Banker to the Poor (7 page)

As for the repayment mechanism, I decided that we should keep it as simple as possible. I felt that the transaction should be local, and so in Jobra village I went to visit the
pan
(betel leaf) seller in his tiny stall in the middle of the village. A small man with a toothy grin and unshaven face, he kept his shop open day and night, and he knew just about everyone in the village. Certainly everyone knew him. When I suggested that he be the collection point for Jobra, he was enthusiastic. He did not ask for any fee. We told the borrowers that every day as they cross the road or go about their ordinary business, they should simply give their daily installment to the
pan
seller.

This proved to be a short-lived experiment. Borrowers claimed they had paid their daily installment, and the
pan
seller said they had not.

"Don't you remember?" a borrower would say. "I came at midday. I bought some
pan
from you. I gave you five taka, and when you gave me my change I told you keep my installment of loan repayment. Don't you remember?"

"No, you didn't give me five taka."

"Yes, I did. I remember it very well."

"No, you paid me with a bill and I gave you back full change."

Arguments were unending. I knew we had to simplify the procedure. So I bought a notebook, and on the left I wrote each borrower's name. In the center I made three columns showing amounts paid per installment and the date:

I made the sheet simple so that the
pan
seller needed only to make a check mark each time a borrower paid him. But after a few days even this system broke down. The borrowers claimed that the
pan
seller had forgotten to check them off. Something had to be done about my accounting system. But what? As an experiment, I abandoned the daily repayment system and moved to the next best thing, a weekly repayment system. Today, some twenty years later, our loans are still paid in the same way, week by week, though now they are made to our frontline bank workers who meet weekly with borrowers in their villages.

Our repayment rate has remained high all along. Generally, it is our success in getting high repayment while serving very poor people in disaster-prone areas that surprises people the most about Grameen's success. People sometimes assume that faithful repayment of loans must be part of Bangladeshi "culture." But nothing could be further from the truth. In Bangladesh, the wealthiest borrowers make it a habit not to pay back their loans. I am amazed by the mockery that goes on in the name of banking. Public deposits go through the banking system, through the government banks, through private banks, to people who will never pay back the money.

If Grameen was to work, we knew we had to trust our clients. From day one, we knew that there would be no room for policing in our system. We never used courts to settle our repayments. We did not involve lawyers or any outsiders. Today, commercial banks assume that every borrower is going to run away with their money, so they tie their clients up in legal knots. Lawyers pore over their precious documents, making certain that no borrower will escape the reach of the bank. In contrast, Grameen assumes that every borrower is honest. There are no legal instruments between the lenders and the borrowers. We were convinced that the bank should be built on human trust, not on meaningless paper contracts. Grameen would succeed or fail depending on the strength of our personal relationships. We may be accused of being naive, but our experience with bad debt is less than 1 percent. And even when borrowers do default on a loan, we do not assume that they are malevolent. Instead, we assume that personal circumstances have prevented them from repaying the money. Bad loans present a constant reminder of the need to do more to help our clients succeed.

While we struggled to develop an effective and reliable credit delivery and recovery mechanism during our pilot phase, we also worked on making sure that women benefited from the program. We set a goal of having half of our borrowers be women. This took us more than six years to achieve. In trying to attract woman borrowers, we fought against the normal practices of Bangladeshi banks, which effectively exclude women. To say that our financial institutions are gender-biased is an understatement. When I point out the gender bias of banks, my banker friends grow irritated with me. "Don't you see our ladies' branches all over town?" they argue. "They are designed to serve women only."

"Yes," I answer, "I see them, and I also see the idea behind them. You want to get women's deposits. That is why you make ladies' branches. But what happens when one of the ladies wants to borrow money from you?"

In Bangladesh, if a woman, even a rich woman, wants to borrow money from a bank, the manager will ask her, 'Did you discuss this with your husband?' And if she answers, 'Yes,' the manager will say, 'Is he supportive of your proposal?' If the answer is still, 'Yes,' he will say, 'Would you please bring your husband along so that we can discuss it with him?' But no manager would ever ask a prospective male borrower whether he has discussed the idea of a loan with his wife or whether he would bring his wife along to discuss the proposal. It is not by chance that women constituted less than 1 percent of all the borrowers in Bangladesh prior to Grameen. The banking system was created for men.

It was my anger about this situation that initially prompted me to commit to having at least 50 percent of our experimental project loans granted to women. But we soon discovered new socioeconomic reasons to focus on women. The more money we lent to poor women, the more I realized that credit given to a woman brings about change faster than when given to a man.

In Bangladesh, hunger and poverty are more women's issues than men's. Women experience hunger and poverty more intensely than men. If one of the family members has to starve, it is an unwritten law that it will be the mother. The mother will also suffer the traumatic experience of not being able to breast-feed her infant during the times of famine and scarcity. Poor women in Bangladesh have the most insecure social standing. A husband can throw his wife out any time he wishes. He can divorce her merely by repeating, "I divorce thee," three times. And if he does, she will be disgraced and unwanted in her parents' house. Despite these adversities, it is evident that destitute women adapt quicker and better to the self-help process than men. Though they cannot read or write and have rarely been allowed to step out of their homes alone, poor women see further and are willing to work harder to lift themselves and their families out of poverty. They pay more attention, prepare their children to live better lives, and are more consistent in their performance than men. When a destitute mother starts earning an income, her dreams of success invariably center around her children. A woman's second priority is the household. She wants to buy utensils, build a stronger roof, or find a bed for herself and her family. A man has an entirely different set of priorities. When a destitute father earns extra income, he focuses more attention on himself. Thus money entering a household through a woman brings more benefits to the family as a whole.

If the goals of economic development include improving the general standard of living, reducing poverty, creating dignified employment opportunities, and reducing inequality, then it is natural to work through women. Not only do women constitute the majority of the poor, the underemployed, and the economically and socially disadvantaged, but they more readily and successfully improve the welfare of both children and men. Studies comparing how male borrowers use their loans versus female borrowers, consistently show this to be the case.

It was not easy to focus our efforts almost exclusively on lending to women. The first and most formidable opposition came from the husbands, who generally wanted the loans for themselves. The religious leaders were very suspicious of us. And the moneylenders saw us as a direct threat to their authority in the village. These objections I had expected, but what surprised me was to hear educated civil servants and professionals arguing against us. They contended that it made no sense to lend money to women while so many men were jobless and without income. Or they argued that women would only pass the loans on to their husbands and would wind up even more exploited than they were before. One official of our central bank even wrote me a menacing letter demanding that I "explain fully and immediately why a high percentage of your borrowers are women." Curiously, my reply asking whether the central bank had ever asked the other banks in the country why they have such a high percentage of male borrowers went unanswered.

In the beginning, we were unsure how to attract women borrowers. Bengali women rarely, if ever, borrow money from banks. I could have put up a billboard saying:

ATTENTION ALL WOMEN:
WELCOME TO OUR BANK
FOR A SPECIAL LOAN PROGRAM
FOR WOMEN

This billboard might have received media coverage or free publicity but would never have attracted women borrowers. First, 85 percent of poor women in rural Bangladesh cannot read, and second, they are rarely free to come out of their houses without their husbands. We had to devise a whole series of tricks and techniques to recruit women borrowers. At first, because of the rules of
purdah,
those of us who were men never dared enter a woman's house in the village.
Purdah
refers to a range of practices that uphold the Koranic injunction to guard women's modesty and purity. In its most conservative interpretation,
purdah
forbids women to leave their homes or to be seen by any men except their closest male relatives.

In rural villages like Jobra,
purdah
is colored by beliefs in spirits that predate Islam. Such beliefs are usually perpetuated by the village pseudo-mullahs who teach religious primary schools, or
mak-tabs,
and interpret Islam for the villagers. Though these men are looked on as religious authorities by the illiterate villagers, many of them have a low degree of Islamic education and do not always base their teachings on the Quran.

Even where
purdah
is not strictly observed, custom, family, tradition, and decorum combine to keep relations between women and men in rural Bangladesh extremely formal. So when I would go to meet with village women, I never asked for a chair or any of the bowing and scraping that usually accompanies figures of authority. Instead, I would try to chat as informally as possible. I would say funny things to break the ice or compliment a mother on her children. I also warned my students and coworkers against wearing expensive dress or fancy saris.

Instead of asking to enter a woman's house, I would stand in a clearing between several houses, so everyone could see me and observe my behavior. Then I would wait while one of my female students entered the appointed house and introduced me. This go-between would then bring me any questions the women might have. I would answer their questions, and back into the house the student would go. Sometimes she would shuttle back and forth for over an hour and still I was not able to convince these hidden women to seek a loan from Grameen.

But I would come back the next day. And again the go-between would shuttle back and forth between the village women and me. We wasted a lot of time with the student having to repeat everything I said and all the questions of the village women. Often our go-between could not catch all my ideas or the women's questions would get jumbled. Sometimes the husbands would get irritated with me. I suppose the fact that I was a respected head of a university department reassured them somewhat, but always they demanded that our loans be given to them, not to their wives.

One day, as I sat in a clearing between the houses of a village, it clouded over and started to rain. As this was during the monsoon season, the rain turned into a heavy downpour. The women in the house sent an umbrella out so I could cover myself. I was relatively dry, but the poor go-between got rained on every time she shuttled back and forth between me and the house. As the rain increased one of the elder women in the house, said, "Let the professor take shelter next door. There is no one there. That way the girl won't get wet."

The house was a typical rural Bengali hut—a tiny room with a dirt floor and no electricity, chair, or table. I sat alone on the bed in the dark and waited. Wonderful smells of simmering
atap
rice seeped into the hut from next door. A bamboo wall and cabinets divided this house from the neighboring one, and every time my go-between talked to the women in the adjoining house, I could hear some of the things they said, but their voices were muffled. And every time the go-between would return to tell me what they had said, the women next door would crowd against the bamboo divide to hear my answers. It was far from an ideal way of communicating, but it was certainly better than standing outside in the rain.

After twenty minutes of this—hearing each other's voices, but talking indirectly through a go-between—the women on the other side of the wall started bypassing my assistant and shouting questions or comments directly at me in their Chittagonian dialect. As my eyes grew accustomed to the darkness, I could make out human shapes staring at me through the cracks in the partition. Many of their questions were similar to the ones the men asked us: "Why must we form a group?" "Why not an individual loan to me right now?"

There were about twenty-five women peeking at me through the cracks in the bamboo when suddenly the pressure on the partition grew too great and part of it collapsed. Before they knew what had happened, the women were sitting in the room listening and talking directly to me. Some hid their faces behind a veil. Others giggled and were too shy to look at me directly. But we had no more need of someone to repeat our words. That was the first time I spoke with a group of Jobra women indoors.