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A Nobel Prize Winner Under Siege – WSJ.com

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The Bangladeshi government is moving to exert control over the celebrated Grameen Bank.

By GEORGE SHULTZ AND MADELEINE ALBRIGHT

With so many banks making headlines, it is easy to overlook news about Bangladesh’s Nobel Peace Prize-winning Grameen Bank. No, this bank does not need a bailout. Quite the contrary, it has been prospering as it continues to provide life-changing microloans to millions of poor people. The borrowers also run the bank—they are the majority owners. But the Bangladeshi government recently moved to change this arrangement. We urge the government to reconsider.

At issue is whether the bank’s managing director should be appointed by the board of directors (most of whom are elected by the millions of small shareholders) or by the bank’s chairman, who is appointed by the government. Preserving the right of the board of directors to make this choice would be in keeping with the bank’s most distinctive feature—that the institution’s customers are also its owners and managers.

The Grameen Bank model has been strikingly successful; it should be emulated, not changed. With 30 years of experience, Grameen delivers exceptional loan-repayment rates (97%) while vastly improving the lives of its members. Credit is given only to start or expand businesses, and members join as groups of five, who provide mutual support and accountability.

With 8.3 million borrowers, Grameen is a primary source of capital for women entrepreneurs and has used its influence and resources to support education, community-hygiene initiatives, affordable health care and better nutrition. In the process, the bank has contributed mightily to social, civic and environmental awareness throughout Bangladesh.

In 2006, Grameen’s owners and Muhammad Yunus, its founder, were honored with the Nobel Peace Prize in recognition of their efforts to reduce poverty. Dozens of countries have developed institutions based on the Grameen model, providing benefits to hundreds of millions of people in Asia, Africa, the Middle East, Latin America and even the United States.

A major reason for the bank’s success is its loyalty to the principle that the same people who rely on it for credit also have a direct role in managing its operations. The idea that poor people can run their own bank successfully has been very empowering—especially for women, who make up the vast majority of borrowers and who often have little or no access to conventional sources of commercial lending. That is why it would be a mistake for the government of Bangladesh to deprive the board of directors of the right to appoint the managing director.

Borrowers elect nine of the 12 members on the board while the government appoints three directors, including the chairman. The board as a whole has been responsible for bank operations, a governance structure that has served the rights and interests of its member owners since Grameen’s founding several decades ago. We believe that Secretary of State Hillary Clinton was right, in her visit to Bangladesh in May, to caution against any step that “would undermine or interfere in the operations of the Grameen Bank or its unique organizational structure.”

Grameen Bank is more than just another financial institution. It is a living demonstration of how people who lack advantages of any kind can nevertheless lift themselves out of poverty through hard work and personal accountability. It is a testament to the capacity of women to succeed in business when accorded the opportunity to do so. And Grameen is—or at least it should be—a fundamental source of pride for the government of Bangladesh.

With the world watching, the government should consider carefully how to proceed now that its steps to seize direct control over the bank’s leadership have stirred controversy. We hope it will choose instead to preserve a system that has worked well, earned credit for Bangladesh on the world stage, and inspired followers across the globe.

Mr. Shultz, a former secretary of labor, Treasury and state, is a distinguished fellow at Stanford University’s Hoover Institution. Ms. Albright, a former secretary of state and permanent representative to the United Nations, is a chairwoman of the Albright-Stonebridge Group.

Using Microfinance to Bring Clean Water to India’s Poor

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Written By: Tom Murphy; Posted: 03/ 8/2012 3:09 pm

Original – http://www.aviewfromthecave.com/2012/03/using-microfinance-to-bring-clean-water.html

 Mumbai — A unique public-private partnership involving private sector giants like Unilever and Heinz is improving the health of Indian children. Two hours outside India’s tech hub Bangalore is Krishnagiri the Integrated Village Development Project (IVDP) is using interest-free microfinance loans to increase access to products people could not afford on their own. “I care about the safe health and education of children. If I do business with people and don’t care, it is not development. This is not development,” explained Kulandei Francis, founder of IVDP.

The term ‘microfinance’ elicits the image of groups of women who take loans, share the liability with the group members and use the money to expand a small business. This idea grew out of Nobel laureate Mohammad Yunus’s Grameen Bank which has operated in Bangladesh for four decades and reached a wider audience thanks to organizations like Kiva that allow any person to provide a microfinance loan to a woman anywhere in the world. Today, a shopper at Whole Foods can round up to the nearest dollar at the register to support the company’s microfinance institution of choice.

Microfinance is just about everywhere these days.

The truth is that microfinance is a complicated term that covers many ways people access financial services around the world. Payday loans in the United States are a form of microfinance — as is rainfall insurance for farmers in Ghana. It would be similar to calling every financial service that I can access in the United States ‘finance.’ It does not come close to adequately capturing the services I use.

In India, the most common avenue of accessing financial services by the poor is through self-help groups (SHGs). On the face they look similar to Yunus’s group lending scheme, but there are important differences that allow for a shift from building business to supporting social goods like health and education.

 

SHGs are formed by women with the help of an NGO. For a period of time, the women only save money. They deposit a small sum of 50 rupees ($1) each month. After six months, the women are eligible to take small loans. These loans can either come from the group savings account or through the bank. The group helps determine if the loan is appropriate for each member and serve as a check for the bank. Because the liability of the loan is shared among the group, it is in their interest to ensure that each member is capable of paying back a loan on time.

NGOs run Bank Linkage Programs to serve as an organizing mechanism and a bridge between the women and the banks. Having never been to a bank themselves, this bridge allows access, and provides an easy way of becoming familiar with banking. Additionally, the mission of the NGO is to ensure financial access for families so they can weather the peaks and valleys of poverty. The livelihoods of clients are at the forefront of NGOs like IVDP.

This small change in structure impacts how outcomes are then measured. For IVDP, success is measured by the health of children and their ability to go to succeed at school. To achieve this mission, IVDP partners with corporations like Unilever.

Unilever’s PureIt water filter is a significant innovation in terms of bringing safe water to homes in India. The device filters water to meet the US EPA standards for clean drinking water. It is simple to use and the most cost effective filter available.

IVDP partners with Unilever to provide women the ability to purchase a PureIt using an interest-free loan. She can pay for the 2000-rupee filter over time and has the ability to access future loans, still without interest, to pay for a new filter when it needs to be replaced. When I asked Mr. Francis why he would forgo the interest earned on the product he scoffed at the thought of collecting interest, “We do not take interest on anything that improves children’s health.”

 

I visited one SHG in Krishnagiri that is associated with IVDP. Of the 15 members in the group, 10 said they already owned a PureIt and two indicated that they are interested in purchasing one in the near future. The group leader bought the first PureIt about a year ago. A worker in a garment factory, she said that she used to do nothing to treat her water. When a family member fell ill, she would boil the water for them until they got better.

She understood that boiling water had a connection with illness, but did not do it as a precautionary measure. Since owning the PureIt, she says her children have been less sick and in school more often. In my time visiting both urban and rural users of PureIt, this change was observed by every mother. Their children were sick fewer days since drinking water from the PureIt and had improved attendance at school.

In another home, the PureIt was decorated with stickers. I remarked that it looked like the children liked the filter. She nodded saying, “The children maintain the PureIt and insist it is always clean”. She explained that her three sons and one daughter learned about clean water while at school and demanded that they have access to clean water. The mother, having learned about PureIt from her SHG and hearing the praise from the group leader, spoke with her husband and decided they would take out a loan to buy the filter.

Now, her children take a bottle of clean water with them to school each day. She did not know that germs were in her water and that they were making her family sick. She too was happy with the PureIt because it provided her good tasting water and her children were less sick. Only by seeing the product demonstration and learning about clean water from her children did she understand the importance of water safety.

Mr. Francis offers additional products to his clients including nutrition packets by Heinz and solar lamps from d.light. Such partnerships help to achieve his goal of improved health and education opportunities for the children of Krishnagiri. The group leader of the SHG uses one of the solar lamps. She charges it in her courtyard and said it is helpful during frequent blackouts so she can get around the house and her children can do their studies.

Recent studies and a book by David Roodman make it clear that microfinance has not been the transformative poverty solution as proponents claim. Giving families the ability to access financial services is important itself and support from NGOs to provide loans, like the interest free loan offered by IVDP to buy a PureIt, can bring about access to more products and services for the poor.

To Catch A Dollar: A Sundance Movie Review

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Michelle Malsbury, BSBM, MM
April 01, 2011
Last evening I had the privilege of seeing this wonderful movie about Grameen Bank and Mohammed Yunus. It was called “To Catch A Dollar”. In 2008 Mohammed Yunus won the Nobel Peace Prize for microfinance. His groundbreaking work with Grameen Bank sets him apart from most financiers. However, he still adheres to the adage that it “takes money to make money”, just on a slightly less grand scale. Hence, the dollar theme.

The story revolves around the Nobel Laureate, Mohammed Yunus from Bangledash, India. He has travelled all over the world, but began his plan for change in his home, India. India has a large population and much of that population is quite impoverished. The people there suffer from an array of maladies some of which could be solved if they had some money and hope. Mr. Yunus wanted to change the dynamics of his society for the betterment of ALL her citizenry. His plan was simple and genius! He created what is known as microfinance.

Mr. Yunus saw a need to loan money to women who were under the poverty level in his country because they had no credit, no credit scores, no collateral, and no way for any bank to serve them. He set out to loan between $500 and $3,000 to each one. He did not collateralize these loans, but did make some requirements that would help these lucky ladies to become self-sustaining, productive, members of their society. Here´s how the plan works.

The money was conditionally lent out to groups of five women. All women had to be under the level considered impoverished and could not be on any other state assistance plan. Businesses ranged from hair salons to nail salons and from chicken hatchers or goat herders to shoe sales or catering businesses and more. Each woman served as support for her team and met each week for one hour to see how these new business ladies were progressing. They discussed an array of business topics pertinent to their new positions. One member from the Grameen Bank was also present to check in with these ladies and to collect the funds for repayment of the loans. There were also some other interesting twists to what had to be done by these ladies who were lent funds. Each step was thoughtfully intended to help them get out of poverty and make something of their lives.

Contingencies to money being lent also expressly designed a plan where each lady had to sock away a whopping two dollars each week into savings accounts and make weekly, affordable payments to Grameen for these loans. Larger loans, than the $3,000 max individual loan, could be taken out if all members of the group could concur and continue in the practices that had been outlined for them by their loan officer at Grameen. Over a period of time these loans had a 99% plus payback ratio and have helped many many deserving women in India to achieve their dreams.

This microfinance plan was so successful that it was implemented in Ghana: New York City: Omaha, Nebraska: San Francisco, California. Target women for this microfinance program have typically been new immigrants to the USA because they are so motivated toward making a place for themselves and working hard to achieve that end. Can this type of financing translate into other segments of our society and perhaps be the cure for what ails our banking and investment system? I say I believe so.

To date more than 5,000 loans have been made by Grameen to women of various backgrounds and over $15 million dollars have been invested in this program. For more information about this special man, Mohammed Yunus, or Grameen Bank please preview some of his news video´s on YouTube.