November 2008: Engaging Congress on microfinance
You may have heard of Muhammad Yunus and Grameen Bank, who won the Nobel Peace Prize in 2006. Muhammad Yunus came to the U.S. in the 1960s to receive a PhD in economics from Vanderbilt University.
After his country’s independence, he returned to Bangladesh to teach economics at Chittagong University. There was a famine in the country and he said, “The economic theories in my textbook are quite elegant, but they’re not working in the village next to my campus. I’m going to go into the village and learn economics from the villagers.”
It was 1976. He met a woman who was making bamboo stools. He asked her how much profit she made every day. She said, “I make two pennies a day profit.”
He asked, “How is that possible? It is a beautiful stool. Why do make only two pennies a day profit?”
She said, “I don’t have the money to buy the bamboo, so I borrow the money from a trader or moneylender on the condition that I sell the finished product back to him, at a price he sets, and the price he sets barely covers the cost of the bamboo. So I make two pennies profit a day.”
He asked her, “If you could sell the stool to anyone, could you make more than that?”
She said, “I could, but I don’t have the money to buy the bamboo. I have to keep borrowing from the moneylender.”
Prof. Yunus had a student go around the village to see who else borrowed from the same moneylender. They found 42 people who needed a grand total of $27 to be freed from the moneylender.
Prof. Yunus lent 42 people a grand total of $27 from his pocket. The stool maker went from two pennies a day profit to $1.25 a day profit because she could now sell the stools to the highest bidder.
These 42 borrowers were the first of what would become Grameen Bank or village bank. Today Grameen Bank has 7.5 million borrowers and 97 percent are women.