Father of Microloans Sees end to Poverty
Wednesday, October 17, 2007
Envision a world with poverty museums — places where children would go to learn of a dismal way of life extinct, of malnourishment, illiteracy and premature death.
When 2006 Nobel Peace Prize winner Muhammad Yunus mentioned the concept Tuesday in speeches at the Microsoft campus and later at the University of Washington, he got chuckles from the audiences.
But Yunus was serious.
“We can create this day very soon. It doesn’t have to be a pipe dream. It can happen,” he said at the UW. “That’s the task we have ahead of us.”
His idea of lending small sums to the world’s poorest citizens has already pulled millions out of poverty. For the 3 billion people who live on less than $2 a day, a loan as small as $50 can jump-start a business such as raising chickens or sewing.
The concept’s popularity has grown like gangbusters in recent years, and Seattle has become a hub for the microfinance movement, with several supporting organizations based here.
“Poverty is not created by the poor people. It is not their fault,” Yunus told Microsoft employees.
In the early 1970s, a famine struck Bangladesh. Yunus, an economics expert with a doctorate from Vanderbilt University, discovered that 42 poor villagers together needed $27 to pay off debts and become prosperous.
After traditional banks turned him away, he made the loans himself, and was surprised to see that the loans were repaid. Eventually, he founded the Grameen Bank.
In the conventional banking world, Yunus said, having much brings more, and the richest customers are top priority. In his bank, which has since been replicated all over, the poorest are served first. No collateral or legal papers are needed for loans — the system is built on trust.
The system appears to work: Grameen Bank says its repayment rate is nearly 99 percent.
Another radical idea: Instead of lending mostly to men, 97 percent of Grameen’s borrowers are women, who have been found to use the money more efficiently to help families.
Several new developments have occurred in microfinance recently. It has spread to the U.S., where Grameen America is applying the concepts in an immigrant neighborhood in Queens in New York City.
“He really wants the Grameen model to work everywhere,” said Vidar Jorgensen, managing director at Grameen America. “His feeling is that the humiliation of poverty is unnecessary in a world as rich as this.”
Meanwhile, Redmond-based Unitus has brought pension funds and venture capital funds, including private equity giant Sequoia Capital, into the loop.
Unitus helps microfinance institutions such as Grameen Bank to grow faster, and its team is made up of folks from the financial world, including Goldman Sachs and Lehman Brothers, chief executive Geoff Davis said.
Unitus estimates that microlending has the potential to become a $280 billion industry, significantly larger than its current value of $17 billion.
“We need a bucket load more of money,” said Davis, a Yunus prot?g?.
Also, Pacific Northwest techies are bringing technology to the world’s new entrepreneurs. Often, the poor are shut off from information that would help them, such as knowing the price of pigs on the world commodities market, said Peter Bladin, vice president at the Seattle-based Grameen Technology Center.
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