Taking a leaf out of Grameen’s book

Since the world was introduced to Bangladeshi economist Muhammad Yunus and his microfinance model in 2006 – when Yunus and his Grameen Bank received the Nobel Peace Prize – his central concept has spread to create social businesses in more than a 100 countries.

Whilst a celebrated model for alleviating poverty in rural areas of developing countries, microfinancing as a business idea has yet to truly make its mark on the West. It may come as a surprise to many then that the model worked out by Grameen and Yunus has been successfully implemented in poverty-stricken areas in France and America.

One of the most visible effects of microfinance schemes is the clear benefit when it comes to financially empowering females. As women are more likely to lose their jobs in a recession prone climate, savvy models like those implemented by Yunus in Bangladesh, which inspire women’s entrepreneurship, might well be the ticket to turning things around in the UK.

As Yunus talks about the social implications of various Grameen Bank schemes on poor rural communities in his native Bangladesh, he points out the benefits of financial empowerment. “This is the strength they have already achieved, and it’s something that gives (the women) an enormous amount of confidence in their lives, and about what they want to do with it,” he said. 

Glasgow Caledonian University (GCU) identified Yunus’ model as the potential answer to poverty issues in Britain, optimistic it might tackle areas where welfare dependency has been the norm for the past 40 years.

With 2.6 million people unemployed in the UK and some communities seeing third or fourth generation unemployment, policymakers and idea shakers might be excused for looking to the developing world for inspiration.

With the help of professor Pamela Gillies and various investors, the Graamen Scotland foundation is now in its penultimate stage. Over the next five years, the Scotland branch of the Grameen Bank – the first of its kind in the UK – plans to reach 1,500 borrowers and provide 4,300 loans to inhabitants living in the poorest areas. This includes four of the five poorest communities in Scotland; greater Glasgow, West Dunbartonshire, North Ayrshire, and Inverclyde.  

Yunus, who spoke in Glasgow and Edinburgh last week, said the cooperation between him and the founders of Grameen Scotland had been strong. “The story of microfinance has spread all over the world and inspired people, and I was in Glasgow Caledonian University because of that," he said. "And Pamela became interested in our work and wanted to do a credit programme in Scotland.

“We’re preparing for other microcredit schemes to be launched in Scotland, and hopefully they will be ready very soon. One of the ideas is to create a centre for social businesses within Glasgow Caledonian University.

"So many things have happened in the meantime, and this is gradually opening up more and more responses from other directions who are wanting to help solve the problems which we face in Glasgow and other cities in Scotland.”

The Grameen system works by one poor individual choosing four trusted people to form a group with, which then receives a five-day training programme focusing on transparency. If they successfully complete the training, each member of the group receives a small loan – “seed money” – which helps them turn the skills they learn at training into an income-generating business.

In the next stage borrowers continue to receive financial training and are required to make repayments on the loan as well as injections into a savings account, which initiates a powerful cycle of poverty alleviation by helping these individuals help themselves and each other. The initial loan requires no collateral or minimum credit rating.

The cooperation between GCU and Yunus has spawned a number of ideas and projects, one being the Grameen Glasgow Caledonian Nursing College in Bangladesh, which opened its doors in 2009 and is expecting its first set of graduates this spring.

The Grameen business model, when implemented, will hopefully encourage women in poorer areas of Scotland to start their own social business together with a group of trusted friends and business partners; the aim being to develop a sense of financial responsibility in women, likely to both empower them as individuals within a family life but also reach further to inspire the impoverished communities they are an integral part of. With the goal of tackling welfare dependency issues, the model seeks to “encourage their own economic and personal development and that of their family and their community”.

Research from developing countries has shown that as mothers gain a stake and control in the financial resources of a household, children are more likely to stay in the education system and less likely to suffer from malnourishment. The Grameen Scotland foundation seems to be inspired by these facts, believing they can be transferred to work in a moderated form for a westernised society.

By encouraging savings and offering women help in a knowledge-based function, like planning nutritious meals for children, the organisation is looking to tap the far-reaching consequences from financial empowerment, not only providing a few more pounds in the bank.

Warning against judging the microcredit customer as a small time borrower, Yunus talks about his response to jokes like this made by businessmen he’s met on his travels. They shouldn’t be judged as “some small borrower who borrows the equivalent of 250 dollars or something like that”.

The hard-hitting truth is that today, the savings of Bangladeshi women who have participated in the scheme over the years have reached more than a million USD in total. As Yunus told the businessmen: “They have enough money in their accounts to buy your company several times over.”