Muses of Murari

Many of you must have heard about Grameen Bank. This book is the autobiography of the founder of Grameen Bank. For those who are not aware of Grameen Bank, let me give a short gist of its background. Grameen Bank started by Muhammed Yunus in Bangladesh. It basically provides micro-loans to the poor people, whom the traditional banks shun considering them as not-credit worthy. Poor people would use the money lended by Grameen bank and  work on their ideas or skills and make money and repay the amount with interests periodically. To the surprise of so called traditional bankers, the repayment rates are as high as 97%!

This book written in direct and simple language, speaks on how Grameen Bank shaped and how the idea of micro-lending started in the times of adversity, during famine of Bangladesh in 1974. Started by an economic professor as an experiment, slowly and steadily, Grameen Bank, revolutionized the under privileged and helped them to earn their own dignity. The book described many heart rendering examples about how poor people suffer from blood sucking money lenders and live in cyclic poverty life. Initially, Yunus supplied a loan of $27 from his own pocket to 40 odd families. These people not only repaid the money, but also started to live with hope, ate meals everyday, sent their children to schools and reaped the benefits they deserved. Later determined to experiment in larger scale, Yunus approached traditional banks to sanction loans for an entire district. Encouraged by further success, he established a bank and spread his idea across the country. After seeing the astonishing results, many an organization including World Bank supported other countries to setup similar micro-lending institutions. Result – success everywhere.

I had one thing that was creeping in my mind while reading. The book is all painted green. I thought there should be negative side  too. Without knowing it, one cannot come to drastic conclusions. But, the book is about the story of micro-lending and transformation of societies. This idea as such worth a book and other things can be dealt elsewhere.

Coincidentally, the bookmark I am using has an advertisement of RangDe, an micro-lending venture! I tried their site and found it interesting. RangDe allows anyone to invest their monies as low as Rs. 500. In the website, there are listed profiles of candidates who are looking for micro-loans. RangDe does managing or have tie-ups with other institutions to pass the loan amount to the genuine people, recover payments and other administration work. Overall it charges 8.5% interest, of which only 2% goes to the social investor. Considering the purpose of the investment, 2% is acceptable, though it is loss when the year-on-year inflation rate is considered. RangDe also has educational investment vehicle. Here, any social investor can help a poor parent by lending certain amount, for which RangDe or its partners, buys educational vouchers and passes on to poor parents. Children and their parents can choose a school of their choice and use these vouchers to pay the fees. Parents pays off the loan with the interest of 5% odd. In this case, social investor won’t receive any returns at all. Instead of donating the entire amount, social investor would end up donating interest, which he would have gained if he had invested somewhere else.

Instead of donating the vouchers, RangDe lends loans to buy vouchers. I am not sure how effective this lending loan to buy vouchers work in principle. The people who will be looking for this kind of arrangement are already poor. If you lend a loan, which is not revenue generating, is it not that you further increase the burden of loan? Instead, why not simply allow people to donate generously towards this cause. My good guess is the interest charges, are for the intermediary(social venture). Well, it looks to me as negating the intention of the cause. Of course, I am partly fed with information and one demands to see things holistically.

Related posts:

• Take away from a Fruit Vendor
• Talking to BrainVilla’s founder
• “Buffett : The Making of a American Capitalist”
• Online book stores. Few thoughts…
• Social, media, communication & more links