scale multi-family buildings, and make loans to small businesses. Expansion to a depressed rural area is under discussion. Benevolent Banking in Bangladesh In 1983, Gryzwinski and Mary Houghton, the president of South Shore Bank's holding company. Shore- bank Corporation, were invited by Dr. Muhammed Yunus to come to Bangladesh 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 Bangladesh- ee family. Educated in the United States, he returned to Bangladesh to teach classical economics at Chittagong University. As he walked from his classroom to the village where he lived, he saw extreme poverty. Eighty percent of the people live on a subsistence diet. The benefits of classical 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 enterprises, and defaults were far in excess of American standards. Why not loan to small enterprises and people in villages? The Grameen Bank was started by Yunus with the goal of creating a credit system that would meet the Dr. Muhammed Yunus needs of Bangladesh's poor people. A group loan technique was developed. To receive a loan, individuals must join a group of five unrelated villagers who "supervise" each other. This credit system, using peer pressure, has resulted in a default rate under 2 percent. Loans are for amounts ranging from $60 to $200 to purchase a cow or buy materials to start a rice husking business. Through mid-year 1986, the Grameen Bank has made over $30 million in loans through a decentralized 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 self-confidence 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. 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. South Shore Bank is also seeking to apply these models to rural areas. Gryzwinski recently announced the formation of the Southern Development Bank Corporation (SDBC), which with a $3.75 million investment from the Winthrop Rockefeller Foundation, will help small business owners, farmers, and others in rural Arkansas. The thrust of SDBC's work in Arkansas will be job creation initiatives replicable in other rural and urban areas. Other Community Banking 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. Credit unions are socially responsible 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 (NFCDCU) in New York is an Page 20
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