Microcredit – Changing Village India

Perhaps one of the more ‘economically’ revealing movies in recent years was Slum Dog Millionaire, not only for its intriguing plot line but also for the scenes of contemporary India, scenes of disastrous poverty juxtaposed against obscene wealth. To a Western sensibility the primitive desperation of the Indian orphans is reminiscent of something out of a Charles Dickens novel, yet, for many around the world, it is merely a tragic common place. Lately, even for those of us in the ‘wealthy’ West.

In 1974, the Indian, Muhamad Yunus, founder of the Nobel Prize winning Grameen Bank decided to do something about it.

“I would walk by people dying from famine to teach my economics class at the university…and I said ‘What is this?’ I felt completely empty…the theories I was teaching were useless for these dying people. I realized I could help people as a human being, not as an economists…So I decided to become a basic human being…I no longer carried any preconceived notions.”

As a ‘basic human’ Yunus led his economics students on a field trip to a poor village in Bangladesh. They interviewed a woman who made bamboo stools, and learned that she had to borrow the equivalent of 15 pounds to buy raw bamboo for each stool made. After repaying the middleman, sometimes at rates as high as 10% a week, she was left with a single penny profit margin. Had she been able to borrow at more advantageous rates, she would have been able to amass an economic cushion and raise herself above subsistence level.

What Yunus discovered as a ‘basic human’ was that all humans have basic needs. And one of the most basic was simply credit at a reasonable rate.

Against the advice of banks and government, Yunus started giving out ‘micro-loans’ at low rates, and in 1983, he formed the Grameen Bank, meaning ‘village bank’ founded on principles of trust and solidarity.

One more unusual feature of the Grameen Bank is that it is owned by the poor borrowers of the bank, themselves, most of whom are women. Of the total equity of the bank, the borrowers own 94%, and the remaining 6% is owned by the Government of Bangladesh.

The Grameen bank was just the beginning, of course. Move Your Money and Occupy Wall Street have followed up on these efforts. According to the web site of the Move Your Money campaign, an estimated 10 million accounts have left the largest banks since 2010. There’s good reason for this. In the West, the largest banks have become usurious in their late fees and over draft charges and penury in the interest they pay on savings. More importantly, as Occupy Wall Street and Move Your Money have pointed out, the larger the institution, the less likely they are to assist the community. They are more like vultures, picking over the corpses of the economically dead, than the heroic George Bailey who loaned out money not for the profit of a few, but for the good of the many.

In the following article, Ellen Brown for AlterNet details how cooperative banking is reinventing today’s financial industry in a way that would make George Bailey smile….Really.

Cooperative banking has arrived