My major official project as a volunteer this year is creating a database system for RELUFA's micro-finance program, CAP, or Credit Against Poverty. I got the first draft of it (the "beta") done around Christmas, and we've been adding features and reports ever since. We plan to put it on the Internet soon, so we can continue to collaborate on it easily when we leave. I've wanted a solid pro-bono side project like this for years.
The CAP program makes small loans to individuals and groups who would not otherwise have access to credit. They use this money for a variety of small businesses, everything from running a food stall to raising small animals for sale to fruit drying to brickmaking. Micro-finance is a popular idea now, and you'll see signs and billboard for micro-finance programs if you drive around Yaounde, interspersed with signs for all kinds of other NGOs. Micro-finance in its modern form got its start in the seventies, when a Bengali economics professor named Muhammand Yunus decided to start loaning small amounts of money to the poor. This grew into Grameen (from the Bengali for "village") Bank, the institutional pioneer of micro-finance.
I just finished reading Yunus' book, Banker to the Poor, where he describes the history and philosophy of his work and Grameen. It's a fascinating read, and a positive and encouraging take on the difficult problem of world poverty.
Grameen has loaned billions of dollars to poor Bengalis in tiny increments to pull themselves out of poverty, and boasts a loan payback rate of 98%. This number is surprising because micro-loans work differently than other bank loans. The reason poor people cannot typically get loans from banks is that they have no collateral and need only small amounts. Micro-loan programs require no collateral and deal in small amounts. So why would anyone pay the loans back? The borrowers are in groups, so there is peer pressure to pay it back. The bankers build relationships with the borrowers, often over a long period of time. And the borrowers, initially anyway, are genuinely poor people, the bottom layer of society, and thus have no other option if they don't make this work.
Yunus' concept of poverty is an arresting one. He argues that the poor are creative and able to solve their own problems; they don't need training or handouts, just access to credit. He has found this idea to be a hard sell, even in the face of his own success in Bangladesh:
Almost everyone I spoke with dismissed what I said, arguing that the Bengali experience could not be relevant to poverty eradication in the United States. They claimed that Chicagoans needed jobs, training, health care, and protection from drugs and violence, not micro-loans, and that self-employment was a primitive concept lingering only in the Third World. Low-income people in Chicago needed money for rent and food, not for investment. They had no skills anyway.
I advanced the same arguments I had made to bankers in Bangladesh. "The poor," I said, "are very creative. They know how to earn a living and how to change their lives. All they need is opportunity. Credit brings that opportunity. Perhaps our two societies are different and thousands of miles apart, but I don't see any difference between the poor of Bangladesh and the poor of Chicago. The problems and consequences of poverty are the same."
His vision is to use micro-finance and other such empowering tools to wipe out world poverty. And he is no fan of most international aid or the welfare state.
I have always believed that the elimination of poverty from the world is a matter of will. Even today we don't pay serious attention to the issue of poverty, because the powerful remain relatively untouched by it. Most people distance themselves from the issue by saying that if the poor worked harder, they wouldn't be poor.
When we want to help the poor, we usually offer them charity. Most often we use charity to avoid recognizing the problem and finding a solution for it. Charity becomes a way to shrug off our responsibility. But charity is no solution to poverty. Charity only perpetuates poverty by taking the initiative away from the poor. Charity allows us to go ahead with our own lives without worrying about the lives of the poor. Charity appeases our conscience.
World poverty, says Yunus, is a soluble problem, and not as complicated as we make it out to be.
...things are never as complicated as they seem. It is only our arrogance that prompts us to find unnecessarily complicated answers to simple problems.
The book is not just a clear description of an innovative approach to world poverty, but Yunus' argument for respecting the experience and abilities of the poor people he serves with a cheerful sense of possibility. Start small, think big, and never say die.
1 comment:
Hi Chris!
This was an interesting read for me, because, as someone who studied development, I have also pondered on the role of charities, 'aid', giving, etc. It must be true that charities, especially those very large, somewhat corporate-like INGOs with their HQs in London, New York or Geneva, show images of the poor that feed into the stereotype of 'dependency', 'need', even 'inability' to provide for oneself, rather than the many cases of entrepreneurial spirit and adaptation that you and I have seen here in Yaoundé. Although this is not to deny that there are those in need.
Although aid can provide those basic necessities for the poor (albeit a very tiny minority of a given community or country), I always wonder if their role can do more damage to the capacity and role of the government. Even more important is that the role of charities, who implement aid programmes, whilst welcome, might not always do enough to improve the peoples' lives on a long-term, sustainable basis. I also know of cases where communities have fought one another for aid programmes, sometimes making themselves seem poorer than their neighbours, because of the great amounts of money/attention that could pour into their communities.
Back to Yunus....have you read Hernando de Soto? His book "The Mystery of Capital" (2000) has a really interesting argument, somewhat similar to Yunus - that the poor are entrepreneurs, that they have the capabilities to create businesses, etc, but that they lack capital...they have no assets, no collateral, with which to secure a loan.
“The cities of the Third World and the former communist countries are teeming with entrepreneurs. You cannot walk through a Middle Eastern market, hike up to a Latin American village, or climb into a taxicab in Moscow without someone trying to make a deal with you. The inhabitants of these countries possess talent, enthusiasm, and an astonishing ability to wring a profit out of practically nothing.” (p.4)
“...the major stumbling block that keeps the rest of the world from benefiting from capitalism is its inability to produce capital.” (p5)
“...most of the poor already possess the assets they need to make a success of capitalism... But they hold these resources in defective forms: houses built on land whose ownership rights are not adequately recorded, unincorporated businesses with undefined liability, industries located where financiers and investors cannot see them.” (p.5-6)
He argues that they possess ‘dead capital’ because they “lack the process [needed] to represent their property and create capital. They have houses but not titles; crops but not deeds; businesses but not statutes of incorporation.” (p.6-7)
His argument is that they need a formal and legal private property regime:
“...capital [can] be extracted and processed from assets. But only the West has the conversion process required to transform the invisible to the visible”
Because the West has created (over a long period of time) formal legal property regimes, they have this conversion process. But because in most developing countries, legal property rights are ‘fuzzy’ – that is, there is no clear ownership of property (from houses to businesses to goods), they are ‘extralegal’ or semi-legal. The property regimes are also so complex in these countries that it is difficult to enter the legal property realm. This is another hindrance in creating the conversion process that would allow assets to create capital.
Pretty interesting! Both Yunus and de Soto see that the poor have potential if only they can access capital, so they both see the importance of using market-based initiatives. These initiatives could provide a much more sustainable (and indigenous) approach to poverty alleviation than aid and charity giving. I haven’t read Yunus’s book but I’d be interested in seeing how their arguments relate to/differ from one another. If you’d like to read de Soto, I have the book.
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