Chapter 5 "The Poor Man's Banker" Part Two Chapter Four The Craftsman Making Bamboo Stools in Chopra Village (1)

In 1976, I started visiting some of the poorest families in Chopra to see if there was any way I could help them directly.The village is divided into three sections, inhabited by Muslims, Hindus and Buddhists.When I visit Buddhist quarters, I take my student Dipal Chandra Barua, who was born and raised in the area, with me.I often go with my colleague Professor HI Latifi, who knows most of the families there and has a natural knack for making the villagers feel at ease. One day, when Latifi and I went to Chopra village for a routine interview, we stopped in front of a low thatched hut with crumbling mud walls and a thatched roof riddled with holes.We made our way to the house, past a flock of foraging chickens and a vegetable patch.A woman crouched on the filthy floor of a porch, her knees clamped tightly to a half-made bamboo stool.She concentrated on her work, and her fingers moved quickly, weaving those stubborn bamboo strips.

Hearing Latifi's greeting, she hurriedly put down the bamboo utensils, stood up, and hurried into the room. "Don't be afraid," Latifi called to her, "we are not strangers. We teach at the university, we are neighbors. We just want to ask you a few questions." Latifi's polite attitude made her feel relieved, and she replied in a low voice: "There is no one at home." She meant that there was no man in the family.In Bangladesh, women are not supposed to speak to men who are not close relatives. Children run around the yard naked.Neighbors were watching us from their windows, wondering what we were doing.

In the area where Muslims live in Chopra Village, we often have to talk to women through bamboo walls or curtains.In effect, the practice of covering (purdah) keeps married Muslim women in constant isolation from the outside world.The Chittagong area has been strictly observing this custom. Born and raised in Chittagong, I speak the local dialect and always try to win the trust of Muslim women through chatting.Complimenting a mother about her child often comes naturally to the mother's comfort.So I picked up a naked child next to me, but he burst into tears and rushed towards his mother.She let him crawl into her arms.

"How many children do you have?" Latifi asked her. "Three." "This kid is good-looking," I said. The mother calmed down a little, and walked towards the door with the child in her arms.She was in her early twenties, thin, with dark skin and dark eyes.She was wearing a red sari, and her eyes showed the tiredness of a woman who works from morning to night every day. "What's your name?" I asked. "Sofiya Begum." "How old are you?" I asked. "21 years old." I didn't take out a pen and a small notebook to record, I was afraid that would frighten her.I only allow my students to take notes on return visits.

"Is this bamboo your own?" I then asked. "yes." "How did you get it?" "I bought it." "How much did this bamboo cost you?" "5 taka." At the time, that was equivalent to 22 cents. "Do you have 5 taka?" "No, I borrowed it from paikars." "Those Chinese? How did you decide with them?" "I have to sell the bamboo stool back to them every day as repayment." "How much do you sell for a stool?" "5 taka and 50 poysha." "Then you've earned 50 bosa?"

She nodded.That's only about two cents. "Can you borrow cash from a moneylender to buy your raw materials?" "Yes, but the moneylenders will demand a lot. Everyone who deals with them becomes poorer." "How much interest will the moneylender charge?" "It depends. Sometimes he wants 10 per cent a week, but I have a neighbor who pays 10 per cent a day." "And that's all the money you're making with these beautiful bamboo stools, 50 paisa, right?" "right." Sophia didn't want to waste any more time talking.I watched as she went to work again, her little tan hands weaving the bamboo branches they had done for years and years, her livelihood.She squatted barefoot on the hard mud.Her fingers were calloused, and her nails were black with sludge.

How will her children break out of the cycle of poverty that started with her? How will Sofia's children go to school when she barely earns enough to feed herself, let alone properly house and clothe her family? ? It was impossible to imagine that her little one would one day escape such a tragedy. Sophia Begum was only making two cents a day, which shocked me.In college courses, I have theoretically analyzed amounts of millions of dollars, but here, right in front of my eyes, the question of life and death is laid out in "cents."What went wrong?! How did my college courses not reflect the realities of Sofia's life? I'm angry, angry at myself, angry at the economics department, and the thousands of brilliant professors who Neither tried to bring up and fix the issue, and I was mad at them too.In my opinion, the existing economic system doomed Sophia's income to always be so low that she would never be able to save a dime, never be able to invest anything to expand her financial base.Her children are doomed to continue living in abject poverty, starving and barely subsisting, just like her and her parents.I've never heard of anyone suffering from a lack of 22 cents before, and it seems to me impossible and absurd.Shall I put my hand in my pocket at once and give Sophia the little money she needs as capital? It's so easy, so easy.And I resisted the urge.She wasn't asking for a handout.Besides, giving someone 22 cents isn't going to solve the problem in the long run.

Latifi and I drove back to my mountain home.We walked in the garden in the evening heat.I tried to see Sophia's problems from her own perspective.She suffers because it costs 5 taka to buy those bamboos and she doesn't have the cash needed to buy the raw material.As a result, she can only survive in a tight cycle of borrowing money from the merchant and selling things back to him.Her life is a form of conditioned labor, or simply put, slavery.The merchant calculated very carefully, and only paid Sophia just enough to buy raw materials and barely enough to survive.She couldn't break free from that relationship where she was exploited.To survive, she can only continue to work through the merchant.

In the Third World, usury has become so standardized and widespread that borrowers rarely realize what a coercive contract it is.Exploitation takes place under various guises.In the rural areas of Bangladesh, one maund (1 maund, about 37 kilograms, the weight unit used in India and some Middle Eastern countries) of rice with husks borrowed at the beginning of the farming season must be returned two maunds when harvested.When the land is pledged, it will be at the disposal of the creditor, and the creditor can keep the ownership of the land until the loan is fully paid off.In many cases, a formal document such as a bawnanama guarantees the rights of creditors.According to the document, the creditor usually refuses to accept partial repayment of the loan. After the stipulated repayment period, the creditor can "buy out" the land at a pre-agreed "price".Another form of collateral security was dadan, a contract that secured a loan from a merchant to purchase future crops at a pre-agreed below-market price.Sophia Begum made her bamboo stools under the constraints of a "dadan" contract with a moneylender.

In Bangladesh, sometimes borrowing is for a specific or temporary purpose (like marrying a daughter, bribing an official, fighting a lawsuit), but sometimes it is just to survive — to buy food, medicine, or an emergency.In this case, it is difficult for borrowers to get rid of the burden of borrowing.Often, borrowers have to borrow again to pay back previous borrowings, and end up stuck in the cycle of poverty like Sophia.In my opinion, Sophia's status as an indentured slave can only be changed if she finds 5 taka to buy her bamboo.A line of credit could get her that money.She can then sell her product on the free market, charging the full retail price directly to the consumer.She only needs 22 cents.

The next day I called Maimuna Begum, the university student who was collecting the profile for me, and I asked her to help me list people like Sophia in Chopra village who depend on moneylenders a list.Within a week, I had a list of 42 names with borrowings totaling 856 taka — just under $27. "My God, my God, all these families are suffering just because they don't have $27!" I exclaimed. We are saddened by the fact that Memna stood there and said nothing. My mind is not going to let this problem exist.I want to help these 42 able-bodied, hard-working people.Like a dog obsessed with a bone, I kept digging around this issue.People like Sophia are not poor because they are stupid or lazy. They work from morning to night, doing complex manual work.They are poor because the country's financial institutions cannot help them expand their economic base. Without any formal financial institutions to meet the loan needs of the poor, the loan market without formal institutions is taken over by local moneylenders.It is an effective delivery system, creating a torrent on the one-way street to poverty.But if I can lend that 27 dollars to those villagers of Chopra, they can sell their produce to anyone and get the highest return for their labor without being exploited by merchants and usurers up. It turned out that everything was so easy.I handed the $27 to Memna and told her: "Here, lend this money to the 42 villagers on the list. They can pay back the lender's money and sell their products for a good price." "When are they supposed to pay you back?" she asked. "Whenever they can afford it, when it's best for them to sell their product," I said, "they don't have to pay any interest, and I'm not a borrower." Memna went.The development of events puzzled her. Usually, I fall asleep within seconds of my head hitting the pillow, but that night I couldn't.Lying in bed, I am ashamed that I am a part of a society that cannot provide 42 skilled people with the measly $27 that would enable them to earn their own living.I know that what I'm doing is grossly inadequate, and it's keeping me from resting my head.If anyone else needs capital, it is almost impossible for them to track me down as the head of the economics department.What I do is an impulsive response to this particular event.Now, I need to create an institutional solution that these people can rely on, an institution that can lend money to those who have nothing.I decided to go to the manager of the local bank and ask his bank to lend money to the poor.Things seemed so simple and straightforward that I fell asleep. The next morning, I climbed into my white VW Beetle and headed to the local Janata Bank branch.Janata is a state-owned bank, one of the largest in the country.The Janata Bank branch at the university is just outside the campus gate on a street full of small shops, stalls and eateries where local villagers sell betel nuts, hot meals, notebooks, pens to students. Wait for all sorts of things.Those rickshaw pullers are all gathered here, waiting to pull the students from the dormitories to the classrooms.The bank branch is set up in a square single room with bars on the two front windows, walls painted dark green, and wooden tables and chairs in the room.The manager sitting in the back left of the room waved to me. "Sir, what can I do for you?" The clerk brought tea and biscuits.I explained the reason for my visit. "The last time I borrowed money from you was to raise funds for the tripartite sharing project in Chopra village. Now I have a new proposal, I would like to ask you to lend money to the poor in Chopra. The amount involved is very small, I have done that myself, lent 42 people $27. There will be many poor people who will need money to buy raw materials and necessities as start-up capital.” "What raw material?" The bank manager was puzzled, as if this was some kind of new game, and he was completely unfamiliar with the rules of the game.Out of general respect for a university official, he let me finish, but obviously didn't understand. "Well, some people make bamboo stools, and others weave floor mats or pull rickshaws. If they can borrow money from a bank at commercial rates, they can sell their products on the free market for a decent profit. Profits, so that they can live a better life. Now, they can only work like slaves, never able to escape being trampled underfoot by those wholesalers who loan them capital at high interest rates." "Yes, I know about the moneylenders (mahajons)," replied the manager. "So I'm here today, and I want to ask you to lend money to these villagers." The bank manager grinned and said, "I can't do it!" "Why?" I asked. "Hmm—" he stammered, not knowing where to begin to explain his series of objections. "Just one thing, the little money you're talking about these villagers needing to borrow isn't even going to cover the cost of all those loan paperwork they have to fill out. The bank doesn't waste time on such tiny amounts of." "Why not?" I said, "For poor people, this money is vital to their survival." "These people are illiterate," he replied, "and they can't even fill out our loan forms." "With 75% of the population in Bangladesh unable to read and write, asking to fill out forms is a ridiculous requirement." "Every bank in the country has this requirement." "Oh, that says something about our bank, right?" "Even when a person comes to the bank and wants to save money, we ask him or her to write down how much money they want to save." "why?" "What do you mean by 'why'?" "Oh, why can't a bank just take the money and issue a receipt that says 'how much money was received from so-and-so'? Why can't the bank do that? Why does it have to be the depositor? ?” "If there are no people who can read and write, how can the bank survive?" "Quite simply, the bank issues a receipt for the amount of cash received and that settles it." "But what if that person wants to withdraw money?" "I don't know... there must be an easy way. The borrower brings his or her deposit receipt and gives it to the cashier, and the cashier returns the money to him. As for what accounting system the bank uses , that's the bank's business." The manager shook his head, but he didn't seem to know where to start, so he didn't answer. "In my opinion, your banking system is designed to discriminate against the illiterate," I countered. The branch manager looked annoyed: "Professor, banking is not as easy as you think." "Maybe so, but I'm also sure banking isn't as complicated as you've made it out to be." "You see, the simple fact is that in any bank anywhere in the world, borrowers have to fill out forms." "Well," I said, bowing to the obvious, "if I can get some of my student volunteers to fill out forms for the villagers, it shouldn't be a problem." "But you don't understand that we just can't lend money to the poorest," said the branch manager. "Why not?" I tried to be polite.There was something surreal about our session.The branch manager smiled as if to say that he understood that I was joking with him.The whole meeting was hilarious and, indeed, ridiculous. "They have no collateral at all," said the branch manager, looking forward to ending our conversation with that. "Why do you need collateral when you can get your money back? Getting your money back is what you really want, right?" "Yes, we want to get our money back," the manager explained, "but at the same time we need collateral. That's our guarantee." "It doesn't make sense to me. People who are so poor that they work 12 hours a day. They need to sell things to earn money to buy food. They will definitely pay you back just to borrow another loan and live again One day! That's the best guarantee you can get - their lives!" The manager shook his head: "You're such an idealist, Professor. You live by the book theory." "But why do you need collateral when you can be sure that the money will be repaid?" "It's our bank's rules and regulations." “So only those with collateral collateral can borrow money?” "yes." "It's a stupid regulation. It means only rich people can borrow money." "The rules are not set by me, but by the bank." "Well, I think these regulations should be changed." "Anyway, we can't lend money here." "You don't want to borrow it?" "Yes, we only accept deposits from faculty, staff and universities." "But don't banks make money by lending money?" "Only the head office lends. We take deposits from the university and its employees here. Our loan to you for a tripartite farming project is an exception approved by our head office." "You mean, if I had come here and asked for a loan, you wouldn't have lent it to me?" "That's right." He laughed.Apparently, the manager hadn't had such a happy afternoon in a long time. "So, what we teach in class about banks lending money to borrowers is a lie?" "Well, to get a loan you have to go to the head office, but I don't know what they'll do." "Sounds like I need to go speak to some higher officials." "Yes. That's a good idea." As I finished my tea and was about to leave, the branch manager said, "I know you won't give up. But from what I know about the banking industry, I can tell you with certainty that your plan won't work at all." Two days later, I made an appointment with RA Howladar, Chittagong country manager of Janata Bank, and met him in his office.We repeated most of the conversation I had with the branch manager in Chopra, but Holladar did bring up the idea of ​​a guarantor, and if someone in the village would do a good deed to act as a guarantor on behalf of the borrower, the bank might consider approving one. A loan without collateral. I thought about it, and there are obvious advantages to the idea, but there still seem to be some insurmountable hurdles. "I can't do that," I explained to Holladar, "how can the guarantor be prevented from taking advantage of those guaranteed? Then he may become a tyrant, and may treat the lenders like slaves." There was a silence.From my discussions with bankers over the past few days, it has become clear to me that I am not fighting Janata, but the banking system as a whole. "Why can't I be surety?" I asked. "you?" "Yes, will you accept me as surety for all lenders?" The district manager smiled: "How much are you talking about?" To give myself room for error and expansion, I replied, "Maybe 10,000 taka ($300) total, no more than that." "Yeah." He fiddled with the form on the desk with his fingers.I could see behind him, a stack of files dusty in old binders.Along the walls are stacks of identical light blue binders, stacked up to the window height.The electric fan above his head played with the files, and on his desk, these forms were always fluttering, waiting for his decision. "Okay," he said, "I will say that we will accept you as surety for that amount, but not for more money." "That's a deal." We shake hands.One more thing popped into my head: "However, if one lender doesn't pay back, I'm not going to take on a defaulted payment." The district manager looked at me uneasily, wondering why I was so difficult to deal with. "As a guarantor, we can force you to pay." "What are you going to do?" "We can sue you through the legal process." "Well, that's exactly what I want." He looked at me as if he were looking at a madman.That's exactly what I want.I'm angry, I just want to cause some kind of panic in this unjust, outdated system.I want to be the stick in the axle that finally stops the damn machine.I'm a guarantor, maybe, but I'm not really a guarantor. "Professor Yunus, you know very well that we will never prosecute a university dean who personally guarantees a loan for a beggar. Whatever money we may recover from you will be offset by the negative publicity tradition , besides, such a mere fractional loan is not enough to pay the legal fees, not to mention the management fees we have to pay to recover." "Oh, you're a bank, of course you do your own profit-cost analysis. But if there's an arrears, I'll never pay." "You are making it difficult for me, Professor Yunus." "I'm sorry, but banks are creating hardship for many people - especially those who have nothing." "I'm trying to help, Professor." "I understand. I'm arguing with the bank's system, not with you." After some more rounds, Holladar concluded: "I will definitely recommend your loan application to the head office in Dhaka, we will wait to see what they say." "But I thought you, as the district manager, had the authority to decide?" "Yes, but this is too outrageous for me to approve. It has to be approved at the highest level." It took another six months of paperwork before the loan was officially approved.Finally, in December 1976, I succeeded in taking out a loan from Janata Bank and gave it to the poor in Chopra.Throughout 1977, I had to sign every loan application.Even when I was traveling in Europe or America, the bank would send me a telegram or write a letter for a signature and never deal with anyone in the village who actually borrowed money.I was the guarantor, and in the eyes of the bank officials, I was the only one who counted.They don't want to deal with poor people using their money, while I make sure that the actual lenders - the ones I call the "banking untouchables" - don't have to go to the bank and thus avoid scorn and humiliation harassment. That's how it all started.I don't intend to be a moneylender or lend money to anyone, what I really want to do is solve an immediate problem.Out of sheer disappointment, I question the principles of the bank's most basic mortgage guarantee.I don't know if I'm right or wrong, I don't know what I'm getting into.I am walking blind, learning as I go.My work has turned into a struggle to show the world that these so-called "financial untouchables" are actually reachable, even huggable.To my great surprise, it turned out that unsecured borrowers did better on their repayments than secured borrowers.Indeed, the repayment rate on our loans exceeds 98%.The poor know that this loan is their only chance to escape poverty.If they do not repay their loans on time, they will lose their only chance and fall back into poverty.