Hereford Civic Society |
30 May 2009
How can Herefordians respond to the credit crunch? What can we do to protect and enhance our city?
Oddly enough, part of the answer may lie not in Broad Street but in Bangladesh. Odder still, the hero of the story is a bank—and a solvent one at that.
The Grameen Bank was founded in 1976 in Bangladesh by Dr Muhammad Yunus. Two years earlier he had been moved to lend $27 personally to a group of 42 families who had been caught in the appalling 1974 famine. It was “working capital”, money used to help them make items for sale and so start anew.
Just think about it: $27, 42 families, and a loan not a gift. Yunus had trained in economics in the USA, and noticed how the families both collaborated and encouraged each other to pay back the loan.
By creating a future repayment obligation on the families, the loan strengthened social ties between them, and spurred them on. There were no loan agreements, or loan guarantees. Who has a lawyer, who has collateral, in the midst of famine?
From this seed was born the Grameen Bank’s idea of “solidarity lending”, part of what is now known as “microcredit” (the average Grameen loan today is $250).
Here’s how it works: each borrower must belong to a five-person group in order to get a loan, but only the borrower is on the hook to repay it. So why have the group at all? The answer is that Grameen will not lend to another member of the group until the original loan has been repaid.
This means that the group has a strong incentive to make sure its members behave responsibly. The repayment rate is thus 98%—extraordinarily high for non-credit-worthy borrowers in developing countries. And the whole system operates on trust. There are no written contracts and no guarantees.
At the same time the programme has a strong moral and behavioural component. Borrowers are encouraged to abide by the 16 Decisions, a series of workaday but vital maxims designed to reinforce good habits.
The 16 Decisions emphasize the values of discipline, unity, courage and hard work. But they also include detailed exhortations to educate children, grow vegetables all year round, dig pit latrines and drink only from tube wells—or at a pinch, boiled water.
The whole thing could hardly be further removed from the 125% loans, corporate jollies and inflated pensions of the British banks.
The Grameen bank is now a huge enterprise, with more than six million clients in 27 countries, and nearly a billion dollars in active loans. It is over 90% owned by its borrowers, and over 90% of those borrowers are women. Talk about social empowerment.
So what lessons might this have for Hereford City? I would suggest that it is a superb model of social action. We could form a city clean-up group—making sure it's not too large to be unwieldy. Every member has his or her own pet project: litter, graffiti, signs … you name it. We tackle one, then another. But only in turn, so everyone who participates gets their own area cleaned up.
Then we set up another group. And another, and another. Pretty soon we have a clean city. That means more tourism. Then we set up a food co-op, and a broadband co-op, and off we go again…
