Banker to the Poor (15 page)

I believe that many training programs are counterproductive. If Grameen had required borrowers to attend a training program in business management before taking out a loan to start a business, most of them would have been scared away. Formal learning is a threatening experience for our borrowers. It can even destroy their natural capacity or make them feel small, stupid, and useless. Also, poor people are often offered incentives to participate in training programs—sometimes they receive immediate financial benefits in the form of a training allowance or training is made a prerequisite to obtaining other important benefits in cash or in kind. This attracts the poor, even though they may not be interested in the training itself.

This is not to say that all training is bad. But training should not be forced on people. It should be offered only when they actively seek it out and are willing to pay in kind or cash to obtain it. Grameen borrowers, for example, do look for training. They might want to read the numbers in their passbooks, for example, or figure out what amounts have been paid and how much remains to be paid back. Often Grameen borrowers want to be able to read the Sixteen Decisions, keep accounts, or follow business news. Or they may want to learn about poultry raising; cattle raising; or new ways of planting, storing, and processing crops. Grameen is also bringing new technology to them: cellular telephones, solar energy, the Internet. Soon borrowers will need to calculate the cost of telephone calls or read the words on a computer screen.

Even before I started the Grameen Bank, I had been a critic of international aid agencies in Bangladesh. By far the most influential agency, and the one I have most criticized, is the World Bank. The World Bank and Grameen have been through so many fights and disagreements over the years that some commentators have labeled us "sparring partners." There have always been a few individuals in the World Bank who understand what micro-credit is all about, but our styles are so radically different that for many years we have spent more time and energy fighting each other than helping each other.

One public confrontation occurred at the World Food Day teleconference of 1986. Patricia Young, national coordinator of the U.S. Committee for World Food Day, invited me to be a panelist along with the World Bank's then-president, Barber Conable, at a teleconference that would be broadcast by satellite to thirty countries. I had no idea what a teleconference was, but I accepted the invitation as an opportunity to explain why I felt credit should be accepted as a human right and how credit could play a strategic role in removing hunger from the world.

I had not intended to go into battle against the World Bank president, but Conable provoked me by stating that the World Bank provided financial support to Grameen in Bangladesh. I thought I should correct this erroneous information, and I politely interjected that the World Bank did no such thing. Conable paid no attention. Again he stated that World Bank funds helped Grameen. This time I firmly contradicted him. Conable ignored my protest and repeated that the World Bank provided financial support to the Grameen Bank. I thought I should make the truth clear to satellite-TV viewers. We at the Grameen Bank have never wanted or accepted World Bank funding because we do not like the way the bank conducts business. Their experts and consultants often take over the projects they finance. They do not rest until they have molded things their way. We do not want anyone to come and meddle with our system or to tell us how to behave. Indeed, just that year we had actually rejected a $200-million low-interest loan from the World Bank. I also told Conable, who was bragging about employing the best minds in the world, that hiring smart economists does not necessarily translate into policies and programs that benefit the poor.

I find multilateral donors' style of doing business with the poor very disconcerting. I can cite one example of my experience in the island of Negros in the Philippines. In 1989, a Grameen replication program called Project Dungganon had been launched in response to the growing malnutrition among island children. Several years after it had been established, Dr. Cecile del Castillo, Project Dungganon's founder, asked a UN agency for money to expand her program. The agency responded by sending four missions to investigate her proposal, spending thousands of dollars on airline tickets, per diems, and professional fees. Due to bureaucratic complications, however, the project never received a single penny. In other words, after nearly five years of specialists reviewing the problem and wasting precious resources, the poor islanders were unable to receive a single micro-credit loan with support from this agency. I cannot help but remark that had the Negros project received an amount equal to the cost of a single UN mission, it could have assisted several hundred poor families.

The growth of the consultancy business has seriously misled international donor agencies. The assumption is that the recipient countries need to be guided at every stage of the process—during identification, preparation, and implementation of projects. Donors and consultants tend to become overbearing in their attitude toward the countries they help. Furthermore, these consultants often have a paralyzing effect on the initiatives of the recipient countries. Officials and academics in these countries quickly adopt the figures mentioned in the donors' documents even if they personally know that those figures are incorrect.

After 1986, when Grameen made it clear to the World Bank that we would not let it tell us how to run our business, the bank decided to try to form its own micro-credit organization in Bangladesh by combining our methodology with those of a number of other micro-credit programs. I thought the idea was wholly unrealistic. Ultimately, the Bangladesh government took our advice and resisted the World Bank initiative, but the World Bank did not learn anything from the process. On the contrary, it removed the name "Bangladesh" from the rejected project document and offered it to the Sri Lankan government instead.

My less-than-pleasant experience with the World Bank spurred me to learn as much as I could about development agencies. One observation that became increasingly apparent is that multilateral aid institutions have a lot of money to disburse. Officials determine target amounts for each country. The more money officials manage to give out, the better grade they receive as lending officers. Therefore young, ambitious officers of a donor agency will choose the projects with the biggest price tag. By moving a lot of money, their name moves up the promotion ladder.

In my line of work, I have often witnessed the desperation of donor agency officials to give away ever-larger sums of money to Bangladesh. They will do almost anything to achieve this, including bribing government officials and politicians either directly or indirectly. For instance, they will rent newly built, expensive houses owned by government officials or invite them on attractive foreign trips under the guise of official workshops and conferences. Consultants, suppliers, and potential contractors often facilitate this bribing mechanism. After all, they are the ones who most benefit from projects funded by donors.

One research institution in Bangladesh estimates that of the more than $30 billion in foreign donor assistance received in the past twenty-six years, 75 percent was not spent in Bangladesh. It was spent on equipment, commodities, and consultants from the donor country itself. Most rich nations use their foreign aid budget mainly to employ their own people and to sell their own goods, with poverty reduction as an afterthought. The 25 percent that is spent in Bangladesh usually goes straight to a tiny elite of local suppliers, contractors, consultants, and experts. Much of this money is used by these elites to buy foreign-made consumer goods, which is of no help to our country's economy or workforce. And there is a general belief that a good chunk of donor money ends up as kickbacks to officials and politicians who have helped make purchase decisions and sign contracts.

The situation is the same in all countries receiving aid, which amounts to $50–$55 billion a year. Aid-funded projects create massive bureaucracies, which quickly become corrupt and inefficient, incurring huge losses. In a world that trumpets the superiority of the market economy and free enterprise, aid money still goes to expand government spending, often acting against the interests of the market economy.

Most foreign aid goes to building roads, bridges, and so forth, which are supposed to help the poor "in the long run." The only people really benefiting from most of this aid, however, are those who are already wealthy. Foreign aid becomes a kind of charity for the powerful while the poor get poorer. If aid is to have some impact on the lives of the destitute, it must be rerouted so that it reaches poor households more directly.

I believe that a new aid methodology has to be designed with new objectives. In fact, the direct elimination of poverty should be the objective of all development aid. Development should be viewed as a human rights issue, not as a question of simply increasing the gross national product (GNP). When the national economy picks up, the situation of the poor is not necessarily improved. Therefore development should be redefined. It should refer only to a positive measurable change in per capita income of the bottom 50 percent of the population.

One day I was approached by an American journalist who was openly irritated by my apparently endless carping against "development aid" organizations such as the World Bank. Like many others, he saw the World Bank as a benevolent and enlightened organization, doing its best at a thankless task. He raised his microphone in the air between us and said in a challenging voice, "Instead of always being so critical, could you tell me what concrete steps you would take if you became president of the World Bank?"

"I have never thought of what I would do if I were president of the World Bank," I said coolly. "But I suppose the first thing I would do would be to move the headquarters to Dhaka."

"Why on earth would you do that?"

"Well, if as Lewis Preston [then president of the World Bank] says, 'The overarching objective of the World Bank is to combat world poverty,' then it seems to me the bank should be moved to a location where poverty is at its worst. In Dhaka, the World Bank would be surrounded by human suffering and destitution. By living in close proximity to the problem, bank officials might be able to solve it faster and more realistically."

The interviewer nodded. He seemed less agitated than at the start of the interview.

"Also, if the headquarters were moved to Dhaka many of the bank's five thousand employees would simply refuse to come. Dhaka is not known for its vibrant social life and is certainly not a choice spot for a World Banker to raise children. I think that many would voluntarily retire or change jobs. This would help achieve two things: First, it would ease out those who are not completely devoted to fighting poverty; second, it would reduce costs, as Dhaka salaries would be much lower than those required in expensive Washington, D.C." And that was the end of that.

In 1987, when I was visiting the United States, I had a much more productive meeting with the American press. I was speaking before a congressional committee. At the end of the hearing, I was rushed to a tiny room where someone was busy talking into a speakerphone. I had no idea how a telephone conference call worked and no one had briefed me, but there I was, faced with a speakerphone and fourteen editorial writers from leading daily newspapers waiting on the line to ask me questions.

The person initially talking on the speakerphone was Sam Daley-Harris. An ex–high school teacher turned social activist, Sam had started a national volunteer network called Responsibility for Ending Starvation Using Legislation, known as RESULTS. Every month he held nationwide meetings with all his volunteers over the phone. What I had stepped into was a press conference. Sam is extremely affable and he spoke in a way that briefed the news writers and me at the same time. I then took questions.

The first conference call lasted for an hour. There was a short break and then another one began with fourteen more editorial writers from various American dailies. That day I learned just how effective RESULTS could be. The resulting editorials helped ensure the passage of legislation in December 1987 that required USAID to devote $50 million to funding micro-credit programs for the poor, despite strong opposition by the Reagan administration.

Sam and I became instant friends. Unassuming and unimposing, he is as solid as a rock when it comes to fighting poverty and hunger. Today, RESULTS has sister organizations in six countries—the United States, the United Kingdom, Canada, Germany, Japan, and Australia. These organizations have endorsed microcredit as a key antipoverty strategy, and work through their grassroots network of citizen activists to ensure it is noticed by the community, the media, elected representatives, and the national government. They have pushed governmental aid agencies and private agencies for more funding for micro-credit programs. They have lobbied treasury departments and ministries to pressure the World Bank into paying more attention to poverty issues—not just once, but every year since the mid-1980s. They have also campaigned for programs and policies that would reduce poverty in their own countries. In fact, RESULTS in the United States has created a suborganization called RESULTS Domestic that is a leading advocate for micro-credit initiatives in the United States. Over the past ten years, the bond between RESULTS and Grameen has strengthened. Each RESULTS volunteer sooner or later becomes an expert on Grameen.

The 1987 conference calls accomplished another milestone in the history of the micro-credit movement: They attracted the attention of CBS's
60 Minutes.
In 1989, two CBS TV crews, one from London and another from Rome, came to visit Dhaka. I spent long hours with the CBS correspondent Morley Safer, visiting Grameen villages and interviewing borrowers, development experts, and government officials. In all, the crews took over a hundred hours of film footage and boiled it down to just twelve minutes. Broadcast in March 1990, the segment became an instant hit. I had never fully realized the power of the media until then. Even today, we receive letters and phone calls from around the world when the show is rebroadcast. In just twelve minutes, CBS had brought out the essence of Grameen in a most inspiring way. The film moved people to action and activism more than any media coverage before or since.