The right to credit

Flora Lewis

September 27, 1990|By Flora Lewis

ONCE IN a while somebody comes along with an important, straightforward idea and the dedication and energy to put it to work. Professor Muhammad Yunus, a soft-voiced, 50-year-old economist, is one of them.

At the moment, the focus is on macroeconomics: oil prices, inflation, the danger of a worldwide recession that would hurt developed countries and devastate the perpetually poor and the struggling ex-communist states. But even in the last, generally flush decade, the poor were multiplying and seeing no prospects for escape.

Iraq's president, Saddam Hussein, is cynically attempting to appeal for their support, posing his defiance to the world as a crusade against the rich.

Iraq is deeply in debt, and dangerous, precisely because Hussein lavished its oil riches on arms that he now uses to seize more wealth. But that won't benefit the poor anywhere, and when the crisis is ended their plight will still require attention if the world is not to stumble from conflict to conflict.

Yunus' formula isn't a magic solution. The myth of finding one is the root of many disasters. But his idea is encouraging, visibly effective, and if it works in tiny steps it spreads rapidly. It is based on the simple notion of credit.

He happens to come from Bangladesh, and that is appropriate because if there was ever a country demonstrating the Malthusian cycle, it is his. Its rich, alluvial soil makes it easy for people to multiply to the point where they can't sustain themselves, and the next invariable disaster restores the tragic balance. Most can never get one step ahead.

Yunus was one of the lucky ones. He won a Fulbright scholarship, studied at Vanderbilt University and went home after his country's independence in 1972 to teach economics at Chittagong University.

But, he says, when the 1974 famine struck and he stared at bodies of starved men, women and children in the streets, he asked himself, "Is this what we made a country for, is this what economics is for?"

At that time, someone in his position might have turned to Marxism, but he wasn't tempted. He'd had enough theory, so he went to a nearby village to look for something practical. "I was influenced by American democracy," he says, "and I've always been a non-violent person."

It occurred to him to lend $6 from his pocket to a basket-woman so she could set up as self-employed. It wasn't charity, and it made all the difference. He found support for offering no-collateral loans in the village, and then in others, founding the Grameen (Bengali for rural) Bank in 1977.

Now the bank has 800,000 loans on its books, hands out $6 million a month, has a 98 percent repayment record, and makes enough profit to sustain itself. The shareholders, 600,000 of them, are successful borrowers whose experience and savings entitle them to buy one share for $3.

The plan has aroused interest in many localities, including Chicago for the urban poor, and Indian communities in Arkansas, North Dakota and Canada.

There are firm rules -- very small loans, commercial interest rates, small community groups to create peer pressure for repayment, and above all, no collateral.

The "right to credit," which Yunus espouses, creates the possibility of self-employment, the only kind available to most of the very poor. And it brings responsibility, a sense of dignity and self-worth that poverty so often denies and the most compassionate relief cannot provide.

The U.S. foreign aid budget is $13 billion a year, of which he would like to see $75 million over three years invested in starting up banks based on his principles. It is very small potatoes and won't remake the world.

But he points out that the existing system directed to big projects, infrastructure, budget supports only trickles down, giving point to complaints that current foreign aid winds up as "our poor help your rich." His idea is to help the poor directly.

There are undertones of the "benign neglect" approach once adopted by Sen. Daniel P. Moynihan and picked up in President Bush's "thousand points of light." They have only eroded the social fabric in the U.S. and aren't advancing development.

Obviously, the Yunus plan isn't enough. But coming from the Third World, it is a refreshing review of how to deal with the problem of haves and have-nots. Wealth is used up all the time.

The problem is the capacity to produce new wealth, and the need is to help produce that capacity. It is crucial to show Saddam's way won't do, and just as crucial to show there is another way for people to help themselves.

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