Benevolent Banking in Bangladesh In 1983, Gryzwinski and Mary Houghton, the President of South Shore Bank's holding company, were invited by . Dr. Muhammed Yunus to come to B~ngladesh and advise him on establishing a bank based on South Shore's experience in community development. Gryzwinski and Houghton were skeptical at first, but after a few visits they realized that the problem in both countries was the same: how ,to make credit available to low-income people. Dr. Yunus was raised in an upper class Bangladeshee family. Educated in the United States, he returned to Bangladesh to teach classical economics at Chittagong University. As To receive a loan, individuals must join a group offive unrelated villagers who "supervise" each other, resulting in a default rate under two percent. he walked from his classroom to the village where he lived, he saw extreme poverty. Eighty percent of the people live on a subsistance diet. The benefits of clas'sical economic theory do not reach most Bangladeshees. Yunus confronted local and national.bankers. The vast majority of loans, with rare exceptions, went to wealthy families and industrial enteiprises, and defaults were far in ex~ess of American standards. Why not loan to·small enteiprises and people in villages? The Grameen Bank was started by Yunus with the goal of creating a credit system that would meet the needs of Bangladesh's poor people. A group loan technique was developed. To ~eceive a loan, individuals must join a group of five unreDr. Muhammed Yunus, of Bangladesh's Grameen Bank (Photo courtesy of South Shore Bank) Summer 1986 RAIN Page 23 lated villagers who "supervise" each other. This credit system, using peer pressure, has resulted in a default rate under two percent. Loans are for amounts ranging from $60 to $200 to purchase a cow or buy materials to start a rice husking business. The Grameen Bank has made over $30 million in loans through a decentrialized system of 226 branches. The bank has improved economic conditions for over 180,000 borrowers. "Grameen Bank's success is a very human one.- Breaking the cycle of extreme poverty for individuals creates selfconfidence and self-worth," Yunus explained at a meeting in Chicago. "Again and again we have seen that every person, if motivated, can succeed. It is a question of survival and human dignity." Now South Shore Bank has asked Yunus to assist them by applying the Grameen Bank's experience in getting credit directly to poor individuals through a number of holding company programs. South Shore Bank's first effort in this direction is the Action Center for Entrepreneurial South Shore Women (ACCESS), recently started with its affiliate, The Neighborhood Institute. ACCESS will be involved in making "micro-loans" to individual low-income women that will encourage self-employment and small business development. Other Community Bankin,g Models South Shore Bank is this country's model of a community development bank. There are other types of smaller financial institutions that are successful in promoting community development. Dwelling House Savings & Loan Association is located in the Hill District area of Pittsburg, one of the city's poorest neighborhoods. Over 7flJ home mortgage loans and 180 home improvement loans have been made to low-income people who could not get loans from traditional lending institutions. Dwelling House has 3,500 investors in 45 states who have insured savings accounts earning 5 1/4 , percent. The founder, Robert R. Lavelle, and the black majority board, view Dwelling House as a Christian ministry. Credits unions are socially responsive by their nature in the sense that they invest in the local community, making loans (generally consumer loans) only to their members. · Small banks and savings and loans also tend to keep money in their community. Many credit unions go beyond local investing and concentrate specifically on community development lending. The National Federation of Community Development Credit Unions (NDFCDU) in New York is an information clearinghouse for credit unions which serve pre- . dominantly low-income communities. NFCDCU helps start new credit unions and assists its 100 members in building their management capacity and in obtaining capital for community development loans. The Self-Help Credit Union in Durham, North Carolina, is an excellent example of a community development credi_t union~ It provides loans and technical assistance to worker-owned businesses and loans for low-and moderate•income housing. Accounts are federally · insured and offer competitive rates. In the last few years, revolving loan funds have sprung up around the country to address the problem of unmet credit needs. These are usually nonprofit organizations that take
RkJQdWJsaXNoZXIy NTc4NTAz