Banker to the Poor (17 page)

One day I was complaining about this situation—billions of dollars for Third World development, but none for dozens of good micro-credit programs—at a lecture in Chicago. During the question-and-answer session I elaborated on how difficult it was to start replication programs because of the lack of donor money. My suggestion was to create a branch of the Grameen Trust specifically for providing support to replication programs. If donors were satisfied with the use of their money, they could give us more. If they were unhappy with our performance, they could remove their support.

As the question-and-answer period continued, I was handed a note from someone in the audience. It said, "Can I see you for a couple of minutes after your presentation?" I passed the note to Connie Evans, executive director of the Women's Self-Employment Project, who was sitting next to me. Immediately after the lecture, Connie ushered me into a small room. A woman was also shown in.

"How much money do you think you'll need to start funding the replication projects?" asked the woman.

"A couple of hundred thousand dollars would be a good start," I answered.

"Will you have difficulty in finding replication projects to fund?"

"Oh, no. There are many that are waiting for money," I answered. "And once we start funding, many more will come forward."

"How long will you be in town?"

"Another two days. Then I go to Washington."

"I'll try to give you a check for couple hundred thousand dollars before you leave. Can I invite you to my home this evening so that you can meet a few of my colleagues and we can proceed with the processing of the grant?"

I looked at Connie and asked, "Can I go?"

Connie was beaming with excitement. "How can I stop you from going to Adele Simmons's home, particularly when she wants to give you a grant?"

That evening we spent with Adele, the president of the MacArthur Foundation, and three of her colleagues, who agreed with Adele's decision to offer us a grant. As I had a hectic schedule for the next two days and no time to write a grant proposal, Adele assigned a staff member to hop into taxis with me, sit next to me during lunches and dinners, and develop a draft of the proposal during my stay. Within two days, the staff had written a proposal that satisfied the MacArthur Foundation.

Adele Simmons's decision to support the Grameen Trust jumpstarted us on our ambitious new replication program and encouraged other donors to follow suit. These included the Rockefeller Foundation, the World Bank, the U.S. government, the UN Capital Development Fund, and the German government. In total, the Grameen Trust—which has been run by a former Chittagong University colleague and close friend of mine, H. I. Latifee, since 1994—has received more than $19.8 million. Virtually every cent has been used to support sixty-five Grameen replication projects in twenty-seven countries. As of late 2002, these organizations have granted more than $444 million in loans to some 1,140,000 poor people.

Grameen attracts potential replicators by inviting them to our International Dialogue Programs—two-week-long conferences hosted by the Grameen Bank and Grameen Trust in Bangladesh four times each year. About twenty people from around the world attend each conference. After a few hours of orientation in our head office, we send these visitors in groups of two to far-flung branches throughout the country. They remain there for five days to learn as much as possible about the branch, its workers, its borrowers, and its socioeconomic environment. They then undertake an in-depth interview with one Grameen borrower over several days. This allows them to see the direct impact of Grameen on a very human level. It also helps to break down the myths and prejudices the participants may have about poor people in Bangladesh, poor people in their home country, or poor people in general.

When the Dialogue participants return from the field, we encourage them to debate the merits and limitations of the Grameen approach. Toward the end of the two-week period, we show them how to apply to the Grameen Trust for seed money to get their own program started. If they apply, we contact other replicators in their country for references. All of this is very inexpensive, but it allows us to weed out those who are not serious about starting a program true to the Grameen spirit. We see a tremendous demand for new funding and hope to reach 10 million borrowers through replication programs funded by the Grameen Trust by 2005. That goal will require roughly $2.2 billion. This may sound like a lot of money, but it is less than double the amount that an American friend of mine helped raise for his law school a few years ago.

About eight years ago a fellow Bengali challenged me in a seminar. He said, "Grameen once received loans at 2 percent interest. Any program in this country that gets loans at that rate can make a micro-credit program work." I think he meant it as an accusation, implying that what we had accomplished was not a big deal, but I took it as a challenge to create a new institution that offered loans at 2 percent interest to any micro-credit program in the country. I convinced the government to establish a nongovernmental agency, called the Polli Karma-Sahayak Foundation (PKSF), which has since made loans to 156 micro-credit programs throughout the country. I was appointed to the board of directors. After PKSF established a track record and methodology that felt comfortable, I supported the proposal that the foundation receive funding from the World Bank. In 1998, the World Bank approved a $105 million loan to PKSF, one of its largest investments in micro-credit ever. Now I believe that several microcredit "wholesalers" like PKSF should be set up in every country so that they can compete against each other. The retail institutions, and the poor people themselves, will benefit directly from this competition.

In 1993, I circulated a proposal that called for $100 million for Grameen Trust to be used for the support of poverty-focused micro-credit programs that operated on a retail level in developing countries. The response to my proposal, despite lobbying campaigns by RESULTS volunteers in seven countries, was not very encouraging. Then, one evening in 1993, I received a telephone call from the World Bank. It was Vice President Ismail Serageldin. Ismail and I had worked together as steering committee members of the Aga Khan Foundation in Geneva and I knew he was a genuine admirer of Grameen. Despite holding a high position in the World Bank, he had not lost a feel for the poor.

"How can we help? Is there anything we can do for you?" he asked

"Well, I don't know. The World Bank only works through governments. You can't work directly with us," I said.

"No, we very much want to work with you, but you always refuse our money."

"We don't need your money. We can manage our own."

"What response are you getting on the $100 million proposal you circulated for the Grameen Trust?"

"Very frustrating experience. Nobody came forward except USAID with $2 million."

"Did you send a copy of the proposal to the World Bank?"

"No, we didn't. We didn't think you'd be interested."

"Can you fax me a copy tomorrow? I'll see what we can do for you."

The next day I faxed the proposal to Ismail. He called me back about a week later, jubilant. "We checked your proposal. We have good news for you. We want to give you the balance of $98 million."

"I am delighted to hear that. We thought we'd never find this money. But how are you by-passing the Bangladesh government?"

"Don't worry, we discussed that too. We'll find a way."

"Let me get this straight, Ismail—are you talking about a loan or an outright grant?"

"A loan of $98 million," Ismail answered.

"But Ismail, the trust will never be able to pay back a loan."

"This is a soft loan with a very long maturity period. It is almost like a grant," Ismail explained.

"But I know how this works. Soon your official will ask for a guarantee from the government for this loan. And why should our government guarantee a loan to the Grameen Trust, knowing that we will give this money to projects in other countries? The Trust will never recover the original amount even if loan repayment is 100 percent. We make projects responsible only for the local currency equivalent of the loan they receive. When they pay back, they pay back in the local currency. But the World Bank will want U.S. dollars. Because of currency fluctuations, the trust will sometimes receive much less, in dollar terms, than what was loaned. I see no way we can take a loan, even if it is a soft loan."

"I see your point," Ismail said. "What if we give you the entire money up front. Then you can invest it and earn enough to compensate for the losses through exchange rate fluctuations."

"I am not an expert on fund management in the international market. I need an expert," I said. "Why don't you look into the matter and help us draw up a business plan that will protect both the trust and the World Bank."

Ismail promised to do that. But neither his specialists nor the ones I consulted came up with a satisfying scenario. For the time being, the World Bank offered us a grant of $2 million without requiring a government guarantee. This grant did not come from the World Bank's loan fund, but from the president's discretionary fund. To mobilize additional funds for microcredt programs, Ismail created CGAP, which was established with a $30 million grant from the World Bank.

Though CGAP's first three years were far from perfect, it did a lot of good. Ismail followed Consultative Group for International Agricultural Research (CGIAR) guidelines in designing the structure of the CGAP. He proposed the creation of a Policy Advisory Group, similar to the Technical Advisory Group of the CGIAR, and suggested that I be named chairperson. From that position, I had the opportunity to associate with a diverse group of practitioners and donors working together to set the global stage for micro-credit. It was exciting. Though several of the programs that received funding from CGAP did not seem to place enough emphasis on the poorest, three leading Grameen replication programs—CARD, SHARE (a program in India started with Grameen Trust funding), and Project Dungganon—did receive grants. CGAP was quickly followed by CGAP II in July 1998. If CGAP II can sharpen its focus on the poorest people and adopt a policy to provide most of its funding to national wholesaler funding agencies like PKSF rather than directly funding retailers, I believe its impact will be significant. I also think that a larger percentage of CGAP funds should go directly into the hands of poor women instead of going to consultancies, international conferences, and research studies.

In March 1995, a group of volunteers from the citizen advocacy group RESULTS came to visit us in Bangladesh. It was the third such delegation. RESULTS participants pay their own way and are always extremely committed to the fight against poverty. As very few of them are professionally involved in development, they remain untouched by the high salaries and cushy benefits that tend to dull one's compassion for the poor.

During one of the sessions with the RESULTS volunteers, I brought up our proposal for $100 million in funding for the Grameen Trust. Many of the volunteers had lobbied their governments to make contributions to the Grameen Trust, but in most cases their governments had rejected the idea. Sensing the disappointment in the room, I suggested that we shift our focus. What if we found 1 million persons who would each contribute one hundred dollars toward the Grameen Trust's efforts to fund Grameen replication programs? We could call it the People's Fund for micro-credit.

Dave Ellis, an educator and philanthropist based in South Dakota, raised his hand to ask a question. He looked very excited. "When are you going to launch this program?" he asked me.

I looked at my watch and said, "Five minutes ago."

Dave pulled a hundred-dollar bill from his wallet and said, "Well, I'm the first one. Now only 999,999 to go." Suddenly, all the other participants started holding up hundred-dollar bills. Some who did not have their money with them borrowed from others. In a few minutes, I had more than twenty hundred-dollar bills in front of me. It was exhilarating. I announced the People's Fund in
Grameen Dialogue,
our quarterly newsletter, and more checks came rolling in from around the world.

Thrilled by the success of the People's Fund, Dave hired a public relations firm and worked with it to design a campaign logo, website, brochure, and business plan. During several successive trips to the United States, I met Dave and Jeff Swaim (the creative director for the public relations firm Amherst & Reeves) to discuss the campaign. The idea of linking 1 million people in wealthy countries with millions of poor people in developing countries through micro-credit was tremendously exciting to me—not only because of the impact on the borrowers, but also because of the impact on the donors. It would create thousands of people-to-people links and indirectly educate millions about the potential of micro-credit.

Understandably, Dave did not want to process all the hundred-dollar checks through his small, Rapid City–based foundation. So Reed Oppenheimer, a philanthropist and RESULTS activist, agreed to establish a U.S.-based nonprofit organization called Grameen Foundation USA (GF-USA). Reed paid all the legal costs of setting up GF-USA and based it in his home state of Oklahoma. As we contemplated the campaign's move from Dave's foundation to GF-USA, we recognized an opportunity to establish a broader mandate for GF-USA than simply managing the People's Fund. So I asked Alex Counts, an American who had been associated with us in Bangladesh for nearly ten years and who had written a book about Grameen entitled
Give Us Credit
,
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whether he would move back to the United States to become the executive director of GF-USA. He agreed. Reed became the chairperson of the board, Alex moved to Washington where GF-USA's main office would be located, and Jeff and Dave continued to work on the campaign.

To date, we have only raised $142,000 through the People's Fund and are still trying to raise the funds needed to implement our business plan. Our goal is to raise the campaign budget separately, so that 100 percent of each hundred-dollar contribution goes through the Grameen Trust and on to grassroots micro-credit programs—with neither GF-USA nor the Grameen Trust retaining any percentage for their administration and overhead. If we can find some foundation, company, or individual willing to fund the plan that Dave and Jeff came up with, I am sure Alex could multiply that amount many times and in a reasonable amount of time generate $100 million in hundred-dollar increments.