Sunday, March 18, 2012

Micro-Lending Banking of Muhammad Yunis: A Banking System for Everyone

"Chapter 5 opens with Muhammad Yunus devising a way to establish an independent bank. Through trial and error he outlines loan policies, such as spreading the repayment over a long period of time in small increments. He also required no collateral, baseline income, or business plan to receive the loan. Instead, he formulated a group-based plan whereby all members must join a group of 5, pass an exam and attend meetings. There were many other standards implemented in this system and I’ll make a point to write a separate blog post on the details of the Grameen banking system. However, the program was successful enough that it generates a 98 percent repayment rate with the vast majority of borrowers being women. The Grameen system encountered a number of hurdles on account of religious and cultural differences; just convincing women to borrow money was a challenge.  In the end, the Grameen Banking System allows people of impoverished communities to work together with the help of a banking system that allows residents of communties to be self-employed, and allow groups to work together to allow the flow of money to be exchanged for people from all walks of life."(All About Microfinance, 2011)

In developing nations or nations of great poverty, there is still gender inequality which dampers the progression of society has a whole.  Yunus expresses how women in these countries have never dealt with financial business decisions of a family let alone a business entity of their own.  In this case, women may seem nervous about taking up such a project.  He then educated them on business ideas, to help promote self-thought, and visions of a future that would be prosperous for them with a little hard work and ingenuity of their own.  He gave them the knowledge and tools to help kick-start of movement where the banks comes to you asking if you need loans to help promote small businesses, and to allow those to start their entrepreneurial adventures of their own.

Ammajan Amina is the epitome of a loving and determined mother and person should be.  Never in my life have a read and felt the struggle of another person’s life so deep in my heart and mind.  Dealing with the adversity she did, yet never giving up give me as lucky individual in this country the motivation to never give up on my dreams no matter how hard or tedious they may be, because hard work and determination to succeed with always lead one to a chance at a better life in the future.  In this woman’s life, she had all but one of her children pass away, she lost her husband and their limited wealth to disease, her home to the weather and a family-in-law who only cared about money, yet she did whatever it took to make sure her children or in the end child to never went hungry.  In the eyes of adversity, she never gave up on the dream of getting out of poverty and making something of herself.  Microfinance through the help of the Grameen bank has allowed her, and now her lone daughter to better their stance in society.  Her daughter now works for Grameen bank, which helps people all over the world. 

                When comparing Microfinance of Grameen Bank, and the banking done by the World Bank, one can see both advantages and disadvantages to both respective lending techniques.  First, we will start off with micro-financing.  In micro-financing, there are great advantages in this method because the banker now goes straight to the people of a said community, city, or country and asks them if they want a loan to start a business, and help promote a positive progression a healthy financial lifestyle in the future.  I believe getting to know the people you are going to lend money to be a great thing because you can educate them on finance, and help spark a fire within individuals to control their own destiny.  At the same time, it may be difficult because many people who are left unwatched can and will sometimes use the money for a short-term binge rather than a planned financial forecast on helping themselves, families, and communities.  At the same time, I like the IMF’s banking system as well.  By allowing governments to handle lending to the people, you can assume that the government will do what is in the best interest of the people of the country to promote and increase economic prosperity for all.  At the same time, governments will sometimes allocate the money to a few individuals or companies to keep the economic growth to a small portion of society rather than the nation as a whole entity. 

                In Chapter 8, Yunis gives criticisms of the World Bank’s system of banking.  One of the criticism’s he had on the World Bank is the idea that the World Bank focuses exclusively on large-scale economic growth rather than help those in poverty lead a better life by self-employment.   According to Yunus, “the essence of development is changing the quality of life of the bottom half of the population,” which includes an “enabling environment that lets individuals explore their creative potential” (p. 56). The World Bank and others focus on measures such as Gross Domestic Product (GDP), per capita income, consumption per capita, or job creation—measures which can only be moved through large scale projects based upon the theoretical assumptions of mainstream economics.

Yunus, Muhammad. 2008. Creating a World without Poverty: Social Business and the Future of Capitalism. New York, New York: Public Affairs

Yunus, Muhammad. 1999. Banker to the Poor: Micro-Lending and the Battle against World Poverty. New York, New York: Public Relations.

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