Economist Dr. Mohammed Yunus and Microcredit
Economist Dr. Mohammed Yunus is a native of Bangladesh. He established Bangladesh's Grameen Bank. Yunus received the Nobel Peace Prize in 2006 for developing microcredit, which provided small loans to the poor members of society, particularly women, to enable them to start a variety of income-generating ventures that would enable them to escape poverty. Since poverty has a significant impact on his country, he granted loans to help the less fortunate develop. The small loans are granted at inexpensive interest rates. The Grameen micro-credit model has been taken to world's most impoverished countries since it is viewed as a perfect solution to poverty in most developing countries (Kowalik & Martinez-Miera, 2010).
The Grameen Model
Using his financial resources, Yunus began giving micro-loans that would only address the basic needs of the poor in his society. He refined the concept of microcredit to break the poverty cycle. The method he developed widely known as the Grameen model enhanced the efficacy of the microcredit. Other commercial banks considered the poor as a risky investment hence they continued getting poor since they could not get access to loans; to uplift them. Yunus had identified the problem with commercial banks and lending practices; that they only wanted to make a lot of money. The poor people could not give as much profit. Hence, they were not considered (Bari, 2011).
Empowering Women through Microcredit
Dr. Muhammad Yunus' idea was not to acquire much wealth or generate many profits, but his business model was to enable the poor people of Bangladesh especially women; start-up small scale self-employment; this was to create wages to meet their needs. Yunus's business model was an anti-poverty type of model tailored to the needs of women. It was centered on the available credit, which was set for entrepreneurial projects. He saw social capital to be the only solution to the unavailable physical collateral among the poor people hence; this resulted in him starting Grameen Bank in 1976. The bank began as a peer-leading institution. The Grameen bank utilizes social capital. It only caters the needs of those in self-groups; the groups were non-family ones. The borrowers would go through training sessions, where the Grameen method is learned. The groups are disintegrated to comprise of five members, and only two are issued with the microloans. The groups meet once a week to strategize on repaying the loans. By successfully repaying loans, more people can borrow an amount of each loan. If one member of the group fails to repay the loan, the rest of the group cannot access a new loan. With such, the groups develop strong incentives among members to enable each other's success in business. The Grameen bank holds up an important position in the microfinance world. It proves that the poor can be "bankable" (Counts, 2008).
Expanding Grameen Model to the United States
Social capital is a good method since it allows the poor people to bind together on a societal level. The members of the community also become self-sufficient while at the same time self-regulating themselves. They also share entrepreneurial knowledge in the small groups; hence, they witness success in their business operations. The Grameen method monitors and carries an onus of screening on those who acquire the loans; therefore, the costs of implementing the program are minimized. Yunus stated that his micro-lending was not only for the developing world since the poor people face same challenges despite their location. Yunus and other corporate sponsors in 2008 launched the Grameen America in different places within the United States starting with New York. Grameen has then been serving the poor, especially women in Bronx, Manhattan, Brooklyn Indianapolis Omaha, San Jose, Oakland, Los Angeles, Charlotte and San Juan. It has moved from the operational branch in the New Yolk to eleven branches in the U.S. In four years time; it had facilitated loans to more than 9,000 borrowers totaling to an estimated value of $35 million at still 99% rate of repayment. Grameen America is structured in a way that loans up to $1500 given to groups of five people; they complete the financial training which takes five days. After the training, they present a viable business idea; it may range from offering salon services to jewelry or even clothing that allows the women to triple their income by USD $3000 a year. Without Grameen bank, those below the poverty line cannot access any bank loan; by performing such activities, the bank acts like a middle man, who encourages the poor to save, to access loans that other providers cannot risk giving out (Grove & Berg, 2014).
Grameen America: Transforming Lives in the United States
There is a place in the United States for a business that does not have a goal of maximizing profits and is based on the Grameen business model, which is not for profit. It has been transforming communities' lives in the fight against poverty in the U.S. Grameen America has experienced increased demand nationwide. To date, more than 75,000 women have been helped to invest in small businesses. They are targeting on all the underserved communities in Boston and the whole nation. While other banks and financial institutions continue limiting the available options for the poor in the society (those with minimum wages), Grameen America continues to reach many; this is to the response of the escalating job demands and the economic mobility that seem to be increasing. The program is addressed to the low-income population and achieving sustainability (Grameen America Inc. - Massachusetts, 2008).
References
Counts, A. (2008). Small loans, big dreams: How Nobel Prize winner Muhammad Yunus and microfinance are changing the world. Hoboken: John Wiley & Sons.
Bari, R. (2011). Grameen Social Business Model: A Manifesto for Proletariat Revolution. Bloomington: Author House.
Grameen America Inc. – Massachusetts. (2008). The Giving Common. New York: The Boston Foundation.
Grove, A., & Berg, G. A. (2014). Social business: Theory, practice, and critical perspectives. Heidelberg: Springer.
Kowalik, M., & Martinez-Miera, D. (2010). Creditworthiness of the Poor: A Model of the Grameen Bank. Federal Reserve Bank of Kansas City. Economic Research Department. Research Working Papers 10-11.
