Monday, May 18, 2009

Recommended Reading

I’m a big fan of audiobooks – there’s little better to pass the time in traffic jams than to listen to a good book or novel, especially with a talented narrator. I get all of mine from, which also has the virtue of providing free of charge the audio version of the Wall Street Journal with some of its membership plans. Membership isn’t cheap, but if you read/listen as much as I do, then it pays for itself in the long run.

The latest book I’ve read (or is that listened to?), is Muhammed Yunus’ “Banker to the Poor: Micro-Lending and the Battle Against World Poverty”, which describes the founding of the Grameen project in Bangladesh and the success it has had in opening up access to credit and economic opportunities for the absolute poor.

Prior to Grameen, there was little the poor could do to improve their circumstances, especially under the conservative Muslim society – or to be more accurate, conservative patrician society – that existed in Bangladesh. Banks, as conventional banks do everywhere, were and are only interested in lending to those with collateral, rather than to those who have business ideas or have willingness to work. That’s a fairly common complaint I hear, and not just from the poor. What money the poor received was generally through charity or ill-run government projects, and didn’t harness the energy or the labour of the poor in any meaningful way – neither for the country nor for the poor themselves. Some of the stories of the poor, quite frankly, brought a lump to my throat.

But Grameen offered a way out of the poverty trap, albeit one that depended on one’s own willingness to take a chance. By offering tiny loans with no collateral (because the poor didn’t have any), no documentation (since many of the borrowers were illiterate), and relatively low interest rates (compared to money lenders), Grameen helped the absolute poor work for themselves, earn enough to if not prosper then at least survive, and gain a measure of self respect. Just as important, and probably the vital key to its success, Grameen also pushed forward an agenda for social change by concentrating on women borrowers, and encouraging education, family planning and basic personal healthcare. All common sense stuff, but nothing the market economy would attempt on its own left to its own devices.

The book is part autobiography, part microlending manual, and part polemic (with some justice) against multilateral development agencies. If there’s a note of self-congratulation in some of the passages, its well deserved. Probably the best evidence of the effectiveness of Grameen has been the explosion of interest and thousands of copycat organizations across the globe, including in advanced economies. In Malaysia, Amanah Ikhtiar Malaysia conducts microlending operations – I don’t count the micro-finance program run by BNM as equivalent as it doesn’t target the absolute poor.

If there’s a criticism I have, is that microlending is only one aspect of the fight against poverty. I think Grameen’s approach acknowledges this since it explicitly incorporates social reengineering within its operational framework. The problem of course is that all the other methods – education, infrastructure, healthcare, technology transfers – don’t work without access to credit. On that score Prof Yunus has probably stumbled on the one thing that can lift desperately poor places like Sub-Saharan Africa, despite a flood of aid money.

If anyone’s interested in obtaining a copy, the book is available through and locally through MPH.

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