Mohammad Yunus, banker to the poor and Chief Advisor of Interim Govt in Bangladesh

Oinam Nabakishore Singh *

Recently, after the ouster of Prime Minister of Bangladesh, Sheikh Hasina, on the 5th August, 2024 by the movement spearheaded by students, the name of Mohammad Yunus was in the news headlines in India and abroad. He was chosen by the leaders of the protesting students to head the interim Government in Bangladesh.

Perhaps, everybody in Bangladesh except probably some supporters of the Awami League, the political party of Sheikh Hasina, appears to have endorsed the proposal to install Mr. Yunus as the head of the interim Government. It is a testament of the faith reposed by the people of Bangladesh in the capability, integrity and leadership of Mr. Yunus at the hour of crisis faced by the people there.

Mohammad Yunus is better known as the banker to the poor worldwide. He is an economist by profession having studied Economics in Bangladesh and the United States of America. While he was teaching Economics at Chittagong University in Bangladesh, he witnessed famine in 1974 in that country resulting in hunger and death of many people around the university campus.

He was shocked by such tragedies. He felt that the theories of Economics he taught in classrooms were of little use to the poor people living in villages next to the university campus. He visited villages to interact with poor women engaged in making bamboo stools and enquired about their source of funding to buy bamboo required as raw materials.

It was informed that local money lenders, called loan sharks for charging exorbitant interest, were the source of fund. In orer to free them from the clutches of loan sharks, he asked the women to find out other women in the area, who need loan for their trade and form a group.

After interaction and formation of the group, Mr. Yunus started to give small amount of loan, now called microcredit, to the individual members at interest rates lower than that charged by the local money lenders by using his own money.

Borrowers were happy with the simplicity of procedure in obtaining loan and they repaid the loan regularly. With expansion of lending in many villages in Bangladesh led to establishment of Grameen Bank by Professor Mohammad Yunus in 1983.

This author had a chance to study micro credit or micro finance while studying Master in Development Management at Asian Institute of Management at Manila in 2001-02. By that time, the scheme of microcredit had become popular across the world, and have been used to alleviate poverty.

It may be worthwhile to note some major differences between the banking services of commercial banks and micro credit institutions in their approach to lending and process of sanctioning loan. Commercial banks in all parts of the world are located at towns and cities, where they see opportunities of deposits from business and individuals, and extending credit to creditworthy individuals and business with the sole objective of earning profit.

Main driver before opening a new branch of bank is prospects of business for the bank. Providing banking service to the residents around the branch is secondary for a commercial bank. However, public sector banks like State Bank of India or any such bank do open branches on account of political pressure. On the other hand, micro credit institutions are located right at the doorsteps of borrowers, who also become depositors.

Services of banking under micro credit is rendered by a visiting staff at the home of borrowers. Such staff used to visit the homes of borrowers in Bangladesh on bicycles to disburse loan or collect repayments. Meeting of the group of women themselves or with bank staff would discuss business plans of the prospective borrowers. It is made clear that credit is being extended for the micro business to be started by the borrower.

Since all group members cannot avail loans at the same time, it was also made known that repayment by first borrowers would enable future loans to other members of the group who are yet to borrow. As such, a group pressure is built-in, where other members of the group became vigilant about the use of loan by earlier borrowers. It is also agreed that there would be zero tolerance about default in repayment.

Sometimes, other members of the group repay loans on behalf of defaulting borrowers. It is claimed that repayment of Grameen Bank is nearly 100 percent. Another characteristic of microcredit scheme is loans are given without any collateral unlike loans from commercial banks.

In fact, poor women or men are mostly without any tangible assets to be offered as collateral for the loan. Further, paperwork and documentation seen in commercial banks are not required under microcredit scheme. Mohammad Yunus would proudly say that services of lawyers are not required in Grameen Bank.

Up to June 2024, the cumulative amount of loan disbursement by Grameen Bank, since inception, stood at US$ 38,654.37 million (BDT 3,127,339.75 million) to 10.61 million borrower members, 97% of whom are female members. Following an exceptional banking practice, Grameen Bank has ensured a lucrative recovery rate of 96.29% (as of June 2024) which is comparatively higher than any other banking systems (source: https://grameenbank.org.bd/about/introduction).

In recognition of the services rendered by Grameen bank especially in poverty reduction in Bangladesh and other poor countries, which adopted micro credit model of banking services to the poor across many developing countries in the world, Mohammad Yunus and Grameen Bank were jointly honored with Nobel Prize for Peace in 2006.

Besides microcredit, Grameen Bank initially extended loan and grants for education of the children of the borrowers, which enabled children of poor families to pursue education and bring about changes in the society. Credit for mobile phone were given to women entrepreneurs in the villages, where little telecommunication facility was available, so that market information about crops or fish would be exchanged over long distances resulting in better price for the produce of farmers.

A large number of Bangladesh migrants are working as skilled and unskilled labour in many countries in the Middle East, Singapore and other countries. Service provided by women phone service providers enable many to keep in touch with their loved ones abroad. In fact, the story of Grameen Bank is not just about credit to the poor women; rather, it also helped in transformation of the society especially by empowering poor women in villages.

Microfinance model of Grameen Bank has been adopted in all States of India. In Manipur too, there are several microfinance institutions providing small loans to many people mostly in villages. Some of them have qualified to be Non-Banking Financial Company (NBFC), an entity regulated by Reserve Bank of India. National Bank for Agriculture and Development(NABARD) has been extending loan through self-help groups of women to start business by members.

North East Financial Development Corporation (NEDFI), a financial institution under the Ministry of North East Development for extending business loan in the North East, has been at the forefront of extending credit to microfinance institutions in Manipur.

Bandhan Bank, which started as a microfinance institution initially in Kolkata in 2001, and later upgraded to NBFC in 2006, is now a bank licensed by Reserve Bank of India in 2015. This author opened the first branch of Bandhan Bank in Manipur. It has branches in several towns in Manipur for extending credit to poor women.

Unfortunately, the movement of micro-credit in Manipur has been severely impacted by the lockdown due to Covid-19 in 2020-22, and ongoing conflict since May 3, 2023 in Manipur. Repayment and recycling of credit have been hit hard. It may be noted that microcredit institutions are filling a large gap in financial services, which would remain unfulfilled by the commercial banks in many years to come.

With Mohammad Yunus at the helm in Bangladesh, it is expected that that country would be able to navigate the difficult period of protests and upheavals. He himself visited Hindu temples there to reassure the minority Hindus that the Government would do everything to ensure their safety in Bangladesh.

It is heartening to note that Bangladesh military did not usurp power in Bangladesh as it happened in the past and in Pakistan. Rather, it persuaded, Sheikh Hasina to step down from the office of Prime Minister.

A transition to an elected Government in Bangladesh is the final goal of the interim Government headed by Mohammad Yunus. People of Bangladesh have reposed their full faith in the Nobel laureate to bring the country out of the mess left behind by Sheikh Hasina.

One glaring lesson for Manipur is that leadership matters to navigate in turbulent waters of the State. It is hoped and wished the leadership in Manipur and India do enough to bring the State back to peace and normalcy.