Microfinance: A Self-Guided Tutorial and Discussion Forum for Smart People

Comment

Comment by Ron Severson on April 4, 2010 at 11:14am

Hi all,

As the faciliator of sorts for this self-study and discussion forum, I would like to keep this site open for any further discussion about Yunus' book, Banker to the Poor, or about the related topic threads started by others listed at the top of this site. Certainly, people may want to continue their conversation about Yunus, Grameen, and move on to Yunus' second major book focused on social business within these group pages. I invite everyone to participate in that further investigation and commentary--as a large part of the development world is going the way of private-public partnerships, MFI-corporate partnerships, non-profit/for-profit partnerships, etc. Effective development takes a multi-faceted approach.

At the same time, I will start a new group, soon, called something like "Chapter Two--Microfinance: A Self-Guided Study and Forum--Stuart Rutherford's Amazing Work." That will allow us to go back to page 1 in terms of navigation, at least, and to develop a "chapter approach" to our readings and conversations over time.

So, now's the time to add a few wrap up comments on Banker to the Poor or to start a new thread on Yunus' later work on social business within this group before we move on!

Hope you are all well out there!
Ron

Comment by Fehmeen Khan on March 30, 2010 at 8:38am

1) Programs added over time to meet different needs

The poor have many needs and over time, as Grameen Bank discovered these needs, and developed sufficient expertise, loan products for irrigation, education and house construction and repair. Some of these were seasonal (irrigation loans during dry seasons and repair loans after heavy monsoon rains/floods during the summer).

Lessons learned: evolution is better than biting off more than one can chew, and customer intimacy is vital

2) Changing the Grameen Bank business model
Operational and organizational problems that arose after the rapid growth of Grameen Bank were the reason the Grameen Classic System (GCS) was changed to Grameen Generalized System (GGS).

Some new features of the new model (GGS) were:
- borrowers were eligible to get bigger loans on good performance
- loan upgrade options can be decided by loan officers = empowered employees (options included convenient duration and schedule for loan repayment)
- savings were accepted from borrowers and non-borrowers

Comment by Ron Severson on March 26, 2010 at 11:21am

Hi all,

The next book (actually long essay) I propose we read is the quite amazing study and treatise, "The Poor and Their Money," by Stuart Rutherford.

Here's the link:

http://www.uncdf.org/mfdl/readings/PoorMoney.pdf

The link is available for free from the net. This version of the book is the first manuscript made available through the University of Manchester. It seems like they have a wonderful program in development studies.

Comment by Ron Severson on March 25, 2010 at 1:20pm

Hi Mamo Roba Godana,

It's great to get commnents from you in this group. I look forward to hearing what you think about some of the issues.

I think two of the important questions related to the book , Banker to the Poor, (before we move on to consider another text) are:

1) What programs did Grameen add over time to target specific needs of impoverished persons who lacked access to credit, insurance, etc.?

2) What changes were implemented from Grameen 1 to Grameen 2, and why were these changes implemented?

Comment by mamo roba godana on March 24, 2010 at 2:50am

banker to the poor is one of the books we use in the university...interesting....i can`t stop reading.its one of my best.thanks ron for starting the discussion...will take my time-off en contribute.

Comment by Marty Jenkins on March 23, 2010 at 8:21pm

Thanks Ron - it looks like you have an amazing program and your students are very fortunate to have this opportunity and you as their guide. I spent some time at your website - and it all looks very exciting. I wish these sorts of opportunities had been available when I was in college - some 30+ years ago. I might not have flunked out of college and might have gone down a path that I only found some three years ago.

Comment by Ron Severson on March 23, 2010 at 5:57pm

Hi Marty,

We have now been in Uganda for two years. So far, 26 volunteers have worked for MAPLE Microdevelopment, including Ugandans as we always work in intercultural teams. Grad, undergrad, and former students from several universities have participated, including the University of Oregon, the John Molson School of Business at Concordia University in Montreal, Copenhagen Business School, Makerere University Business School in Kampala, and the Islamic University in Uganda. These collaborations are expanding.

We have now been a 501c3 U.S. non-profit for over 6 months and are nearing completion of the process to become a Ugandan NGO. Until then, we cannot provide micro-credit or other financial services directly, but we work with community based savings and loan groups in Northern Uganda (Lira and northern villages) and Mbale, Uganda (East Central Uganda, including surrounding villages) to provide entrepreneurial support services and empowerment--leadership--professional development programs for young women of secondary school age. In an outreach program, we work with groups in Kenya and Uganda to develop income generating supply chains (owned by local people) into rural areas for low carbon emission cookstoves and other products such as solar cell powered lighting and cell phone chargers. (I also serve on the board of directors for Aprovecho Research Center, and our design-manufacture relationship with Shengzhou Stove Manufacturers in China recently won the Ashen Award for International Energy Champion and the stove was named a "world changer" in a New Yorker Magazine feature article (Dec. 21.)

We are also developing our loan model, which we can implement once we gain Ugandan NGO status.

I think our greatest asset is that we have constantly been on the ground and have developed a strong network of relationships at the informal and formal levels in Uganda. Our weakness is that we are far from sustainable and need to do better at fundraising now that we are past our initial seed grant until revenues can cover operational expenses. We are working hard and are optimistic--both requirements for success in this field!

Comment by Marty Jenkins on March 23, 2010 at 3:33pm

Ron - being a Google addict and particularly interested in what you and your students are doing in Uganda - I found this link. http://www.dailyemerald.com/2.2358/local-sustainability-projects-receive-200-000-1.194488 It sounds quite intriguing. I would love to learn more of your microcredit program and where you are at with it.

Comment by Ron Severson on March 23, 2010 at 2:39pm

When I think of our organization's experience in Uganda and the possibilities that the entrepreneurial culture of persons is stronger, even just from growing up, in Bangladesh compared to Uganda, then I think that Marty's work on demographics is heading toward some explanation.

80% of Ugandans live in rural areas and still have strong connections to ancestral land. They are landowners through an informal inheritance system that does not exist in written contracts. Their population per acre is not nearly as dense as in Bangladesh, where, it seems from Banker to the Poor, that land ownership is something associated with being rich rather than being poor. The connection of Ugandans to ancestral land has allowed them to "dig" as they say in English, to practice small scale agriculture. They do not grow up in communities or households of entrepreneurial merchants, which might be more of the case in Bangladesh.

Moving from a family agricultural base and providing for one's own needs through working the land in traditional ways, does not necessarily teach persons, through experience and without access to other forms of education, the kinds of skills necessary to start and sustain a viable small business.

At the same time, necessity is a good teacher, and many Ugandans I know have found creative ways to make money due to necessity. In that sense, perhaps the poorest of the poor share something in common that does not differ from culture to culture.

Yunus may have been against providing formal training for other good reasons, though, too. I think he would be against seeing a lot of money that could go directly to the poor go instead to armies of NGO, Anglo-European consultants, for example. I think he also knew that microfinance, to become sustainable, would need to keep operational costs low. Any business education offered would need to avoid recreating colonial relations and would need to occur in a way that did not raise interest rates. I think this is difficult, but possible.



On the question of learning from books (or from other sources beyond one's own experience--such as stories told by others, cell phone community knowledge networks, access to the internet, etc.) compared to learning from experience, I think both are needed, and need to be connected.

Comment by Ron Severson on March 22, 2010 at 3:00pm

Fehmeen: I also think that any banking system focused on eradicating poverty, to be successful, must be elegant in its simplicity. Grameen is a great model and reminder of this fact. The focus on finding the right staff, who are motivated internally and recognized within and beyond the organization, and avoiding constant rapid turnover because of the underpay and hard work, is critical. I also like Yunus' comment: "But you can strip everything away from a Grameen employee, and still at heart he or she remains a teacher" (103).

Question of Culture in Banker to the Poor

"After all these struggles, repeated in thousands of villages, it is frustrating to hear people dismiss our accomplishments arguing that Grameen's success is due due to cultural factors that cannot be replicated elsewhere. To succeed in Bangladesh, in many ways we have had to struggle against our culture" (111).

Yunus' claim that culture is not relevant to MFI design is based on an assumption that all poor people essentially share the same culture. "I don't see any difference between the poor of Bangladesh and the poor of Chicago. The problems and consequences of poverty are the same" (184).

It is also based on another assumption that all poor people (and all humans) share a particular capacity or "innate skill" a "survival skill." This innate skill makes every poor person a natural entrepreneur who needs no training. Banker to the Poor, therefore, argues, in general, against providing training/teaching but more particularly states, "This is not to say that all training is bad. But training should not be forced on people. It should be offered only when they actively seek it out and are willing to pay in kind or cash to obtain it" (142).

Also on the question of universality of human experience without reference to culture, Yunus defines "development" universally (as opposed to any reference to well-being which might differ in the experience of persons). "It [development] should refer only to a positive measurable change in per capital income of the bottom 50 percent of the population" (146). (Later in the book, p. 211, Yunus more rigorously changes this to the bottom 20%.) This is a macro-economic measure that equates development, in all of its expressions, solely with aggregated income. Of course, the economic, pro-poor advance in this definition is that it draws from the bottom 50% while traditional macro measures draw from the entire population, ignoring the fact that capital unequally accumulates only in the hands of the rich. A country can "develop" while most people in the country get poorer in the traditional model. (Note: Later in the book, p. 202, he gives a more nuanced, 10 point definition of being "poverty free," but it seems that his definition of development does not arise from his definition of being poverty free.)

For me, each of these points raise important questions:

1. Are poor people the same everywhere in the world?
2. Are all poor people everywhere in the world natural business entrepreneurs or are some cultures less "business entrepreneurial" than others? If so, is entrepreneurial education, therefore, more important in some places than in others if an organization aims to support income generation as a way out of poverty there?
3. Do the poor themselves everywhere in the world agree what "development" means for their communities, their families, and themselves? Are there measures of development that end in eradicating poverty (whether universal or more culturally specific) that cannot be measured by an increase in income?

Additional Thoughts:

There is a very successful development organization with worldwide outreach here in Oregon called Mercy Corps. They have experience working in 135 countries. Providing microfinance is only a part of their mission, but they have worked with several models over the years. Interestingly, they have now started a microcredit branch that serves the poor here in Portland, Oregon. They have concluded that the Grameen model does not work here because the level of individualism is too high to use a social collateral model, where a group of 5 persons join to become guarantors for one another. This does not mean they are right, only that the question of working in collectivistic or individualistic cultures may have a large bearing on what MFI model might work best.

I'm also very interested in "The Sixteen Decisions" listed in Ch. 8 of Banker to the Poor. Are these all universal or are any of them cultural? To what degree does obedience to them require a certain cultural attitude toward writing as laws for living (strong in Islamic culture) and to respect for rules and authority (rather than a cultural celebration of the Robin Hood rebel who transgresses rules in the name of a higher, transcendental unwritten law?) Also, to what extent does the success of this model come from the fact that the 16 rules were created internally, by insiders, and not by outsiders?

For me, these are important cultural questions that affect practice. Self-discipline is crucial for any MFI system to work, but does it arise in the same way in all cultures?

It would be interesting to hear what others think.

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