The Price of a Dream: The Story of the Grameen Bank and the Idea That Is Helping the Poor to Change Their Lives
By David Bornstein
Simon & Schuster, $25
Bangladesh is a country that generally intrudes on the Western imagination only when disaster strikes. The floods that ravage the densely populated nation usually catch our attention only when the death toll passes 200,000, as in the 1970 cyclone, which led to George Harrison's Concert for Bangladesh. The more common tragedy, the daily struggle for food and shelter by the country's poorest people, goes largely unnoticed. It is all the more remarkable that The Price of a Dream, by David Bornstein, presents an upbeat history of a homegrown model that actually seems to work, and does it through fully realized portraits of the people whose lives are touched by it.
From a modest beginning in 1977, the Grameen Bank has become a model for development projects throughout the world. Its guiding principle is stunningly simple: it provides micro-loans--in Bangladesh, often as small as $60 over a year--for small-business enterprises such as peddling or home-based bamboo weaving. Sometimes the loan can cover the purchase of a much-needed dairy cow. These small loans can have huge consequences for the borrowers, making the difference between barely scrounging a meal once a day and eating three times a day.
The bank is the brainchild of Muhammad Yunus, a Bangladeshi economist who received his Ph.D. from Vanderbilt University in Nashville. When he returned to Bangladesh after it became independent of Pakistan in 1971, he was frustrated to find that large-scale international development projects had little impact on the lives of impoverished villagers, who form the majority of the country's population. As early as 1976, Yunus presented a paper titled "Institutional Framework for a Self-Reliant Bangladesh," in which he argued forcefully that locally based institutions would make better use of Bangladesh's resources.
Over the years, he has come to believe that the widespread availability of credit on reasonable terms is the key to solving the problems of rural underdevelopment. In its absence, villagers are forced to rely on usurious moneylenders to tide them through periods of low earnings or to make the investments that will allow them to improve their means of livelihood. As a result, villagers can end up in what Yunus calls "a form of bonded labor." So crucial is the need for credit that Yunus has often expressed the hope that the United Nations would amend its Universal Declaration of Human Rights to include "credit for self-employment."
Grameen, whose name is derived from the Bangla word for "village," first began as an experiment operating from special windows in the conventional national banks. In 1983, the bank became an independent entity. Today more than 1,050 branch offices serve more than two million clients. Despite predictions from traditional bankers that Grameen's clients would take the money and run, 97 percent of its loans are repaid--a rate comparable to Chase Manhattan's. The reason: the bank has created a culture that helps clients become self-sufficient entrepreneurs.
Everyone who takes a loan must become a member of a five-person borrowers group. Groups share responsibility for loan repayments--and defaults--so they are very careful in choosing new members. Since most villagers have none of the data that bankers traditionally use to decide if a prospective borrower is creditworthy, who is in a better position to judge than the villagers themselves? As Bornstein writes, neighbors would detect the early warning signs of repayment problems, because "villages afford little privacy. In rural Bangladesh, villagers can smell what their neighbors are cooking for dinner."
Muhammad Yunus remains the moving spirit behind Grameen, though he has tried to institutionalize the bank's practices so that it can carry on when he no longer leads it. Bornstein conveys Yunus' charisma without indulging in hagiography, and acknowledges that "although I felt pulled in [by Yunus' personality] I was conscious of being somehow pushed away."
One of the most interesting aspects of Yunus' work has been his impact on the role of women in this largely Islamic country. Early on, Yunus recognized that women's unpaid labor was an economic resource that could benefit the entire country. Currently, 94 percent of the bank's borrowers are women.