Banker to the Poor:
On charity, overlapping with Ayn Rand:
Anyone who drives in a car in the city of Dhaka is assailed on all sides by professional beggars to give them a hand-out.
Why not give? For just a few pennies we can alleviate our conscience. When a person approaches who has leprosy and his fingers and hands are eaten away, we are so shocked, we immediately and quite naturally reach into our pockets and hand over a bill that is a pittance for us but a fortune for the recipient. But is this useful? No, most of the time it is actually harmful.
On the donor’s side, you have the feeling that you have done something. But in fact you have done nothing.
Handing out money is a way of shielding ourselves from addressing the real issue. Handing out a pittance is a way of making ourselves think we have done something and of feeling good for having shared our good fortune with the poor. But in fact we are leaving the problem alone. We have merely thrown money at it and walked away. But for how long?
Giving alms to a beggar is not a long-term or even a short-term solution. The beggar will only go to the next car, the next tourist and do the same. And eventually he will come back to the donor who gave him money and on whom he now depends. If we honestly want to solve the problem, we have to get involved and start a process. If the donor opened the door of the car and asked the beggar what the problem was, what his name was, how old he was, whether he had ‘sought medical assistance, what training he had, then the donor might be of help. But handing the beggar money is only a way of telling him to buzz off and to leave the donor alone.
I do not question the moral duty to help, nor the instinct to want to help the needy, only the form that help takes.
On the recipient’s side, charity can have devastating effects. It robs the recipient of dignity, and it removes the incentive of having to generate income. It makes the recipient passive and satisfied with thinking ‘all I have to do is sit here with my hand out and I will earn a living’.
This is one reason that for too long Bangladesh and other third-world countries have had a deliberate policy of playing up their natural disasters. For the last decade, we have given the international image-makers the idea that we are in an incurable situation. While it is true that we have many natural disasters, we are not helpless nor hopeless. When I see a child begging, I resist the natural impulse to give. But the fact is I do give hand-outs sometimes, I do it when the human misery is so terrible – some disease, some mother with her dying child – that I cannot stop my hand from reaching to my pocket and giving her something. But I fight against this urge as much as possible.
On gender (bold added) and on the poor:
The banks told me that the poor were not creditworthy. My first reaction was, ‘How do you know, you have never lent to them? Perhaps it is the banks which are not people-worthy?’
‘They don’t have collateral,’ they answered.
That is true, but the poor have their self-respect and the peer pressure of their fellow borrowers. We have worked with the poorest people in one of the poorest countries on earth, Bangladeshi village women who have no land and have never touched money in their lives, women who cannot read and write, who have to relieve themselves only at night so as not to be seen, who do not dare stand in front of a man, who must cover their faces when strangers appear. Working with these people we maintained a recovery record of over 98 per cent.
Again and again, the specialists explained that what the Grameen Bank was attempting to do was impossible.
‘OK’, I said, ‘we are mad, but we don’t care, we will persevere.’
We were told that even if we were successful in lending to a handful of indigents and getting the money back, this could not be scaled up to reach any significant number of villages. Yet today we work with 36,000 villages, over half of all the villages of Bangladesh, and we operate with a staff of 12,000 in over 1079 branches.
We were told that we should lend to the head of the household, typically a male. Instead we targeted destitute women, and these turned out to be our most determined weapon against poverty. Today out of 2.1 million borrowers, 94 per cent are women.
We were told that the minuscule loans we made (averaging about $150 per borrower) would not create enough income to alter the poverty status of a family; that poverty was too entrenched to be affected by such loans. But independent studies show that our borrowers are steadily improving their lives: within a decade half of them rise above the poverty line, and another quarter comes close to crossing it.
Independent studies show that our borrowers are better off than other families with regards to nutrition, child mortality, use of contraceptives, sanitation and availability of safe drinking water. Our housing loans have provided homes for 350,000 families, while another 150,000 have built houses with incomes from their Grameen-funded enterprises. We were told that Grameen would always be a sick institution dependent on the subsidies of donors, yet we have been able to make our branch-level operations profitable. In fact, Grameen now deals solely on the commercial market issuing its own bonds and borrowing from commercial banks. Grameen is the soundest financial institution in Bangladesh today.
I struggle to imagine micro-lending solving poverty in the U.S. We aren’t set up for individuals to work for themselves in a free market instead of having jobs. The examples in the book so far suggest that micro-lending best helps people who need capital to do productive work without losing most of their profit to exploitative terms. Many poor Americans already have access to much more money/capital than the micro-lending involves, and aren’t nearly as poor as Bangladeshi villagers, but still lack good opportunities to work for themselves productively using small amounts of money. The barriers to entry for U.S. small business tend to be much higher.