Firsthand Look at Microcredit in Bangladesh
workings of Grameen Bank during Winter Term
Anne C. Paine
Tal first heard about the Grameen Bank when he took the Modern
South Asia course taught by Danforth Professor of History Michael
Fisher. The concept of microcredit fascinated him.
jaw dropped," the sophomore economics major said. "I wanted
to go and see how it works."
who also is pursuing a concentration in international studies, began
his quest with a private reading supervised by Visiting Assistant
Professor of Economics Steven Yamarik, a specialist in economic
growth. They focused on the theory behind the Grameen Bank, the
concept of microcredit, and the use of credit as a development tool.
quest ended in Baneshwor, a Bangladeshi village about 200 kilometers
northwest of Dhaka, close to Bangladesh's border with India. He
spent last winter term there, observing the business operations
of the Grameen Bank and interviewing loan recipients in the village.
Grameen Bank was established in 1976 by Muhammad Yunus, an American-educated
economics professor in Bangladesh who pioneered the microcredit
movement. (Oberlin awarded Yunus the honorary doctor of humanities
degree in 1993.)
bank loans very small amounts of money to people too poor to qualify
for credit at traditional banks while simultaneously providing close
supervision to borrowers. Loan recipients are required to repay
loans in small installments at weekly meetings with bank officials
and to be part of cooperative teams of five people, all of whom
are responsible for the loans of individual borrowers.
date, Grameen (which means "village") has loaned a total
of about $3 billion to some 2.4 million borrowers, most of them
women, and about 98 percent of its loans are repaid on time. Its
practices have been adapted in at least 40 other countries, including
the United States.
beauty of microcredit is that it addresses poverty alleviation.
I see that as different from development," Tal said. "Development
strategies are often built on large notions of infrastructure and
changes in financial systems and markets. Microcredit is very simple.
It uses a basic tenet of capitalism – people are smart enough to
provide for themselves. They need to have credit to do that, though.
They don't need roads, they need $3. Yunus believes that credit
is a fundamental right for all people."
spent most of his mornings with bank managers, attending weekly
borrowers' meetings. Afternoons were spent walking through the village,
interviewing loan recipients or observing loan disbursals. He recorded
his observations in a journal.
Grameen's policies are "friendly," the bank is often mistaken
for a charity. Tal found that it is most definitely a business.
saw a woman who had asked for a loan that exceeded the amount the
bank is willing to give," he said. At first the loan had been
approved, but then the error was caught. "She was crying. She
needed this money. She won't be able to borrow again – if you don't
follow the rules, you're not eligible for the next loan. And once
you start getting these loans, you realize you need credit,"
system can be harsh, but more often it empowers.
woman who really did impress me used her first loan to purchase
a cow. Slowly she added chickens and goats," Tal said. "Now,
10 years later, she has one and a half acres of land. She rents
out a half acre. She hires people to work her land, to help harvest
in harvesting season. She helps other people when they can't pay
back their loans. She keeps a stash of her own money, secret from
her husband. She is supporting her two sons' businesses. She's clearly
become a power in the community now."
whose airfare to Asia was financed by a competitive winter-term
grant of an airline ticket by Bálint Gergely '00, said he was well
prepared academically for the trip, but was shocked by the environmental
conditions in Dhaka, the capital city. People's welcoming attitude
toward visitors, and their fascination with foreigners, also surprised
is already putting his experiences to work in a summer job with
the Cooperative Housing Foundation, a Maryland organization that
works to improve housing, community services, and finance throughout