The Culture of Poverty
May 24th 2008 11:17
We in Australia live in such prosperity, there is so much money going around, even for some meaningless activities such as fishing the Marlin or golfing. I think most people would find it hard to believe the poverty in which such a large part of humanity still lives under today.
In Dr Mohammad Yunus autobiography, Banker to the Poor (1), the founder of the Grameen Bank of Bangladesh explains how the culture traps people in it.
In Bangladesh most people are poor. There are commercial banks but they do not lend to the poor, the reason being: (a) they don’t lend small amounts of money; and (b) the poor cannot provide collateral to guarantee their loans.
Because poor people cannot provide collateral they cannot borrow, and so cannot invest in profitable small business enterprises of their own creation and get out of the vicious circle of poverty.
It’s not that the poor lack entrepreneurial spirit – they actually have lots of practical business ideas – it’s just that commercial banks would not lend to them.
On the other hand, as a side note, it’s ridiculous what the upper classes of Bangladesh do with regards to loaning money. They just borrow a lot of it, because they can provide collateral, but they never mean to repay it. This is because of a quirk in the political system in which all parties promise that, upon being elected, they will pardon all citizens’ debt, which they actually do repeatedly.
The other aspect of the culture of poverty is to think that the poor are so because they either are lazy or stupid. The fact is that the poor know exactly how to get out of their vicious circle, if just someone lends them some money.
Often the poor of Bangladesh fall victim of the private lender which is also a trader in some product such as baskets made of fibre, and who charges them 20 per cent per week and sometimes per day on loaned money. Having to pay such interest, the poor fall prey of such lenders, never to make enough money and become independent.
Dr Mohammad Yunus started lending to the poor when he realised their enormous hard working and practical nature. From there the Grameen bank was born and has been replicated since in many parts of the world with great success. Dr Yunus received the Nobel Prize for Peace 2006 between many other recognitions.
Millions of Grameen borrowers have crossed the line of poverty and increased their wellbeing manyfold. It’s particularly interesting that Grameen lends only to those who are utmost poor, because obviously, the desperation of their situation gives them motivation and courage.
Grameen also only lends to groups of four or five borrowers, being each member of the group responsible for the punctual repayments of the others. Peer pressure substitutes for collateral. Grameen’s repayment rate is 98 per cent, a staggering figure by any means.
The Grameen experience is the proof that once broken the circle of poverty, nothing can stop the poor getting into a much better economic situation.
--------------------
(1) Yunus, Mohammad; Banker to the Poor: the autobiography of Muhammad Yunus, founder of the Grameen Bank, Aurun Press, London 1998, ISBN: 1854105779.
In Dr Mohammad Yunus autobiography, Banker to the Poor (1), the founder of the Grameen Bank of Bangladesh explains how the culture traps people in it.
In Bangladesh most people are poor. There are commercial banks but they do not lend to the poor, the reason being: (a) they don’t lend small amounts of money; and (b) the poor cannot provide collateral to guarantee their loans.
Because poor people cannot provide collateral they cannot borrow, and so cannot invest in profitable small business enterprises of their own creation and get out of the vicious circle of poverty.
It’s not that the poor lack entrepreneurial spirit – they actually have lots of practical business ideas – it’s just that commercial banks would not lend to them.
On the other hand, as a side note, it’s ridiculous what the upper classes of Bangladesh do with regards to loaning money. They just borrow a lot of it, because they can provide collateral, but they never mean to repay it. This is because of a quirk in the political system in which all parties promise that, upon being elected, they will pardon all citizens’ debt, which they actually do repeatedly.
The other aspect of the culture of poverty is to think that the poor are so because they either are lazy or stupid. The fact is that the poor know exactly how to get out of their vicious circle, if just someone lends them some money.
Often the poor of Bangladesh fall victim of the private lender which is also a trader in some product such as baskets made of fibre, and who charges them 20 per cent per week and sometimes per day on loaned money. Having to pay such interest, the poor fall prey of such lenders, never to make enough money and become independent.
Dr Mohammad Yunus started lending to the poor when he realised their enormous hard working and practical nature. From there the Grameen bank was born and has been replicated since in many parts of the world with great success. Dr Yunus received the Nobel Prize for Peace 2006 between many other recognitions.
Millions of Grameen borrowers have crossed the line of poverty and increased their wellbeing manyfold. It’s particularly interesting that Grameen lends only to those who are utmost poor, because obviously, the desperation of their situation gives them motivation and courage.
Grameen also only lends to groups of four or five borrowers, being each member of the group responsible for the punctual repayments of the others. Peer pressure substitutes for collateral. Grameen’s repayment rate is 98 per cent, a staggering figure by any means.
The Grameen experience is the proof that once broken the circle of poverty, nothing can stop the poor getting into a much better economic situation.
--------------------
(1) Yunus, Mohammad; Banker to the Poor: the autobiography of Muhammad Yunus, founder of the Grameen Bank, Aurun Press, London 1998, ISBN: 1854105779.
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