There can be no doubt as to the success of the scheme that Muhammad Yunus describes in this book. Going against the prevailing wisdom of the day – that the poor were not credit worthy – he set up Grameen Bank and helped created a new way of helping the disenfranchised, microfinance.
The book is a mixture of the author’s autobiography and that of the bank. While some of the former gives some insight into his motivations, and is not entirely uninteresting, it doesn’t sit entirely comfortably with the origins of the bank. The story of the latter is fascinating – from its origins in the villages next to the Yunus’s university department to its blossoming as a national lending institution with global contacts and influences. His description of overcoming the hurdles put in his way strikes a chord with anyone who has faced the post-colonial legacy of third world bureaucracy. While at times we are unsure how much progress is merely good luck, there is no doubt that Yunus’s determination & vision in creating Grameen is worthy of the Nobel prize he later achieved.
Grameen continues to be successful in Bangladesh and elsewhere, though some of the potential difficulties have become more evident over time. Microfinance has not proved to be a silver bullet for poverty. There are a couple of reasons for this. Firstly, not all people are have the entrepreneurial that many of the highlighted Grameen customers do. Many do, and perhaps that is good enough, but until these people create businesses that give jobs to others the wider community benefits are slow to accumulate. Although the repayment rates are remarkable, Yunus skips that inevitably many of these businesses will be unsuccessful or never grow beyond family crofting-type enterprises.
The second issue relates to the structure of lenders. Yunus has devoted a whole book to what the corporate structure for social enterprises should be (see our review here.) His conclusion that mutuality is the only good structure seems to have some strong support from events, particularly in India. As many microlenders have turned into commercial enterprises, they have all too often looked to maximise profits by pushing up interest rates and become the very loan sharks that Yunus created Grameen as an alternative too. It may be that some loan sharks saw an opportunity to rebrand too, presenting themselves in a more positive light. Either way, the lenders end up all too often suffering higher defaults or, even more damagingly, collecting the profits that should accumulate to the borrowers and prevent them pushing themselves out of poverty.
Unfortunately this has led to microfinance getting a bit of a bad name. Which is a shame, as Yunus has shown that micro-lending can lead to significant improvements in people’s lives. The book is a tale of a remarkable achievement, and we should hope his legacy lasts and can benefit many in the future.