Monday, October 16, 2006

The Grameen Bank (Investing in Peace)

I want to congratulate Muhammad Yunus and the Grameen Bank for being honored with the 2006 Nobel Peace Prize.  While I don’t follow the Nobel prize all that carefully, this one caught my interest because Dr. Yunus is not getting the award for brokering a peace treaty, opposing the proliferation of weapons, or creating a fledgling international peace-keeping body.  All of these are worthy activities btw, but Yunus’s work is something of a departure as far as the committee is concerned.  Rather than deal at the national or international level, Yunus’s bank creates peace at the most fundamental unit imaginable through what is known as “micro-enterprise”.  The idea is simple.  If regular people have their basic needs met, they have less reason to go to war.  

The American-educated Yunus (a PHD from Vanderbilt) created a bank that specializes in lending money to aspiring business owners in his native Bangladesh whom traditional banks considered too high risk because they lack collateral beyond their own skills and will to succeed.  Yunus made a somewhat controversial decision to target women borrowers because research showed that they are far more likely to reinvest any profits they might make in their families.  The first loan recipients were a small group of women who were making furniture out of bamboo.   They turned a small profit, more loans were made, and the Grameen Bank even got into the cell phone business, bringing service to isolated areas of Bangladesh. This has been replicated by the cell phone company Grameen Foundation and expanded to other developing countries.  

I found the committee’s choice fascinating because several years ago I worked on a grant for the Macarthur Foundation that looked at micro-enterprise as an alternative or supplement to welfare in the United States.  The rhetoric was simple enough.  Instead of giving people handouts or even giving them jobs, the notion was that you would encourage them to create jobs and businesses themselves.  Micro-enterprise is one of those odd concepts where progressive and conservative principles came together rather suddenly.  My particular end of it was to marry entrepreneurship for adults to an idea that was at the time in Federal Vocational Education law, all aspects of the industry (AAI), a notion that to teach career skills well all students should learn not just the physical tasks of the job, but the underlying finance, science, management, labor rights, etc. Where traditional vocational education trained workers, AAI sought to foster potential entrepreneurs.  

I still believe very strongly in micro-enterprise, but it appeared to have its limitations.  The two most serious limitations were that it’s not a universal solution for bootstrapping low income communities into the economic mainstream.  First, it depends on a certain level of human resources.  A number of individuals on “welfare” face what they call “multiple barriers to entry”.  Thse range from learning disabilities, addiction problems, family obligations, to language issues, etc.  Although there are many examples of individuals who dealt with all these barriers to start micro-businesses catering parties, selling cleaning services, doing repair, making deliveries, and setting up computers, there are a certain number of individuals who aren’t necessarily capable of developing their own business.  

Second, the average businesses that were developed even when successful tended to be supplemental to existing work rather than so profitable they formed the basis of a career.  I wound up arguing that the flexibility was actually an important feature for young mothers, students, or those who had limited capacity to travel or work regular hours.  I also noted that micro-enterprise had the potential to allow individuals to learn “career skills” by doing and this would likely be more effective and ultimately less expensive than traditional career development activities.  At least in America, the solution to poverty needed more of an infrastructure than just a few thousand well-placed small business loans.  There was still plenty of call for traditional career development counseling, job development, and various social supports.

The Gareem Bank has been more successful than the American attempts at micro-enterprise, but it nonetheless has a mixed history.  I do honestly believe that it is nonetheless a powerful strategy for economic development around the world, but it’s just one of  many strategies needed.

I suspect that the Nobel Peace Prize committee decided to cite Yunus to draw the world’s attention to the fact that there is another path to peace between the Moslem and Western world.  This is a case where American education and in some cases money (though the ideas go back at least to Gandhi on the Indian sub-continent) got applied to creation rather than destruction in the Moslem world.  The committee wanted the world to know that it was endorsing this saner approach to peace.  Imagine if half the money spent on war were spent on giving poor Moslems the means to start their own businesses and support their families.  I suspect far fewer of them would be attracted to jihadist ideas.

The funny thing to me is that I have a hard time imagining a more deeply conservative, pro market, pro capitalist, approach to peace and spreading what many think of as traditional Amercan values than Yunus’s.  It reminds me of one of the great successes in peace-making of the last century, the Marshall Plan, the decision after World War 2 to use US money to help rebuild Europe in general and Germany in particular.  At the time, it brought American prestige and power to a high point.  Just a thought. Compare Yunus's words after being awarded the Nobel Prize to those of our current administration,

"The one message that we are trying to promote all the time, that poverty in the world is an artificial creation. It doesn't belong to human civilization, and we can change that, we can make people come out of poverty and have the real state of affairs. So the only thing we have to do is to redesign our institutions and policies, and there will be no people who will be suffering from poverty. So I would hope that this award will make this message heard many times, and in a kind of forceful way, so that people start believing that we can create a poverty-free world. That's what I would like to do."

Ask yourself which one sounds enlightened?


At 10/16/2006 04:05:00 AM, Anonymous Anonymous said...

Thanks for posting the great news; the recognition of Muhammad Yunus' work is a huge boost to microfinance programs around the world. A point of clarification though -- the Village Phone program you cite is a project of Grameen Foundation. It is based on Grameen Bank's hugely successful Village Phone program in Bangladesh, which has over 200,000 phones in service. We now have Village Phone Uganda and Village Phone Rwanda up and running succesfully, with more countries to come.

And, agreed that microfinance isn't a panacea -- but as Muhammad Yunus once said, "Does microfinance work for everyone? No. Is it a panacea? No. Is it the most powerful tool we have identified so far to help large numbers of the very poor — those living below $1 a day — rise above poverty with dignity? Absolutely!"

At 10/16/2006 08:42:00 AM, Blogger None said...

I love this story.

At 10/16/2006 09:25:00 AM, Blogger Chancelucky said...

many thanks for coming by here. I was both shocked and gratified to hear from someone from the Grameen Foundation itself. Thanks for the links to other microfinacne programs and Village phone.

We're in absolute agreement by the way. It's long overdue recognition of the inter-connection between peace and economic self-sufficiency for the world's poorest people by the Nobel Peace committee.

It's just my nature to mention that the "market" and entrepreneurship are not universal solutions.

I wish you and the foundation continued growth and success.

Yes, it's nice to talk about good news once in a while, particularly given the sudden departure of the A's from the playoffs. Yikes! should I be pairing something this serious with the A's?

At 10/17/2006 06:51:00 PM, Blogger benny06 said...

Nice to see an anti-poverty man get this award. When we fight poverty, with moral clarity, there is more peace.

At 10/17/2006 07:10:00 PM, Anonymous Anonymous said...

Chancelucky - Thanks. The blogger response has been pretty overwhelming but we're doing our best to keep up!

At 10/19/2006 03:19:00 AM, Anonymous Anonymous said...

In terms of human and humane proportion, the $820,000 per minute the USA spends on our military budget and the additional $200,000 per minute we spend on rubbling Iraq could microfinance a whole lot of aspirations and grass-roots vitality.

It's wonderful to know these kind and smart people are out there doing so much common sensical good.

At 10/19/2006 04:14:00 PM, Blogger Chancelucky said...

absolutely. I do think the Prize committee was trying to send the world a message. I also think it's the right message. Peace and extreme poverty are linked.
I'm not sure it applies to the war in Iraq. That one seems to be more about greed than poverty, but in general many wars are simply about economic survival.

your comment sparked this thought for me. Blogging and publishing are very analogous to microfinance and the larger institutional finance world. In both cases, I think bottom up tends to work better than top down. btw, I also fixed the discussion in my post of the cell phone project to reflect the difference between the bank's projects and the foundation's projects.

Mr. Pogblog,
yes, it was very nice to be talking about solutions or at least an approach to solutions for the problems that trouble us.m


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