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Small is beautiful, and mighty |
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Mar 09 2010 |
PETER GREGORY
Banesa Khatun says microfinance has lifted her from the poorest of the poor to a respectable, self-dependent woman. Photo: RAFIQUR RAHMAN
From little things big things grow. Rarely has this iconic refrain been more apt than in describing microfinance and its rise to prominence.
When Muhammad Yunus lent $US27 ($A30) to 42 poor women in the Bangladeshi village of Jobra in 1976, it is questionable whether he envisaged the global development phenomenon that microfinance would become.
Professor Yunus is visiting Australia this week for a presentation to the Australian business community called "The Power of the Small".
With the federal government set to release its financial inclusion strategy in coming weeks, Yunus's visit provides a perfect opportunity for Australians to demand a comprehensive and effective strategy that will be of genuine benefit.
Yunus, who won a Nobel prize for his microfinance work, is the father of a billion-dollar global banking business that has effected positive social change in countless communities. It is estimated that 106 million of the world's poorest families received a micro-loan in 2007.
Microfinance consists of offering services to the poor and disadvantaged, who often don't have access to the most basic financial products. Most famously it is in the form of a small loan (maybe $100 or $200) that individuals use to build their own small businesses.
The money may be used to buy productive capital, such as a sewing machine or cooking equipment, so the participant can start a micro-business, using the profits to repay the loan and provide for their family. Once they have repaid the loan they are eligible for a larger one, which they can use to grow their business further, and so the cycle continues. From little things, big things grow.
However, microfinance also includes safe saving, tailored insurance products and relevant and meaningful financial education. It often operates hand in hand with health and education programs.
At its core, microfinance challenges conventional banking wisdom because it banks the "unbankable". As a development strategy, its allure lies in the fact that it is a hand-up not a hand-out, building on the skills, abilities and knowledge that the poor already possess.
The benefits of microfinance are substantial. A review of about 100 studies since 1986 found a wide range of evidence that microfinance can increase incomes and lift families out of poverty.
Access to microfinance has been shown to improve children's nutrition, increase school enrolment rates and even reduce domestic violence and HIV infection rates. However, its most powerful contribution to struggling communities is the sense of self-worth, empowerment and positive social capital it engenders among participants.
Most Australians known little about microfinance, and there has not been much support for it in Australia's aid budgets, although an AusAID-funded microfinance facility in Peru was announced last year. Microfinance funding makes up well under 1 per cent of the overall aid budget.
If the government's financial inclusion strategy is to further unlock microfinance's vast potential, it must address key areas. It must be underpinned by adequate financial support. Microfinance must make up, at the very least, 1 per cent of overall aid spending; about $45 million. That percentage must also be maintained into the future, meaning that, by 2015-16, Australia's microfinance budget should be approximately $75 million.
The strategy must also provide support for developing nations to build favourable regulatory frameworks for microfinance institutions. Many developing nations classify microfinance institutions in the same way as banks, despite their stated social goals. This translates into extra costs and diminishes the positive effect that such institutions have on impoverished communities.
The strategy must also provide for seed funding and "scale-up" opportunities for microfinance institutions in challenging contexts. These contexts, such as post-conflict zones and remote and sparsely populated areas, are often avoided by battling institutions as they pose a significant threat to sustainability. The Australian government could fill this market gap, particularly in the Asia-Pacific region.
The strategy must also include a government undertaking to carry out or sponsor more research into best practice in microfinance, particularly in measuring the social impact of programs on communities. Microfinance institutions are typically under-resourced and many don't have the capacity to carry out these evaluations on their own.
Finally, the strategy must evaluate what elements of microfinance can be re-created for indigenous Australians. Proven outcomes of microfinance, in health, school attendance and empowerment, would be of tremendous benefit to our struggling indigenous communities.
Microfinance has planted the seed of hope in countless communities around the world. It is high time the Australian government supported these efforts with a financial inclusion strategy that will enable them to continue to develop in line with Yunus' vision of 1976. From little things, big things grow. |
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Nobel Peace Prize winner shares his expertise on helping the world's poor at Missouri State event |
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Mar 04 2010 |
Kathryn Wall
News-Leader
Nobel Peace Prize winner Muhammad Yunus shared the secret of his successful microfinance program Tuesday to a nearly packed Juanita K. Hammons Hall.
His advice to battle poverty? Do the exact opposite of what traditional banks do.
"The more you have, the more you can get," he said, referring to modern banking which loans to people who already have wealth as collateral. "We reverse it."
Although he didn't develop the idea, his microfinance practices are considered exceptional models. His is a radical idea: give the poor a small loan, without collateral, and help them help themselves.
That unique idea has earned him awards -- too many to list here -- including the Nobel Peace Prize and the Presidential Medal of Freedom, given by President Barack Obama.
In 1976, Yunus returned to his hometown in Bangladesh after college at Vanderbilt University and witnessed the devastating local poverty. After discovering that loan sharks were preying on the poor in a local village, Yunus set out to find out how much money was owed and to find a solution.
More than 40 villagers owed a total of $27.
"I couldn't believe people had to suffer so much for so little money," he said.
Yunus gave villagers money to pay back the loan sharks and noticed how revered he was in the community.
"I thought 'With $27, you could become an angel. Maybe if I give them another $27, I can become a super angel,' " he said, joking.
But quickly, Yunus realized that small amounts of money could make a big impact when people are scraping by. He approached local banks about setting up loan programs for the suffering locals.
They laughed at him.
Instead, he got a loan and distributed the money. Bank officials told him to kiss his money goodbye, but he got it all back -- with interest.
Over the years, the grass-roots effort to help some locals led to the creation of Grameen Bank in 1983. (Grameen means "of the village"). The bank expects to loan $1.4 billion in 2010.
The dramatic growth of the program wasn't without struggles, he said. The far right political groups thought he was promoting communism. The far left political groups thought he was a CIA agent undermining government authority. Religious groups -- and even some husbands -- were mad that Yunus loaned to women, his primary borrowers.
The program continued to work despite the opposition and has grown throughout Bangladesh. In January 2008, Grameen American opened.
The American arm of the bank makes loans of $1,500 on average in New York and Omaha, Neb. It will soon be operating in San Diego. Yunus said borrowers often use the money for products needed for a small business -- like a mixer for a small bakery or a carpet cleaner for a one-person cleaning service.
All of Grameen's loans, both in the U.S. and overseas, require a business plan to pay the money back.
Yunus also discussed his social business model, which takes the profit-making component out of most business plans. Rather than focusing on how profit can be made and returned to owners, a social business focuses on solving a problem and reinvesting in the business.
He used the example of Dannon yogurt in Bangladesh. The problem was that too many children were malnourished.
Dannon developed a yogurt that contained the nourishment unavailable to children and then sold it at a price where even the most poverty-stricken families could afford to buy it.
Any profit made off the sales goes back into the program -- Dannon can take back any money it invested in the program, but does not collect a profit, he said.
Yunus compared the idea to donations. He said people are willing to make huge donations, and this program is similar, except that the money comes back to the investor.
Yunus' ultimate goal is to eliminate poverty. He said it would be great to one day have "poverty museums" where kids would have to go and learn what poverty was way back in history.
"That's the day we should be creating as soon as possible. It can be done," he said.
News Details |
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Nobel winner wants business to cut poverty |
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Mar 02 2010 |
DANIEL FLITTON
February 23, 2010
Professor Muhammad Yunus.
HAVING received the 2006 Nobel peace prize for doling out millions of dollars in tiny loans to the poor, Muhammad Yunus is promoting another big idea - and again, strangely for a banker, the word ''profit'' is not the main feature.
Micro-finance lender Grameen Bank - set up by Professor Yunus to provide small, short-term loans of a couple of hundred dollars, mostly to women to start small businesses - has partnered French multinational dairy company Danone to produce cheap yoghurt in Bangladesh.
Children benefit from ready access to the product and the nutrition it brings, with the profit used to expand the market. It is an example of Professor Yunus' push for the corporate sector to establish what he calls ''social business''.
''Today we dump all our problems on the shoulders of government, and government is slowly becoming more and more incapacitated by the quantity of problems around,'' he toldThe Age.
''Why don't we create a business on the basis of our selflessness, where we run business not for making benefit only for ourselves but exclusively for helping other people?''
The idea is that a company can succeed and also tackle chronic problems such as malnutrition, environmental decay or unemployment. Although the notion might seem quaint to the hard-nosed, competitive culture of corporate Australia, Professor Yunus is sure it will catch on.
He will tour commercial boardrooms in Melbourne and Sydney next month to argue that the private sector - not only charities - can help reduce global poverty.
''Today it looks like such an odd idea,'' he said. ''Today there is only one kind of business: the business to make money. It's as if that is the role that human beings are born to carry out …
"Economists took that selfish aspect of us and built a whole economic theory out of it, and forgot that we are also selfless, we are kind, we want to help people, change their lives and make a better planet for ourselves."
Nobel winner wants business to cut poverty |
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Haiti needs champions to help poorest of the poor |
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Written by Larry Ladell
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Jan 24 2010 |
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“When I met Yunus, the pioneer of microcredit and founder of Grameen Bank in Amman many years ago, we were part of a group of officials and journalists visiting some small businesses run by Jordanian women. On the way, I asked about his preference for providing women more than men with loans to start businesses.
“Women usually spend almost all their income on their families, unlike men,” he replied, adding that men usually spend part of the income on entertainment. “After receiving his cheque, he might go to a bar." |
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The silent revolution on track for working women |
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Written by Jumana Al Tamimi
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Jan 24 2010 |
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“In the midst of its environmental devastation, poverty and death rates in Bangladesh were among the highest in the world in the 1980s. Yet today, Bangladesh has reached a new watershed. Under-five child mortality has plummeted to less than 60 from above 200 per thousand in 1980. Gender parity has already been achieved in both primary and secondary schools. The fertility rate has fallen to two more than six in 1980.
What has made the difference? Look wherever you might, but you cannot ignore the impact of micro-lending, which is focused not just on the poor, because virtually everyone in Bangladesh is poor, but on the poorest of the poor, the destitute of this Islamic nation. By making loans so small they can only be considered micro to women with absolutely no collateral. Dr. Muhammad Yunus has transformed whole communities and perhaps the nation itself." |
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