Big ideas, little loans

The Grameen Bank, which extends small loans to the poor without requiring collateral, is a godsend for impoverished families in Bangladesh. Founded in 1976, the bank (Grameen is “village” in the native tongue) has a simple philosophy: Offer small loan amounts for start-up businesses, make sure that loans are used for what they are intended and that payments are made (peer pressure is often employed in communities). Through the innovative concept of microfinancing, the Grameen Bank has gone on to help the poorest of the poor in Bangladesh. It was made an independent bank by law in 1983, with 90 percent owned by its borrowers and 10 percent by the government.

Grameen Bank founder Muhammad Yunus, an economist, wanted to start a project that would make a difference. And what a difference it has been: The bank now has over 2,000 branches with an overwhelming number of borrowers (97 percent) being women and a stunning loan recovery rate (also 97 percent). Its concept of microfinancing is now being used in more than 50 other countries. And there is now a Grameen Foundation that, according to its motto, “connect[s] the world’s poor to their potential.”

Yunus and Grameen Bank were unknown to women of Guiuan, Eastern Samar, although they instinctively knew that zero-interest loans were what they badly needed.

After enduring Supertyphoon “Yolanda,” the Logatoc sisters sought to raise themselves and their families from dire straits by embarking on little enterprises like selling fish or shell craft, according to a report last week by Inquirer contributor Danny Petilla.“We are not lazy! We just need a little bit of help to start our own small business,” said Gina Logatoc, who borrowed P5,000 from a Manila-based microfinance firm to start a  sari-sari  store.

Thirty women subsequently came together to protect one another from loan sharks, but even the interest rate of legitimate lending firms (15-20 percent) was preventing them from thriving. Still, they were determined to do something for themselves and were not just waiting around for government doles. “If we can get some loans with zero interest, that would be a great help to us,” Gertrudes Logatoc said.

Now there’s a wish that the government should make haste to heed. Communications Secretary Herminio Coloma was in fact reported as saying that the Department of Social Welfare and Development was prepared “to extend microlending facilities as part of sustainable livelihood programs for calamity-affected communities.” It’s now a matter of translating these words into action.

Yunus’ groundbreaking project in microfinancing has not gone unrecognized. In 1984 Yunus received the Ramon Magsaysay Award for Community Leadership, for “enabling the neediest rural men and women to make themselves productive with sound group-managed credit.” In 2006 he received the Nobel Peace Prize jointly with Grameen Bank, for “developing microcredit into an ever more important instrument in the struggle against poverty” and for being “a source of ideas and models for the many institutions in the field of microcredit that have sprung up around the world.”

The Philippines will doubtless benefit immensely from a widespread application of microfinancing. There have been bursts of such activity in the past. The Center for Agriculture and Rural Development Inc., founded in 1986 in San Pablo City, has taken a leaf from Grameen Bank and applied its principles energetically—offering loans, training and insurance to clients now numbering half a million, mostly poor farmers. A nonprofit group called the Arab Gulf Program has studied the feasibility of setting up a $5-million microfinance bank in the Philippines.

Yunus, now known as “the banker of the poor,” came to the Philippines for the 2013 Microcredit Summit that had 800 participants representing over 60 countries. “It’s financially viable. It’s a business proposition. It’s not a charity proposition,” he said. “My position is that profit-making has pushed us away from the real business of people.”

Indeed, microfinancing presents big ways to help impoverished survivors of disaster get back on their feet. When he received the Nobel in 2006, Yunus said: “Now the war against poverty will be further intensified across the world. It will consolidate the struggle against poverty through microcredit in most of the countries. There should be no poverty, anywhere.”