What Sustains Us Among the Naysayers

How can we lend money to poor people?

They are not creditworthy.

Our rules won't permit it.

They cannot offer collateral, and such a tiny amount is not worth lending.

These are just a few of the objections Muhammad Yunus faced as he tried to convince banks to lend money to poor folks who just needed a little capital - perhaps 20 cents to buy bamboo so they could continue crafting their bamboo stools. The first "loan" Yunu gave out was out of his own pocket to 42 people. Total cost: $27.

He went to banks to convince them to loan out money to these people on a regular basis. You saw the answers he got at the beginning of this story. They wouldn't lend money directly, so Yunu had sign off for the loans. "They warned me repeatedly that the poor people who receive the money will never pay it back."

When they did pay him back, the bank manager then warned, "Oh, no, they're just fooling you. Soon they will take more money and never pay you back."

"And so it became a kind of contest between them and me... I came up with results they could not deny because it was their money I was giving, but they would not accept it becauase they are trained to believe that poor people are not reliable."

"Finally I had the thought, Why am I trying to convince them? I am totally convinced that poor people can take money and pay it back. Why don't we set up a separate bank?" 

Grameen Bank has lent over $4.5B to date.

To lend $500 million annually required 3.7 million people, 96 percent of whom are women, to make a decision that they could and would take steps to change their lives and the lives of their families; 3.7 million people had to decide that they were capable of creating change; 3.7 million people survived the sleepness night to show up trembling but committed at the Grameen office the next morning. At the heart of this empowerment lies individual women who chose individually and in synergestic norm-producing groups to become self-reliant, independent entrepreneurs producing goods out of their own homes or neighborhoods or backyards to become economically viable and successful. They found their voices. - The 8th Habit, by Stephen Covey

I tell this story lifted from The 8th Habit for many reasons and you'll find your own. I had to shorten it considerably. Here's a bootstrapper's tip: Don't (necessarily) buy the book but go to your local bookstore, The 8th Habit is on the bestseller display and read pages 6-9 for yourself - it's worth it.

I should point out that Yunus through the traditional banks lent out money first to one village, then when that was paid back he expanded out to two villages and kept growing the number of villages he was lending money to in an organic fashion. Finally he had his ephipany that the bank weren't just naysayers but albatrosses as well. He really needed to change the entire system and the rules of engagement - so he created another system of lending. The banks weren't into creative destruction, but entrepreneurs are.

After his epiphany and the success of more than ten villages under his belt it took another two years for the Grameen Bank to be a reality. Radical new models don't happen overnight.

Part of the value of blogging about being an entrepreneur is getting my take about what it feels like and getting an inside-my-skin perspective. I have no idea what went through Yunus' mind in those early years where all was not certain but I can tell you about what goes through mine. And I'll be doing more of that. In the meantime, I wanted to share this story because the model I have in mind (start-up doesn't convey the extent of the concept just as bank doesn't convey all of Grameen) parallels Yunus' vision.

And because it seems fairly obvious what sustained Yunus through the ups and downs. It's the conviction of the clarity and beauty of the vision and our individual purpose that sustains you - and not having people pat you on the back and offering their admiration (they won't) or everything going smoothly (it doesn't).

When you are inspired by some great purpose, all your thoughts break their bonds. Your mind transcends limitations, your consciousness expands in every direction, and you find yourself in a new, great and wonderful world. - The Yoga Sutras of Patanjali (this version from The 8th Habit)

Before a dream is realized, the Soul of the World tests everything that was learned along the way. It does this not because it is evil, but so that we can, in addition to realizing our dreams, master the lessons we've learned as we move toward that dream. That's the point at which most people give up. It's the point at which we say in the language of the desert, `one dies of thirst just when the palm trees have appeared on the horizon.'" -- from The Alchemist by Paulo Coelho (via Worthwhile Magazine)

Comments

[bas]

that is a great story...
I was involved with the dutch introduction of a similar concept, maybe you have heard of it, since 2005 is going to be the UN international year of MicroCredit! Now MicroCredit is an old concept and proven to work! So: yay for the imaginative and the daring...
thanks for sharing...

[jbr]

Thank you for the reminder to keep going even when things don't seem to be going well. Inertia is the killer of many a great idea. The naysaying bankers are merchants of inertia.

Thanks for sharing the learning!

[Brett]

If anyone is interested in learning more about Yunus' story and Grameen Bank, check out "The Price of a Dream" by David Bornstein. Good stuff.

[Mpenda]

Thanks for the comment. I think I lgeraly agree, but let my comment on this: Absent such a study, however, I think one can safely assume that the benefits of working for a Wal-Mart supplier outweigh the costs (environmental impact aside), otherwise why would people choose to work there? I think that we can safely assume that many people believe that the benefits of working for a Wal-Mart supplier outwight the costs but not that they do. But I think I would grant that it is likely that the benefits do outweigh the costs for many (or maybe most) of the people who choose this. (But also it seems likely that for some (many?) the benefits do not outweigh the costs.)We are dealing with different domains of value I think (which Tierney and Strong seem to collapse to the economic). Some values are tangible and easily measured ($$$$$). Others are not (e.g., community, respect, power, longterm safety). People often trade the latter for the former believing that they are benefitted. But that doesn't imply that they are. (The economist and many others might reply that the only measure of value is a person's occurent desires. So if they think that they are benefited, then they are.)One does not have to be merely for or against Wal-Mart or micro-credit. One can recognize the beneficial consequences while worrying about the possible dangerous effects and harms. Prostitution is probably often caused by a lack of options and yet I feel a little uncomfortable saying that employment trumps other concerns in that case. It's the paradox of preventing someone from choosing to enter into a degraded and oppressive relationship. To not do so, offends justice. To do so, offends the person's autonomy and self-interest.