The next steps for microcredit An interview with Grameen Bank founder and microcredit pioneer, Muhammad
Yunus, discussing microcredit's challenges and successes in extending credit to the world's poor. Cites two
lessons learned: that the poor are credit-worthy; that given credit facilities, the poor can move out of
poverty by themselves.
An interview with Grameen Bank founder and microcredit pioneer, Muhammad Yunus, discussing microcredit's challenges and successes in extending credit to the world's poor. Cites two lessons learned: that the poor are credit-worthy; that given credit facilities, the poor can move out of poverty by themselves.
Share International. What has happened since the Microcredit Summit in terms of advancing the summit's goal?
Muhammad Yunus: First of all, we are clarifying terminologies -- what is microcredit, what does the goal mean in each case -- and building institutional plans. A follow-up summit will be convened in New York in June 1998. Those institutions that have already submitted an institutional plan to help reach the goal will be invited to the summit to discuss their plan. This is a period of mobilization, getting ready for action, and trying to organize ourselves so that each organization commits to a portion of the goal. After the Summit's secretariat gets information from everyone, it will add up the numbers and see how far we are on the way to achieving the goal, how far we are lagging behind. Then, depending on the outcome, we'll try to mobilize more organizations to take up the slack.
SI. Are we talking about banks, non-profit groups?
MY. Three thousand people attended the Microcredit Summit. Each one represented some kind of organization -- a government, a non-profit agency, a news organization, a business enterprise, an existing microcredit program. Each one willing and capable of coming up with a plan will be invited to attend the follow-up summit. We are expecting about 1,000 to 1,200 institutional plans for the summit.
SI. What do you see as the biggest obstacle to realizing this ambitious goal?
MY. It is ambitious, but at the same time conservative; it depends on who is looking at it. If we go full steam, it's not ambitious.
The problems are those of institution-building. Money alone will not do it. You must build institutions at a slow, steady pace, so that at each step your quality of work is 100 per cent guaranteed. The quantity aspect has been emphasized, but quality is the critical factor. How do you build quality? How do you build up institutions to deliver that quality? These are the immediate concerns.
SI. Does that mean building up institutions like the Grameen Bank in different areas around the world, but based on the individual needs of the various countries?
MY. We mean creating institutions with the particular capacity, procedures, and methods needed. For example, with the Grameen Bank, documents have to be translated into 100 or so languages. You cannot take Bangla everywhere. English will go a little farther but it's still limited. In each place, it has to be the local language. Many countries have many languages. China has local dialects. In India, each region has its own language. But language is just one aspect. Another example is the need to develop appropriate software if you are using a computerized system for accounting practices.
And where does the money come from? Should there be the World Bank window, which will give everybody money, and everybody lines up in Washington DC? Does that work for a tiny organization in Tonga? And how does somebody from the World Bank fly into Tonga to find out what's going on? For every dollar invested, some $200 is needed to see that the administration of the program takes place. These are not appropriate practices. But what are the most efficient and appropriate approaches? These issues are now being discussed and solutions being sought.
SI. The World Bank has been a controversial institution in some parts of the world. Do you see them as being helpful in this effort, or are they more of an obstacle?
MY. So far, support from the top is very visible. But how you translate this support into real action at the grassroots level, at the country level, is not very clear. It takes time.
But the creation of C-GAP -- the Consultary Group to Assist the Poorest -- that the World Bank initiated, to create a mechanism by which all the donors can join hands to support microcredit programs, is a very important development.
SI. Looking at the bigger picture, what do you think are the biggest lessons you personally have learned in your work with the Grameen Bank?
MY. One is that the poor are credit-worthy. That was the biggest lesson, because the banks told us they were not credit-worthy, that's why they didn't get credit. Now after 22 years of Grameen operation and getting their money back, nobody can say this is fact. You cannot now walk away from the poor people by saying they are not credit-worthy. Once you withdraw that classification, your entire banking approach has to be reviewed. If they are in the same category as the rich or anybody else, then they are credit-worthy, so give them the money.
Another important lesson is that, given the credit facilities, the poor can change their own lives. One doesn't need to send experts to help them change their lives. They know what to do. All they are missing is something to work with. They can get out of poverty. And microcredit is a very important factor in the process.
SI. Do you think that if the microcredit model is applied widely, this will also go a long way toward dealing with other major problems such as environmental degradation?
MY. If you are extremely poor, you don't care for anything because your survival is overriding. So even if you are damaging forests by cutting down trees, and someone says, "You're damaging the environment, "you say: "But I have to survive." Once you go beyond that level, so that you don't have to worry about your immediate survival, then you can look around at what is good and bad, what can be helpful in preserving the environment and what is bad for the environment. In that way microcredit is also helpful to the environment.
SI. Are you hopeful -- based on your discussions with governments around the world, with NGOs, and others?
MY. The summit made a lot of difference. It has energized many people, so there is a lot more energy, a lot more awareness. And because of the Summit and the goal, people are taking this issue slightly more seriously than they did before. But that doesn't mean that they will be supporting it wholeheartedly. There are hesitations, there are still mind-sets that cause people to see things differently. It takes time. After all, it's a new idea. In one meeting you cannot change all the mind-sets about the poor, about microcredit, and so on.
The next two or three years are crucial. If we can organize ourselves in the next two years, we can reach the goal by 2005.
From the January/February 1998 issue of Share International.