MICROCREDIT

Here are Grameen’s 10 Indicators To Evaluate Levels of Poverty in Bangladesh

Every year GB staff evaluate their work and check whether the socio-economic situation of GB members is improving. GB evaluates poverty level of the borrowers using ten indicators. A member is considered to have moved out of poverty if her family fulfills the following criteria:

The family lives in a house worth at least Tk. 25,000 (twenty five thousand) or a house with a tin roof, and each member of the family is able to sleep on bed instead of on the floor.
Family members drink pure water of tube-wells, boiled water or water purified by using alum, arsenic-free, purifying tablets or pitcher filters.
All children in the family over six years of age are all going to school or finished primary school.
Minimum weekly loan installment of the borrower is Tk. 200 or more.
Family uses sanitary latrine.
Family members have adequate clothing for every day use, warm clothing for winter, such as shawls, sweaters, blankets, etc, and mosquito-nets to protect themselves from mosquitoes.
Family has sources of additional income, such as vegetable garden, fruit-bearing trees, etc, so that they are able to fall back on these sources of income when they need additional money.
The borrower maintains an average annual balance of Tk. 5,000 in her savings accounts.
Family experiences no difficulty in having three square meals a day throughout the year, i. e. no member of the family goes hungry any time of the year.
Family can take care of the health. If any member of the family falls ill, family can afford to take all necessary steps to seek adequate healthcare.

*Between 50-60% of Grameen borrowers get out of poverty within 5 years.

Zones of Microcredit

There are two types of microcredit programs:

Poverty Focused Microcredit – These are poverty-focused, collateral-free, low-interest microcredit programs.
- Green Zone – Interest rates equal market rate plus up to 10%
- Yellow Zone – Interest rate equals cost of funds at market rate plus 10-15%
Profit-Maximizing Microcredit – These charge interest rates HIGHER than the yellow zone. These are basically money-lenders just out to make a profit off the poor. Since there is no regulations as to what microcredit means, they are riding the tails of good microcredit press at the detriment of the poor. Read this New York Times Article.
- Red Zone – Anything over market interest rate + 15%

Not all microcredit is created equal. Some companies are using the concept for profit maximization. Please check out MFTransparency.org for more information on transparency within the microfinance industry.

Method of Action

The Grameen Bank’s Method of action can be illustrated by the following principles:
1. Start with the problem rather than the solution: a credit system must be based on a survey of the social background rather than on a pre-established banking technique.
2. Adopt a progressive attitude: development is a long-term process which depends on the aspirations and committment of the economic operators.
3. Make sure that the credit system serves the poor, and not vice-versa: credit officers visit the villages, enabling them to get to know the borrowers.
4. Establish priorities for action vis-a-vis to the the target population: serve the most poverty-stricken people needing investment resources, who have no access to credit.
5. At the begining, restrict credit to income-generating production operations, freely selected by the borrower. Make it possible for the borrower to be able to repay the loan.
6. Lean on solidarity groups: small informal groups consisting of co-opted members coming from the same background and trusting each other.
7. Associate savings with credit without it being necessarily a prerequisite.
8. Combine close monitoring of borrowers with procedures which are simple and standardised as possible.
9. Do everything possible to ensure the system’s financial balance.
10. Invest in human resources: training leaders will provide them with real development ethics based on rigour, creativity, understanding and respect for the rural environment.

The Robin Hood Effect

There is enough money within every community, it just needs to be redistributed to help everyone. We need to work towards creative ways to managed and invested within each community so that it eliminates poverty and revitalizes communities. Each Grameen Bank is usually profitable after just one year and also successfully using local savings accounts to give out local loans for those most in need. There is a cycle of money throughout the day. Funds are collected in villages each morning and disbursed every afternoon in the form of new loans.

*Another movement I like that is looking into creating vibrant communities by investing locally is the Slow Money Movement.

The Importance of Saving

Another important factor of Grameen is the fact that they have their members save money each week. They tell borrowers that most people will face a business failure, a natural disaster and a health issue in their lifetime, so it is important to put away a little each week in order to be covered in times of need.

Health Problems Lead to Bankruptcy

Grameen found that most members who were having a hard time repaying were facing a health problem at home. Just as is the case in the United States – the majority of bankruptcies happen when a family is facing a serious health problem. And that’s why Yunus started Grameen Kalyan. Healthy members = A Healthy Bank = A Healthy Country

Credit is a Human Right

To get started everyone needs a helping hand and a good support system. Microcredit is not a handout, it’s a hand up! Everyone has a right to certain resources.

Poverty is Not Inherent in the Person

Poverty is imposed on people by the system.

Women Get Deeds to the Land

Grameen borrowers who get housing loans also are required to get the title to their land. This simple yet radical idea has now helped over 700,000 women get the titles to their homes. This helps in a place where women could be put on the street in times of divorce or death.

Build Operate Transfer (BOT)

If you are interested in doing microcredit, you can hire Grameen Bank to help you get started. You don’t need to reinvent the wheel.

The American Dream

The American dream was that each individual could get started by pulling themselves up by the bootstraps and be entrepreneurial. Microcredit is successfully creating many “moms and pops”.

The Peace Prize

Muhammad Yunus and the Grameen Bank won the Nobel Peace Prize, not the prize in economics because alleviating poverty leads to peace. When people have no way of surviving, it leads to crime and war.

16 Decisions

When provided with a loan, the borrowers have to memorize the following principals. The 16 decisions were created by some of the first Grameen borrowers to help with the educational, moral and spiritual upliftment of women.

We shall follow and advance the four principles of Grameen Bank: Discipline, Unity, Courage and Hard Work – in all walks of our lives.
We shall bring prosperity to our families.
We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest.
We shall grow vegetables all the year round. We shall eat plenty of them and sell the surplus.
During plantation seasons, we shall plant as many seedlings as possible.
We shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health.
We shall educate our children and ensure that they can earn to pay for their education.
We shall always keep our children and the environment clean.
We shall build and use pit-latrines.
We shall drink water from tubewells. If it is not available, we shall boil water or use alum.
We shall not take any dowry at our sons’ weddings, nor shall we give any dowry at our daughter’s wedding. We shall keep our center free from the curse of dowry. We shall not practice child marriage.
We shall not inflict any injustice on anyone, nor shall we allow anyone else to do so.
We shall collectively take on bigger investments for higher incomes.
We shall always be ready to help each other. If anyone is in difficulty, we shall all help them.
If we come to know of any breach of discipline in any center, we shall all go there and help restore discipline.
We shall take part in all social activities collectively.