The 2006 Nobel Peace Prize was awarded to Dr Muhammad Yunus along with the Grameen Bank "for their efforts to create economic and social development from below." Specifically, he has been pioneering Micro-Enterprise Development for over 30 years to those who are poor in Bangladesh. Micro-Enterprise Development (MED) also known as micro-financing and micro-credit has grown at a rapid rate in recent years. This model is now internationally recognised as one of the best ways to enable those who are poor to help themselves out of poverty.
But what exactly is MED[1]? How does it operate? I believe it is helpful to view the process of micro-financing as a revolutionary style of micro bank. This can be seen by its choice of clients and its method of operations:
1. Choice of Clients
A) The poor not the rich
In most Western contexts, banks offer loans to those who have capital and the means to repay the loan. In practice it is those who are already rich who are deemed eligible to receive substantial loans. Typical banks favour the richer people in society and help perpetuate the principle that the rich get richer. In stark contrast, MEDs focus on those with little capital. MEDs choice of clients is for those who are specifically poor and without the means to receive a loan from a typical bank. In practice, many of these people turn to local loan sharks and get trapped in never ending debts on high interest. MEDs provide a radical alternative to greedy loan collectors and open the door of opportunity to economic independence.
B) Women not men
A typical bank focuses its service towards those who already have high positions of status, power, and money to ensure the continuation of profits. Thus, in many non–Western contexts this is largely focused on the male population. In contrast, the large majority of MEDs focus their services towards women. In most MED organizations women comprise around 80-95% of the client population. MEDs provide micro-loans and training to empower women in communities where their roles are often very limited and stifling. In a revolutionary way, MEDs show a concern for those who are marginalized and powerless, and works to empower and liberate.
2. Method of Operation
In most Western contexts, banks are individually oriented. Economic rationalism and Western culture purport an individualistic mindset which honours an individual’s hard work. In practice, banks only lend money to individual clients. The downside to this is a highly competitive and selfish culture. In stark contrast, most MEDs are group oriented. MEDs require that a loan group is formed. This loan group ensures that every recipient of a micro-loan is accountable to their fellow loan recipients. Meeting each week the loan group develops a group rapport and weekly repayments of the loan. Each group has a leader and secretary so that ownership of the group comes from within and not just the supporting micro-bank. The loan group prevents abuse of the loan, whilst also encourages a collective spirit. Instead of building a competitive business, each member exists to build their business individually for the collective good. This is a wonderful counter measure to greed and the ego inherent in Western economic models.
The revolution of micro-financing is sweeping across the world. Focusing on those who are poor and often powerless, MEDs seek to empower and bridge the harsh inequalities in the world today.
But what exactly is MED[1]? How does it operate? I believe it is helpful to view the process of micro-financing as a revolutionary style of micro bank. This can be seen by its choice of clients and its method of operations:
1. Choice of Clients
A) The poor not the rich
In most Western contexts, banks offer loans to those who have capital and the means to repay the loan. In practice it is those who are already rich who are deemed eligible to receive substantial loans. Typical banks favour the richer people in society and help perpetuate the principle that the rich get richer. In stark contrast, MEDs focus on those with little capital. MEDs choice of clients is for those who are specifically poor and without the means to receive a loan from a typical bank. In practice, many of these people turn to local loan sharks and get trapped in never ending debts on high interest. MEDs provide a radical alternative to greedy loan collectors and open the door of opportunity to economic independence.
B) Women not men
A typical bank focuses its service towards those who already have high positions of status, power, and money to ensure the continuation of profits. Thus, in many non–Western contexts this is largely focused on the male population. In contrast, the large majority of MEDs focus their services towards women. In most MED organizations women comprise around 80-95% of the client population. MEDs provide micro-loans and training to empower women in communities where their roles are often very limited and stifling. In a revolutionary way, MEDs show a concern for those who are marginalized and powerless, and works to empower and liberate.
2. Method of Operation
In most Western contexts, banks are individually oriented. Economic rationalism and Western culture purport an individualistic mindset which honours an individual’s hard work. In practice, banks only lend money to individual clients. The downside to this is a highly competitive and selfish culture. In stark contrast, most MEDs are group oriented. MEDs require that a loan group is formed. This loan group ensures that every recipient of a micro-loan is accountable to their fellow loan recipients. Meeting each week the loan group develops a group rapport and weekly repayments of the loan. Each group has a leader and secretary so that ownership of the group comes from within and not just the supporting micro-bank. The loan group prevents abuse of the loan, whilst also encourages a collective spirit. Instead of building a competitive business, each member exists to build their business individually for the collective good. This is a wonderful counter measure to greed and the ego inherent in Western economic models.
The revolution of micro-financing is sweeping across the world. Focusing on those who are poor and often powerless, MEDs seek to empower and bridge the harsh inequalities in the world today.
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[1] Micro-financing is a subset of MED focusing on the economic side of development. MED has a broader focus on community development including health and education through complementary programs.
1 comment:
Micro financing is such a great way of bridging inequalities and offering hope. Involving a whole group of people would seem to be risky but the benefits are amazing. It's challenging to think of different applications of the same concept in situations of different kinds of need...
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