“Give a man a fish, feed him for a day. Teach a man to fish, feed him for a lifetime.”
Aid will not save the world. While it is useful as a short-term response to humanitarian crises (think Haiti), over the long term all it does is create dependency and provides further support to corrupt regimes. Here at Our World we do not concern ourselves with short-term fixes, instead the focus is on the long-term improvement of ourselves and the world we live in. That is why I do not believe in Aid beyond the short-term response. In order to change the world we need a different approach. Thankfully, people throughout the world are already working on this so our job is easy. Micro-finance is changing the very world we live in, it is time for us to support it and make it the number one method of alleviating poverty throughout the world.
The Problem with Aid
Aid does nothing to change the society it targets. At best, it creates a society dependent on the provisions of the outside world at the expense of initiatives designed to empower societies to care for themselves. This article is not intended to attack those unfortunate enough to be struggling for survival in the third world. Their situation is not of their making. This article is targeted towards those people in the western world who use Aid as a means of self-promotion. The various concerts and appeals for donations may make you feel good, and may bring massive attention to the celebrity promoting them, but in the long-term they do nothing to change the plight of the world’s poorest citizens. Aid is a colonial construct, designed to continue the subjugation of indigenous populations throughout the world. It fails to recognise the right of societies to exercise control over the land, resources and people and it fails to provide societies with the opportunities to make their own decisions.
Let’s be clear – I am not arguing that all financial assistance to the third-world should be stopped. The opposite is true – we need to massively increase our financial assistance to the third-world. However, what is needed is an approach which allows local communities to decide what resources and skills they need in order to achieve sustainable economic growth. Aid does not provide such a pathway, micro-finance does.
Empowerment is Key
I have done a lot of work in the finance field – especially around areas of developmental finance and I am highly attuned to the issues involved in this area, I draw on an example from New Zealand history to illustrate the importance of empowerment.
In early 20th century New Zealand, the Government operated two systems to develop the land resource. The European Settlers were provided loans to develop their land into productive farm land. Control and management of the land was left in the hands of the Europeans and these farms flourished. The indigenous population – Maori – my ancestors, were not afforded the same freedom. Maori were seen as a poor race needing to be protected by the Government. Loans were still provided to Maori, but control over the land was exercised by the Government. While Europeans were able to run their farms and benefit from their development, Maori were locked out of our land, and the Government sought the benefit from the development of the land.
There was one problem common to both societies – the under-developed nature of the land in New Zealand. However, two approaches were developed – one allowed for the individual to control and manage the land for his own economic benefit, the other approach provided for government control and management of the land on behalf of the owners – owners who often only got the land returned to them 50 years later, riddled, in most cases, with massive debts. It should come as no surprise that the society which benefited most from the Government assistance was the one empowered to make their own decisions.
The World of Micro-finance
Empowering people is at the core of micro-finance. It is not about imposing a western construct onto third-world societies but asking those societies what they need and working with them to achieve it. This is achieved by providing them with the tools, knowledge, and capital to develop businesses, grow the local economy and start taking charge of their own lives. This is what Micro-finance is all about.
The Grameen Bank
One of the most successful micro-finance operations is the Grameen Bank in Bangladesh. Established by Muhammad Yunus in 1983, the Grameen Bank focuses on providing finance to poor, mainly woman, communities in Bangladesh. The Grameen Bank lends approximately US$500 million each year to around 3.5 million people. It is the prime example of an organisation working with some of the poorest people in society and allowing them to make their own decisions, to take charge of their own lives, and to work towards a more prosperous future for them and their family. The story of the creation of the Grameen Bank is inspiring, and I make no apologies for the length of the following quotation. Courtesy of Stephen Covey (The 8th Habit), here is Muhammad Yunus’ story:
It all started twenty-five years ago. I was teaching economics at a university in Bangladesh. The country was in the middle of a famine. I felt terrible. Here I was, teaching the elegant theories of economics in the classroom with all the enthusiasm of a brand-new Ph.D. From the United States. But I would walk out of the classroom and see skeletons all around me, people waiting to die.
I felt that whatever I had learned, whatever I was teaching, was all make-believe stories, with no meaning for people’s lives. So I started trying to find out how people lived in the village next door to the university campus. I wanted to find out whether there was anything I could do as a human being to delay or stop the death, even for one single person. I abandoned the bird’s-eye view that lets you see everything from above, from the sky. I assumed a worm’s-eye view, trying to find whatever comes right in front of you – smell it, touch it, see if you can do something about it.
One particular incident took me in a new direction. I met a woman who was making bamboo stools. After a long discussion, I found out that she made only two U.S. pennies each day. I couldn’t believe anybody could work so hard and make such beautiful bamboo stools yet make such a tiny amount of profit. She explained to me that because she didn’t have the money to buy the bamboo to make the stools, she had to borrow from the trader – and the trader imposed the condition that she had to sell the product to him alone, at a price that he decided.
And that explains the two pennies – she was virtually in bonded labour to this person. And how much did the bamboo cost? She said. “Oh, about twenty cents. For a very good one twenty-five cents.” I though, “People suffer for twenty cents and there is nothing anyone can do about it?” I debated whether I should giver her twenty cents, but then I came up with another idea – let me make a list of people who needed that kind of money. I took a student of mine and we went around the village for several days and came up with a list of forty-two such people. When I added up the total amount they needed, I got the biggest shock of my life. It added up to twenty-seven dollars! I felt ashamed of myself for being part of a society which could not provide even twenty-seven dollars for forty-two hard-working, skilled human beings.
To escape that shame, I took the money out of my pocket and gave it to my student, I said, “You take this money and give it to those forty-two people that we met and tell them this is a loan, but they can pay me back whenever they are able to. In the meantime, they can sell their products wherever they can get a good price.” After receiving the money, they were very excited. And seeing that excitement made me think, “What do I do now?” I thought of the bank branch which was located on the campus of the university, and I went to the manager and suggested that he lend money to the poor people that I had met in the village. He fell from the sky! He said, “You are crazy. It’s impossible. How can we lend money to poor people? They are not creditworthy.” I pleaded with him and said, “At least give it a try, find out – it’s only a small amount of money.” He said, “No. Our rules don’t permit it. They cannot offer collateral, and such a tiny amount is not worth lending.” He suggested that I see the high officials in the banking hierarchy in Bangladesh.
I took his advice and went to the people who matter in the banking sector. Everyone told me the same thing. Finally, after several days of running around I offered myself as a guarantor. “I’ll guarantee the loan, I’ll sign whatever they want me to sign, and they can give me the money and I’ll give it to the people that I want to.”
So that was the beginning. They warned me repeatedly that the poor people who receive the money will never pay it back. I said, “I’ll take a chance.” And the surprising thing was they repaid me every penny. I got very excited and came to the manager and said, “Look, they pay back, there’s no problem.” But he said, “Oh, no, they’re just fooling you. Soon they will take more money and never pay you back.” So I gave them more money and they paid me back. I told this to him, but he said, “Well, maybe you can do it in one village, but if you do it in two villages it won’t work.” And I hurriedly did it in two villages – and it worked.
So it became a kind of struggle between me and the bank manager and his colleagues in the highest positions. They kept saying that a larger number, five villages probably, will show it. So I did it in five villages and it only showed that everybody paid back. Still, they didn’t give up. They said, “Ten villages. Fifty villages. One hundred villages.” And so it became a kind of contest between them and me. I came up with the results they could not deny because it was their money I was giving, but they would not accept it because they are trained to believe that poor people are unreliable. Luckily, I was not trained that way so I could believe whatever I was seeing, as it revealed itself. But the bankers’ minds, their eyes were blinded by the knowledge they had.
Finally, I had the thought, Why am I trying to convince them? I am totally convinced that poor people can take money and pay it back. Why don’t we set up a separate bank? That excited me, and I wrote down the proposal and went to the government to get the permission to set up a bank. It took me two years to convince the government. On October 2nd 1983, we became a bank – a formal, independent bank. And what excitement for all of us, now that we had our own bank and we could expand as we wished. And expand we did.
Micro Finance Works
Micro-finance works. It is a community-based holistic approach to individual and societal development. The Grameen Bank seeks to empower individuals within Bangladesh to make a better life for themselves. This is the way forward. If you are reading One World then I know you have the ability to help people help themselves. Later this week I will write about my efforts to engage in micro-finance and encourage you to join me. I believe in the power of Micro-finance and its ability to change the lives of millions around the world. Will you join us and work towards making a real difference?