BANGLADESH — Muhammad Yunus is a Bangladeshi professor, banker and founder of the Grameen Bank, which focuses on providing microfinance in Bangladesh. When his bank makes small loans to women in Bangladesh, the quality of their lives improves in different ways.
The idea of microfinance programs is not new. It has proven particularly helpful in increasing access to water and sanitary facilities. Globally, 573,000 home water and sanitation loans have reached more than 2.4 million people.
Yunus’ program targets poor women, some of whom have never handled money before. Some aid programs only provide short-term success before donated equipment, such as a functional restroom, falls into disrepair and people revert to old habits.
However, supporters of Yunus and microfinance in Bangladesh believe that the key is giving these women the means to build the restroom rather than giving the restroom itself. This creates a larger sense of personal ownership and responsibility, and the loans are more likely to have positive long-term effects.
In Bangladesh, the improvements in sanitation and access to clean water that the Grameen Bank’s loans allow also extend to other elements of poverty reduction. About 39 percent of loan recipients report feeling more safe since they are no longer forced to travel long distances for safe facilities.
In addition, 25 percent of these women say that since less time is spent searching for facilities and taking care of sick family members, their productivity and income increased as they devoted more time to business ventures.
Alternatively, women may choose to spend the loans they receive to improve the health of their families. Many women in Bangladesh marry young and are given the responsibility of raising several children, yet they have no economic power to help them.
Of note, 40 percent of the nation’s children are malnourished, and these loans help mothers provide better food for their children in larger quantities, as well as medicine if they get sick.
Recipients of microfinance from the Grameen Bank in Bangladesh also attend weekly meetings. These meetings are equal parts support group and think tank, with women sharing success stories and ideas of lifestyle changes they can make to improve their social and economic status.
The women also review the bank’s “Sixteen Decisions,” a list of practices they are asked to abide by. Practices include conscious family planning, construction of clean and safe bathrooms, aiding family and community members in need and more.
Opponents of microfinancing in Bangladesh argue that it is unlikely recipients will be able to repay their loans and will then face even greater poverty. However, even though 80 percent of global borrowers earn less than $2 per day, no statistical difference between their repayment rates and those of wealthier borrowers for water and sanitation has been found.
One might also question why loaning to women, in particular, is advantageous. Yunus has discovered women have better repayment rates than men. The Grameen Bank’s repayment rates are 97 percent compared to an average of less than 70 percent at banks where most borrowers are middle-class men.
Furthermore, women have never before been given any economic opportunities. This makes them a vast untapped market that has great potential for economic growth. So far, microfinancing given to women in Bangladesh has improved access to clean water and safe bathrooms. Many recipients have gone on to take out additional loans and start small businesses.
These women are an available market opportunity, and willing to improve both their own and their families’ lives. Small loans are a relatively low-cost solution which provides direct poverty reductions as well as improvements to recipients’ quality of life.
– Nathaniel Siegel
Photo: Flickr