Survival tips for the West from Third World experiences
Grameen Bank, whose claim to fame lies in micro financing rural households in third world countries, is dishing out loans on the streets of Washington DC. That is almost as strange as Iceland, once categorized as a first world country, applying for World Bank (WB) and International Monetary Fund (IMF) loans.
It is assumed only developing countries do that. These strange things are happening in the wake of a global recession that financial pundits say will get worse before it gets better.
Developing countries have learned the hard way that free market economics seems to only work for the few. The majority have had to find other ways of making ends meet. In this round of crisis where the privileged few find themselves staring bankruptcy in the face, developing countries may be in a position to give them a little advice.
In some kind of role reversal, one can almost hear them saying “Watch out for Bretton Woods institutions which have a habit of recycling failed policies and imposing tough conditions on repayments that take up most of your budget while charging interest on the interest.” Indeed this has been the experience of many a debt ridden developing country.
It is said that the current global financial crisis was caused by the Wall Street boys club. Testosterone driven, they got out of hand with risk taking and bad investments. The Third World, which has never really been a part of that racket, nevertheless feels the pinch of fall out. It may as well offer the West an idea or two.
For more than three decades, Grameen Bank has been pioneering programs to alleviate poverty. The bank began as an action-research project in 1976 and transformed into a bank in 1983, providing microcredit and related financial services targeting the rural poor in Bangladesh.
Ninety-seven percent of the borrowers were village women, and they became shareholders of the bank. Because Grameen Bank was constituted as a “for-profit” organization owned by the poor, it became the first model of a kind of “social enterprise”, more specifically a “social business ”, a term coined by Professor Muhammad Yunus (its founder) in his book Creating a World Without Poverty.
Grameen Bank and some of the more prominent Bangladeshi non-governmental organizations (NGOs), all of whom sought to combat poverty, were originally positioned at two extreme ends of a large spectrum when they began their operations. Grameen Bank was focused exclusively on microcredit for poverty alleviation in a ‘business-like’ way; it believed empowerment of the poor, particularly of women, was only feasible through a cost-effective, financially self-reliant mechanism.
As Grameen microcredit expanded in the 1980s, it became clear that while microcredit was a prerequisite for poverty alleviation, it was more effective when the social development needs of women and their families were met at the same time. It also became apparent that, to ensure sustainable growth and development, Grameen Bank borrowers needed access to better health, better housing, better schooling, better nutrition, and greater social participation.
On the streets of Washington DC, away from Wall Street ‘testosterone boys’, Grameen is working mainly with women who have opened up small businesses and sharing lessons learned in Bangladesh in a more socially congenial manner. Not surprisingly, their businesses are growing amidst the worst recession America has seen in a long time. Their story may serve as a gift from Third World countries to the West.
Studies conducted by the African Development Bank (ADB) suggest that financial remittances from family members living and working in foreign countries have made significant contributions to maintaining non income rural Third World families. More to the point they offer examples of how banking and social welfare can work hand in hand for people who are not formally employed and are being supported by families.
Morocco has one of the highest levels of migrant remittances in the world and an efficient banking system with good national coverage. Senegal, a West African country characterized by longstanding migratory flows, a highly developed trade network, has a very high growth rate for informal money transfers. It represents a significant Diaspora presence in several countries. The banking sector qualifies Senegal as an emerging market.
Mali, Senegal’s neighbor, is landlocked and poorer. But its Diaspora is more concentrated and migration is mostly of rural origin. Informal transfer systems are highly developed and well organized. The banking sector qualifies this market as slightly competitive. The Comoros, a high-migration Indian Ocean country, has an economy which is heavily supported by migrant remittances.
This option out of the bankruptcy void requires that Westerners put aside individualistic ways in favor of more communal social arrangements. It also requires that they play fair and tone down exploitative tendencies. Would this be asking for too much from people who have been used to having it all?
