Helping people help themselves!
- Leela Sharma
- Aug 11, 2024
- 2 min read
Updated: Feb 18
Date: August 11, 2024
Just a few days ago, Nobel Laureate Dr. Muhammad Yunus was appointed to lead an interim government in Bangladesh, following the resignation of the former prime minister. Dr. Yunus received the Nobel Peace Prize in 2006 for founding Grameen Bank, which provides small amounts of money called micro-credit to poor people and teaches them good financial practices. I found his story inspirational and wanted to share it.
It all started when Dr. Yunus observed that people in Bangladesh were very poor and had no access to getting loans. The problem was twofold – first the people had no transportation to reach a conventional bank. And even if they somehow made it to a bank, no bank would ever give these people any loan as they had no assets and no credit history.
Grameen Bank started in the mid-70s with the philosophy of ‘solidarity group lending’. The loans are divided among several recipients. This not only reduces transaction costs but also ensures that the loans are repaid on time. The group members are incentivized to cover each other’s installments, if needed since they will all be penalized if any one of them defaults. The resulting social pressures act as a check against free-riding and delinquency.
Grameen’s initial recipients were mostly women, and these tiny loans combined with financial education drove female empowerment. The socio-economic impact of micro-credit was enormous, and Grameen Bank was very successful in helping reduce poverty in Bangladesh. This model has now been successfully copied in over 100 countries.
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The success of microfinance demonstrated by Dr. Yunus and the Grameen bank has shown that small amounts of money and education can really help raise people out of poverty. People want to help themselves; we just need to give them the tools and the education to do so. Empowering marginalized groups, especially women, to create agency for themselves by investing in their families’ wellbeing can be such a great way to help our society!