Small Loans, Big Dreams: A Fulbright Story

By Alex Counts (Bangladesh, 1988-9)


The following is an excerpt from the 2022 edition of my book about Grameen Bank and the microfinance revolution: Small Loans, Big Dreams: Grameen Bank and the Microfinance Revolution in Bangladesh, America and Beyond (Rivertowns Books). Founded in 1976 by Professor Muhammad Yunus, a Fulbright Scholar from Bangladesh in 1965 who would later receive 2006  Nobel Peace Prize for his efforts, Grameen Bank would go on to help millions of Bangladeshis-particularly rural women-to rise out of extreme poverty or at least make their conditions more tolerable.  After I graduated from Cornell in 1988, I began my own Fulbright fellowship in Bangladesh, working with Grameen for ten months and seeing firsthand the impact of the microcredit movement.  I returned for 5 more years, and later went on to establish the US-based Grameen Foundation, one of the many organizations carrying on Yunus’s vision across the world.  The focus of the book was augmenting an in-depth profile of Yunus with detailed descriptions of the journeys of two groups of women borrowers; one was in Bangladesh and the other was in Chicago, where an early effort to adapt Grameen to the U.S. was underway at the time. This updated edition covers the major developments in microfinance and with Grameen Bank since the previous edition in 2008, including the breakthrough in applying Grameen’s methodology to addressing urban poverty in the United States represented by Grameen America.  It has been well-received by reviewers, earning the designation of “editor’s pick” by Publishers Weekly BookLife.—Alex Counts  


It began as one stubborn man’s desperate attempt to make sense of his life in a country racked by famine. In 1974, Bangladeshis were dying by the thousands for lack of even the meager nourishment to which they had grown accustomed. The skies blackened with vultures in search of another corpse to devour.

Three years removed from the glorious war of liberation, the country’s dreams of freedom had been cruelly broken, transformed into a nightmare of hunger, wanton violence, and despair. U.S. Secretary of State Henry Kissinger famously called Bangladesh “the world’s basket case.”

For one Bangladeshi, a soft-spoken economist named Muhammad Yunus, this was intolerable. He had to do something, even if it could only begin as a small gesture. Exactly what, he didn’t have the faintest idea. Still, there was one thing he understood: The economic theories he had mastered at American universities while earning his Ph.D. would be of little use. Professor Muhammad Yunus would have to mix with the poor and see what he could think up after immersing himself in their reality. He hardly had grand illusions about what one man could do, working alone. But he had to act.

That is how it began.

Bangladesh’s Poverty and the Birth of the Grameen Bank

By 1983, despite nearly 10 years of an “assault on poverty” declared in the wake of the 1974 famine, real wages were 2.3 percent lower than in the last year of Pakistani rule, and a day’s work in the fields bought a laborer three kilograms of rice instead of the four it had fetched in 1970. At the same time, the nation had three million new mouths to feed every 12 months. By the mid-1980s, per capita consumption reached an all-time low of 1,943 calories and 48.9 grams of protein. (According to the Food and Agriculture Organization, the minimum daily requirement to sustain sedentary life is 2,150 calories and 65 grams of protein.)

During the 1980s, the plight of women in rural Bangladesh became increasingly severe. Even in good times, women prepare the feasts but are only permitted to eat the leftovers after the men are finished, to wash their husband’s new clothes while wearing tattered saris, and to hope, often in vain, that the money their guardians earn is being saved or productively invested rather than being frittered away. In bad times, women go the hungriest, work the hardest, and have to stand by helplessly while their children cry out for food. All year round, in good times and bad, women suffer many other humiliations. They cannot travel outside their immediate home after puberty without becoming the subject of lurid rumors. They are the victims of frequent beatings and verbal abuse by husbands and in-laws, and against all reason are blamed for floods, droughts, and disappointing harvests.

Life for a Bangladeshi woman is, more than anything else, one of isolation. In certain parts of the country, it is common to find women who have not strayed from an area smaller than a few hundred square yards for decades at a time; who have never held currency in their hand or seen a market; who have no friends; who have never played any meaningful role in the politics of their family, their village, or their country.

With an annual per capita income of around $200 in the early 1990s, and a population of roughly 115 million people packed into 68,000 villages in a country the size of the state of Wisconsin, the fundamental problems in the political and economic management of Bangladesh are manifest. Blame can be liberally spread among the government, the private sector, and the foreign aid agencies. But to understand the depth of the sorrow this nation has suffered, one need not open a single history book or read a fancy economic printout. One need only stand in a village for a few hours and look around at all the frail women with sunken, toothless faces hunching over earthen stoves or carrying water on one hip and a child in their arms as they walk barefoot down muddy village paths strewn with animal and human feces.

Yunus became intrigued when he saw many of the women in the poorest families making mora (finely woven bamboo stools). Because they lacked money, the women were forced to deal with paikars (middlemen) who sold them raw materials on credit and bought the stools for a pittance. The women’s effective daily wage was 8 anna, or half a taka ($0.02). Yunus had several of his students find out how many people in the village were working under this type of arrangement. It turned out that there were 42 people who worked for roughly 2 pennies a day because they collectively lacked capital amounting to 856 taka ($27). Some needed only 10 or 20 taka, and the greatest amount any one person needed was 65 taka.

Yunus was flabbergasted. Years later, he would say that he “felt ashamed to be part of a society which could not make $27 available to 42 hard working, skilled human beings so that they could make a decent living.” This lack of investment capital, he came to believe, was one of the root causes of the poverty that blighted rural Bangladesh.  He set out to find a way to address the hardship that came from the inability of his country’s poor to access the tiny amounts of money needed to improve their lives.  His efforts ended up spawning a global movement that would ultimately reach the shores of the United States.

The Secret the Grameen’s Success: Forming Solidarity Groups

Rukia Begum, a member of the seventh group-in-formation of Grameen center number two, stuck her head out of her tiny, rotting thatch hut, squinted, and looked at the sun. From its position in the sky, she figured it was time to leave for her group recognition test, an oral exam given to prospective Grameen Bank members after their training period. Fixing her sari, she contemplated the nausea she felt and the volume of material she and the other members of her group had memorized. For a moment, she thought she was going to vomit.

The oral exam that she was gearing up for requires all prospective members to demonstrate that they understand the rules of the bank, making it difficult for an unscrupulous bank employee to take advantage of them. It also makes it easier for them to recruit new members once they begin borrowing, should they want to do so. The idea is that this is their bank and they must assume their roles as clients and owners with eyes wide open, understanding each and every rule.

An integral part of the training is learning Grameen’s social constitution known as the Sixteen Decisions, which was drawn up by a meeting of center chiefs in 1984. Requiring new borrowers to memorize it was part of the bank’s attempt to respond to the social dimensions of poverty; it was a series of principles and goals to ease the workings of the bank and help borrowers focus on getting themselves out of poverty. They included limiting the size of one’s family, educating children, not accepting or giving dowry (since doing so devalues girls and women), planting vegetable gardens and fruit-bearing trees, and building sanitary latrines. Other decisions were more philosophical; for instance, members pledged to help one another and not let anyone do injustice to them. Borrowers were required to memorize these commitments as part of their group training.  Furthermore, the staff was urged to motivate members to implement them, and a special programs division that received funding from UNICEF for many years organized workshops and delivered supplies (such as iodized salt and packets of vegetable seeds) in hopes of speeding their realization.

When a new group becomes eligible for loans, two women, normally the poorest in the group, submit loan proposals, which will in most cases receive formal approval by the bank in a few days. The first line of defense against bad business decisions is not the bank or its employees, but rather the other women in the group. If the first two borrowers to receive loans have any difficulty repaying, the remaining three will have their proposals delayed, reduced in amount, or, in extreme cases, denied altogether. Each member therefore has strong incentives to scrutinize her fellow borrowers’ loan proposals and to apply a delicate combination of pressure and support to ensure that the money is invested properly and that their income-generating activity succeeds. In practice, this means that poor families that would normally have no contact, or perhaps have an antagonistic relationship born of religious or caste differences or a generations-old feud, are almost forced to help one another. A group member might tip off a fellow borrower to the fact that she is about to buy a cow that is suffering from a disease likely to kill it—even if the seller is a relative of the one giving the tip. Another might help steer business, including her own, to a woman in her group. The impersonal forces of supply and demand are thus softened by a network of friends who want you to succeed for a combination of financial incentives and human empathy.

For a woman to get into such a network, husbands and village elders may need to be defied, and rules and regulations will need to be memorized, trust built up, and finally, the group recognition test passed. For women isolated from their society by illiteracy, poverty, and custom, these are considerable obstacles. A weeding-out process inevitably occurs. Sometimes, when dropouts occur, village elders complain about Grameen’s policy of not forming men’s centers. But by the mid-1990s, Grameen’s senior management had concluded that women repaid their loans—and attended meetings—more regularly than men did; furthermore, there was growing evidence to suggest that lending to a family’s husband helped the husband, whereas lending to the wife helped the entire family. As a result, the percentage of women borrowers in Grameen had been steadily increasing, from less than 50 percent in the early 1980s to more than 90 percent a decade later.

Like millions of other Bangladeshi women, Rukia was ultimately accepted as a member of Grameen, even though her group failed its first recognition test.  The road to self-advancement that Grameen offers is frequently a bumpy one.  In many cases, it is not until the next generation that poverty is eliminated entirely, usually the result a borrower’s investment of her additional income into the education of her children.  In doing the research for this book, I bore witness to this often slow but inexorable process in rural Bangladesh and also in urban Chicago.

Overcoming Opponents and Skeptics in Rural Bangladesh

For the last several decades in Bangladesh, every weekday (except national holidays) witnesses a unique ritual: thousands of Grameen Bank employees set off by foot, bicycle, or boat to take part in meetings attended by hundreds of thousands of poor women living in tiny hamlets scattered across Bangladesh. By noon, the bank workers travel a combined distance exceeding several times the circumference of the globe and collect, count, and deposit millions of taka in small bills—all without turning on a single car, motorcycle, or computer.

The women and men they meet with in cramped bamboo houses are taking part in one of the world’s most daring experiments in rural development; they are both the borrowers and the owners of Grameen Bank. Loans they receive are invested in more than 500 income-generating enterprises as diverse as cow-fattening, rice-husking, trading, tailoring, light manufacturing, and handloom weaving.

One of the enduring mysteries of Grameen and the wider microfinance movement is why unarmed loan officers who, for many years, carried significant amounts of cash every day on predictable routes were so rarely mugged. After spending many months living in rural Bangladesh and talking with people who were steeped in the local culture, I have come up with a hypothesis as to why the staff were almost always unmolested.

While there is often initial opposition to microfinance groups like Grameen when they enter a community, owing to the fact that they exclude the well-off, prioritize women clients, and run afoul of various cultural norms and vested interests, most critics develop some grudging admiration for them over time. People see that the staff members deliver affordable and reliable financial services to clients (and increasingly, attractive savings products to the public), are almost always incorruptible, provide both loans and jobs without favoritism, nepotism, or bribes, and perform their jobs conscientiously year-in and year-out.

I believe people’s respect for these qualities is the main reason why Grameen Bank loan officers were so rarely attacked, even during the eras when they handled large amounts of cash. I also have come to sense that their manner of doing business is gradually raising societal expectations of how all institutions, private and public, should behave.

Grameen Comes to America to Battle A Different Kind of Poverty

Starting in 1976, the Ford Foundation’s office in Bangladesh supported Yunus’s work with small grants, first to Chittagong University’s Rural Economics Program and later to the Grameen Bank Project in Tangail. After Grameen became an independent bank in 1983, Yunus approached Ford with a request for funding to expand in the Dhaka, Patuakhali, Chittagong, and Rangpur districts. He worked out how much money he would need on his calculator, wrote a proposal in longhand, and presented it to Ford program officer Steve Biggs, who wanted to have some people with experience in banking take a look at Grameen before he approved the grant.

Pleased with how Yunus used the foundation’s grants, officials there invited Yunus to Chicago in 1985, and a series of meetings was arranged with the staff of local banks and nonprofit organizations. People were skeptical about the idea of the Grameen model working in inner-city Chicago, but Yunus won over several of his critics. One University of Chicago scholar, for example, had some disillusioning experiences working in India and was convinced Houghton had been bamboozled by Yunus. He felt certain that no program of any size on the Indian subcontinent could be free from corruption. But when he met Yunus in person, the sociologist became a convert.

Much of their discussion centered on Yunus’s description of Grameen Bank’s target group—“the poorest of the poor.” In the United States, he was told, the poorest people need social services, not investment capital. But Yunus held firm, saying that his program was designed to work with the poorest and that he had little interest in working with people if they didn’t share his commitment. He recounted similar arguments that Bengali academics had confronted him with when he was getting started in Jobra, and reiterated his philosophy that every human being had the capacity to use credit to get out of poverty. Recalling those conversations, Houghton said, “While for most of us it was a leap of faith to believe what Yunus was saying, we wanted to believe it was true.” So they kept listening.

At one meeting, Yunus asked a participant what he thought a poor person would need to start or expand a small business in the United States. He was shocked by the answer—$50,000. Yunus went on to say that if there weren’t people who were willing to take loans under $5,000, and capable of making a go of it with that amount, then there were no poor people in Chicago that a Grameen-style program could help.

On his second Ford-sponsored trip to the United States in February 1986, Yunus met Bill and Hillary Clinton in a restaurant in Washington, and both expressed enthusiasm about starting a Grameen spin-off in Arkansas, where Bill Clinton was governor at the time. Hillary Clinton, Yunus remembers, was especially gung ho. “She wanted to start right away!” he recalls. Yunus had just returned from his first visit to Arkansas, where he had been driven through rural areas to meet with “the poor” so he could judge the feasibility of adapting the Grameen approach there. Based on his observations, he told the Clintons that he thought the program had a good chance of success in Arkansas.

That trip, however, had got off on the wrong foot. His hosts—senior officials of the state government, South Shore Bank, and the Rockefeller Foundation—thought Yunus appeared less and less interested in meeting with the local people at each successive stop. Yunus would later complain that he didn’t think that any of the small business owners he was supposed to meet were poor. Didn’t they understand that Grameen was for truly poor people? Yunus remembers thinking that his time was being wasted. On the second day, Yunus persuaded the man from the foundation to bring him to meet some unemployed people and welfare recipients. It was at this point that Yunus began showing interest in the discussions.

Years later, Yunus recalled:

I asked the welfare recipients and unemployed people, “Suppose that your bank lends you money to do something—what kind of thing would you decide to do?” Almost everybody said that a bank would not give them money, so why bother to talk about it. I said, “Suppose they would lend you money.” I got more blank stares. “Look, I run a bank in Bangladesh that lends money to the poor people there. I just had a meeting with Governor Clinton and he asked me to bring my bank to your community. I am thinking of starting a bank right here. Now I am trying to find out if somebody is interested in borrowing money from me. Because if there is no business, why should I come here?” I mentioned that my bank does not need any collateral, nothing.

A woman who had listened very carefully said, “Oh, I would like to borrow some money from your bank!” I said, “Okay, now we are in business. How much money would you like?”

She said, “I would like three hundred seventy-five dollars.” I was surprised, because normally, people don’t say “Three hundred seventy-five dollars”; they make it a round figure, so I asked her what she wants to do with this sum. She said that she was a beautician, and that her business was limited because she did not have all the right supplies. If she could get a box of supplies costing three hundred seventy-five dollars, she was sure she could pay me back with the extra income. She also said she did not want to take a penny more than what the box actually costs.

Another woman, unemployed after the textile factory she’d been working at closed and moved its business to Taiwan, needed a few hundred dollars for a sewing machine. Still another woman wanted $600 to buy a pushcart from which to sell her hot tamales, which she informed the Bangladeshi professor were “famous” in her neighborhood. These interviews tickled Yunus, and he regretted that the trip was nearing its end.

These early explorations into how Grameen’s model could be applied in the United States led to excitement and experimentation during the late 1980s and 1990s, but the initial results were disappointing.  Finally, in 2008 Yunus sent in a small team of Bangladeshis to knock on doors in Queens, a borough of New York City, to see what could be done.  Fifteen years later, Grameen America was on the cusp of lending its three billionth dollar in amounts averaging around $2,000, with a 99% repayment rate and growing evidence from independent researchers that its women clients were benefitting significantly.

In this way, the benefits of the Fulbright scholarship offered to Yunus came full circle, as they so often do.


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