We understood early on that microcredit and ICT have a great synergy. The Village Phone Programme, which has been a tremendous success, is a pertinent example in this regard, says Prof. Muhammad Yunus in an interview with Manish Kumar of OneWorld South Asia.
The year 2005 is being celebrated by the UN as the International Year of Micro-credit, with an aim to build inclusive financial sectors to achieve the Millennium Development Goals. What is its significance?
Over the past three decades we have been able to demonstrate that the provision of microcredit small collateral free loans to the poorest of the poor is a powerful intervention for the reduction of poverty.
We have had tremendous success in Bangladesh with Grameen Bank, which has provided nearly US$ 4.8 billion to more than 4.5 million borrowers, 96 per cent of whom are women. Currently Grameen Bank lends out nearly half a billion US dollars per year. Its repayment rate is 99 per cent. It is financially self-reliant. It does not take any loan or grant from any source. All its funds come from the deposits it collects from the borrowers and non-borrowers and it routinely makes profit.
Grameen Banks experience has shown that poor people, who have been systematically excluded in the past by the conventional banks, are credit worthy, and in most cases, more credit worthy than the rich. I have been arguing that credit should be a human right, because microcredit helps to ensure all other human rights.
The United Nations declaring 2005 as the International Year of Microcredit lends a global impulse to our work. It gives recognition to microcredit as an important tool to achieve the Millennium Development Goal of halving poverty by 2015.
I am totally convinced from my experience of working with poor people that they can find a way out of poverty if we extend to them similar opportunities. In the Year of Microcredit, we have the opportunity to muster our resources and determination to make a historical breakthrough in ending global poverty.
Grameen Bank has covered a long journey in the history of Bangladesh. How would you describe all those years as far as gender and rural livelihoods issues in Bangladesh are concerned?
A large number of impact studies have been made on the Grameen Bank from different perspectives. They all came up with findings showing significant impact on its members across a wide range of economic and social indicators, including increased income, improved nutrition, better food intake, better consumption on clothing, better housing, lower child mortality, lower birth rate, higher adoption of family-planning practices, better healthcare and better access to education for the children.
How much importance do you associate to an enabling environment like favourable macro economic policies, infrastructure facilities etc., in the success of microcredit programmes?
These issues are very important. We need supportive policies, particularly regulatory and legal framework in order for microcredit to succeed. Absence of a legal framework for microcredit programmes is a big constraint to the expansion of these programs.
We have been advocating for the creation of a special microcredit law, which will allow microcredit programmes to mobilise savings, and source money from capital markets, as these will ultimately allow them to become independent of donor funds. This law is soon to be passed in Bangladesh. Similar laws may be adopted in other countries.
How do you think that micro credit or programmes around microcredit would help achieve the larger goals of poverty alleviation, womens empowerment, etc.?
Independent studies show that microcredit results in many positive impacts on families that receive it. A World Bank study in 1998 reported that 5 per cent of Grameen Bank borrowers move out of poverty each year. A recent World Bank study by Shahid Khondkar (2003) shows that the micro-credit programmes operating in Bangladesh have had a greater impact on extreme poverty as compared to moderate poverty. Khondkar concludes that the results of this study strongly support the view that microcredit not only affects the welfare of participants and non-participants but also the aggregate welfare at village level.
According to Grameen Banks own internal survey, 55 per cent of its borrower families have crossed the poverty line by April 2005, judging this on the basis of ten indicators (size of loan, amount of savings, housing conditions, furniture in the house, provision of warm clothing, education of the children, etc.) set by Grameen Bank to track the impact of its programme on the poor families that it serves. To prepare the next generation to stay out of poverty, Grameen Bank encourages the children of Grameen families to enrol, stay and do well in school. The Bank offers scholarships to the top students of each branch and also offers student loans to those who pursue professional studies.
In terms of the empowerment of women, studies have shown that women who receive microcredit are empowered in a number of ways. These include increased mobility, access to networks outside traditional kinship networks, greater participation in household decision making, particularly economic decision making and greater participation in social, political and family activities.
Increased political participation by women is of particular consequence as Grameen system makes the borrowers familiar with electral processes. They go through an annual process of electing group chairpersons and secretaries, centre-chiefs and deputy centre-chiefs and also elect board members for running the Grameen Bank every three years.
Today, female members of the Grameen Bank run for public offices. In the 2003 local government elections; 7,442 Grameen members contested on seats reserved for women, and 3,059 members got elected. In 1997, this number was as low as 1,753.
How can ICT enabled microcredit programmes further enhance the achievement of the goals of poverty alleviation?
The accounting and information management procedures of the Grameen Bank have been computerised in 1,242 out of 1,417 branches. If every borrower pays according to the repayment schedule, the staff has nothing to write on the document except for their signature. Only the deviations are recorded. Paper work that remains to be done at the village level is to enter figures in the borrowers passbooks. This has freed the branch staff to devote more time to the borrowers rather than spend it on paper work.
How important is the growth in rural GDP in relation to the growth in national GDP?
In Bangladesh, rural GDP accounts for one-third of national GDP, so growth in rural GDP is essential for growth in the overall GDP. Bangladesh is an agrarian economy, and a vast majority of its population, and particularly the poorest, is dependent on the rural economy.
I have always argued that the index of development is the progress that is made at the level of the bottom 50 per cent of the population. In that context, growth in rural GDP is essential for the overall development of Bangladesh.
The rural poor are faced with low-productivity in agriculture coupled with the degradation of natural resources and the onslaught of natural disasters and hence are rendered more vulnerable. In such a situation, how can the share of rural GDP in national GDP be increased?
An enabling rural environment has to be created. One problem is the flight of resources from the rural areas to urban areas. While other national banks use savings deposited in the rural areas to finance large projects in urban areas, the savings that Grameen Bank mobilises, supports economic activities in rural areas only. Locating smaller enterprises, business and industries in rural areas which generate employment and self employment is also essential for stemming rural-urban migration.
After being in the microcredit domain for more than 20 years, what made you enter the ICT for development sector?
We understood early on that microcredit and ICT have a great synergy. The Village Phone Programme, which has been a tremendous success, is a pertinent example in this regard.
Loans from the Grameen Bank have helped fund mobile phones and telecommunication services for nearly half of the villages of Bangladesh where such services never existed before. The Telephone-ladies of the Village Phone Programme run a very profitable business by selling these phone services to other villagers. These women play an important role in the telecommunication sector of the country, and also in generating revenue for the Grameen Phone; the largest telephone company in the country. Telephone ladies use 16 per cent of the total air-time of the company, while their total strength amounts to only 4 per cent of the total number of telephone subscribers.
How can ICTs, in your opinion, help in securing sustainable rural livelihoods?
Technology is multidimensional and it can never be a standalone element. Lets take the example of technology in health. By using the telephone, doctors can advise patients living in remote locations. Facilities like the Internet and video conferencing can also be used for consultations between doctor-patients or between doctors themselves. Similarly, technology has an important role to play in the field of microcredit, education, and economic empowerment.
IT can play an immediate role in bringing an end to poverty in three main ways:
Integrating the poor in the process of globalization by expanding their market reach through e-commerce, eliminating the middle-men in their business and creating international job opportunities through out-sourcing;
Ensuring easy access to education, knowledge, and skill building facilities;
Creating a model for providing on-demand health services.
Finally, how can international forums like the World Summit on Information Society contribute to the international year of microcredit?
The World Summit on the Information Society and other international forums can help in the creation of an International Centre for Information Technology to Eliminate Global Poverty.
This Centre can design appropriate tools and strategies for reaching even the most marginalised communities and mpowering them through the benefits of IT.
This Centre will do the following:
The Centre would become a brain-trust and catalyst for promoting infrastructure projects related to the development of information and communication systems for pro poor delivery of services health, education etc. anywhere in the world.
It will identify the interfaces between the informational needs of the poor (in terms of what drives their productivity at work) and IT capabilities, and then proactively create the application systems that might be (are) needed.
As voice-activated and mobile computing platforms hold great promise for the often unschooled and often mobile poor who live in isolated regions, the Centre would sponsor voice based applications to target such communities.
The Centre would conduct situation analyses of how the delivery of essential health care services to the poor can be improved through network-enabled IT facilities and mobile computing, and would sponsor application-development in this area.
The Centre would also be responsible for responding to the imperatives of IT training and skill formation among the youth with limited economic resources so that they can be integrated well with the mainstream economy.
Through investments in research and development (R & D), the Centre will seek to supply IT-solutions that improve the poors productivity, survivability, prevention and cure of diseases, nutritional statusthus ending poverty, hunger and malnutrition around the world.
It will facilitate poor womens access to IT-enabled legal help in order to protect their legal rights.
Document, monitor and publicise the examples of successful ICT for development initiatives from around the world.
Create sub-networks on the basis of geographic areas (national or regional), on the basis of causes and correlates of poverty (agriculture, product marketing, health, education, legal, women, children, destitute, indigenous people, etc.) and on the basis of the type of participants (individuals, civil organisations, governments, and businesses) etc.
Create a database of skills, knowledge and technologies for governments, international institutions, civil society organizations and NGOs working in poverty elimination programmes. Undertake research and action-based research to develop IT facilities, ideas and modules.
Enable the poor and the indigenous people to play an active role in the decision making process of their communities. Also, assist the promotion and preservation of the art and culture of the indigenous and the poor people.
About Muhammad Yunus: He is the founder of Grameen Bank, Bangladesh.