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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.

Microfinance as a Tool to Alleviate Poverty – Forbes

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For millions of people without access to traditional banking, the internet is a lot more than a place to share the latest family photos. It’s an opportunity to tell their stories and gain access to small loans that can change their lives.

Just 10 percent of the global population has access to traditional banking, according the Gates Foundation. To bridge the gap, microfinance institutions step in. Microfinance entails loans of as little as $25 to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services, providing low-income people with opportunities to become self-sufficient.

Back in 1974, a Bengali man named Muhammad Yunus created the concept of microfinance with Grameen Bank, winning him the Nobel Peace Prize in 2006 for the dramatic global impact of his idea. The World Bank estimates that more than 500 million people have benefitted from microfinance to date.

Different than charity, these loans are repaid to the individual lenders. Since 2005, Kiva, a person-to-person microlending organization, has provided more than $329 million from 786,000 lenders in 62 countries, with the astonishing repayment rate of 98.97 percent. Borrowers are able to tell their stories online, along with details of their business idea – say, opening a shop or buying materials to make goods by hand.

Kate Cochran, COO of education microlender Vittana, notes the ripple effect these small loans can have across entire families and even generations. “In India, an education can increase earning power by 200 to 300 percent. In many cases, siblings are able to pay for younger brothers and sisters to complete their education with that extra income, and the upward cycle repeats.”

The Dell Foundation also supports and funds microfinance, with a focus on promoting family economic stability by working to increase the number of high-caliber Microfinance Institutions (MFI) in urban communities through Ujjivan. Other microfinance organizations include ACCIONMicroplace, and Grameen America. Many MFI’s also offer microloans in the U.S. for entrepreneurs with solid business plans but who don’t qualify for traditional bank loans.

Global Philanthropy Group partner Maggie Nielson, who helped develop and implement the United Nation’s Year of Microcredit  program in 2005, sums it up nicely: “People just want access to the same financial tools we have so that they can help themselves. They don’t want someone else to build them a big project or give them a handout. They are perfectly capable of creating their own success even though they weren’t born into the same circumstances. That is the kind of assistance anyone can give. You can literally change someone’s life.”

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.