“…we need to appraise our own lives. How well are we listening to the Spirit? Are we living according to the eternal truths and doctrines of the restored Church of Jesus Christ? Can we effectively appraise the needs of others by the prompting of the Spirit? It impressed me that Muhammad Yunus must have been prompted by the Spirit when he organized a very unusual bank in Bangladesh, which some have said was the beginning of microfinance. When Yunus, who won the Nobel Peace Prize in 2006 for his efforts to help the poor, was asked what his initial strategy would be, he responded:
‘I didn’t really have one at the time. I simply began trying to help with my own funds, then went to the banks and asked them to get involved. They refused for several stated reasons, and thus my strategy began to evolve into: ‘Whatever the bankers did, I simply did the opposite.’ The bankers would only lend to the rich. I would only lend to the poor. The bankers would only make large loans. I would only make very small loans. The bankers would only lend to men. I would only lend to women. The bankers would only lend if there was collateral. I would only lend without collateral. The bankers required extensive paperwork. I only made loans that even an illiterate could understand. The bankers required their clients to come to the bank. I took my bank to the village.’
It should be noted that the banks expected a high rate of loan defaults. Yunus expected and experienced almost none. I understand that Mr. Yunus’s bank has provided more than $4 billion in loans and is entirely self-sustaining. Surely the Spirit of the Lord guided this noble effort.”
There is much written by and about Yunus. I think the his work gives us much to consider when it comes to the issue of self-reliance and poverty in the developing (and industrialized) world. The speech he delivers below give a nice sense of his thought and humility. Watch and learn.
[youtube=http://www.youtube.com/watch?v=3P-mfWCKMRA]
Can’t watch the video on this computer, but I’m impressed with Elder Nelson’s description. I admit I am not familiar with Yunus, but this is pretty cool stuff.
How does his bank compare to the other ones in terms of leverage? Does he leverage his holdings?
I am not sure. This site may be helpful.
So, you’re back at FPR?
It seems to me that Elder Nelson has framed Yunus’s story with the idea of the Spirit as a source of counter-intuitive insight. To be sure, that idea does exist in scripture but I am not sure that it coheres with a realistic picture of Yunus’s activity. Is it inevitable that wealthy, literate, males with collateral who ask for large loans are poor credit risks? It would be interesting to know how often, and for what reasons, Yunus turns down poor, illiterate, women without collateral, too.
I dunno, I’m no banker but it all sounds a bit glib to me.
Mogs
mogs,
I am not sure what you mean by the glib comment. Who are you directing it at. I want to respond to your comment and start the conversation that needs to take place her. But I want to be sure I understand what you are saying.
Nah, I don’t think there’s a conversation that “needs” to take place, or at least not with me. I can’t imagine that anyone would not wish Yunus the best with his efforts. I just find the narratives that surround the report of his success in this excerpt to be interesting in their own right.
Mogget,
I have used Yunus’ book “Banker to the Poor” in my senior seminar dealing with global poverty and global inequality. The depiction of what he was doing in the quote by Elder Ballard is, well, strange.
I think that Grameen, and microfinance in general, challenges the rather simplistic and very outdated concept of self-reliance (especially the view of Marion G. Romney reprinted elsewhere in the March Ensign), particularly as it applies to developing parts of the world.
The obstacle to self-reliance that these women and families faced was not found in the “self.” Instead, it was found in an unjust financial and economic system. When given access to resources many have thrived. This is an important part of Yunus’ story.
The funny thing about the Grameen Bank is that it is not really a bank in the sense that American’s would think. It does not have a profit motive. While it has interest, that interest is low. Also, the purpose of the interest is to increase the number of people who can participate. It is really a program for social change and poverty reduction. But for many western business-types the term “bank” is one that they can support.
My purpose in posting the video is to give people a sense of what Yunus is really about.
I have posted his comments on the free market economy from his Nobel Lecture (and some of my own comments as well) at my other blog.
So it’s a credit union? (bg)
I don’t think the LDS notion of self-reliance implies we are somehow independent islands. We have the notion of self-reliance tied to communitarian ideals – even in the modern church.
I do know a lot of the brethren are apparently quite impressed with microloans. It does seem a much better way of doing improvement than the typical aid model that western governments and NGAs have tended to practice the past half century.
There is a large part of the microcredit market where the intermediating institutions do not mitigate risk the way that both banks and credit unions do in the United States. Instead they act as a market maker for direct loans from individual lenders to individuals borrowers.
One of the benefits of that model is that it personalizes the whole process more in the manner of the old small town banks and less like the contemporary fashion of an impersonal credit scoring machine.
Yunus loans primarily to women, because he believes they are more responsible than men on repaying loans.
These loans primarily are given to help families and villages begin small cottage industries.
We have to remember a few things. First, he is working with people who are taught honesty and hard work. Big banks tend to work with wealthy people, who are less likely to be honest in their dealings, but focused on becoming rich by making a quick buck. Interestingly, today the economic collapse is mostly on bigger banks, not on smaller banks in the USA and elsewhere.
These micro-loans, on the part of both bank and borrowers, are to improve people’s lives, not to grossly enrich a small cadre of suits.
The program, as I understand it, works similarly to our Perpetual Education Fund, which also gives micro-loans for school, with a low interest to repay. The focus isn’t on making profits, but helping others improve themselves and become more self-reliant. In this, Elder Ballard is correct. The micro-loan banks have a focus on benefiting society, not on trying to enrich themselves quickly by making huge, irresponsible risks.
The interest rate charged for most micro credit loans is not all that low–about 20% or so. It is, however, much lower than is traditionally available from the local money lenders, who are really loan sharks. The transaction costs of making and adminstering a portfolio of $100 loans are relatively large, and if the interest payments do not cover those costs, the model will fail.
A number of the best and most effective micro-credit organizations are in fact for profit entities. These organizations tend to be larger, more sustainable and more effective at reaching more people than the smaller organization who function as Mark D. has described as intermediaries between individual lenders and individual borrowers. There are many strong advocates for the poor who are convinced that providing the poor with access to credit through well functioning and sustainable for profit financial institutions, will do far more to help the poor than charity donated in the form of loans made from a capital base that is not sustainable.
It should also be noted that there are many strong advocates for the poor that oppose the for profit model on the basis that they are more likely to abandon the poorest of the poor. I think that both types are needed.