 was an extremely important date for Grameen because for the first time our ideas finally reached deep into the inner sanctum of the international donor countries. Louis Preston, president of the World Bank, invited me to address the World Hunger Conference at the Washington DC headquarters of the World Bank.

As I stood up to speak at the conference, pictures of struggling women flashed through my mind. I paused and looked out over my audience. Who would have imagined that from my office overlooking the Monipur slum in Dhaka’s Mirpur area, I would be here, at the heart of the world’s financial world, giving a speech on our achievements and challenging the World Bank?

The World Bank and Grameen have been through so many fights and disagreements over the years that some commentators have called us ‘sparring partners’. There have always been a few individuals in the World Bank who understand what micro-credit is all about, but our styles are so radically different that for many years we have spent more time and energy fighting each other than helping each other.

As I looked over my audience, I could not help but remember the World Food Day teleconference of 1986. Patricia Young, national co-ordinator of the US World Food Day Committee, invited me to be a panellist along with World Bank then-president Barber Conable in a teleconference which would be broadcast by satellite in thirty countries. I had no idea what a teleconference was, but I accepted the invitation as an opportunity to explain why I felt credit should be accepted as a human right, and how credit could play a strategic role in removing hunger from the world.