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  Lending to the poor
  The birth of micro credit
  The philosophy of responsibility
  Grameen -- transforming lives
  Banking for Bangladeshís flood victims
  Yunus and the rural experiment
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Banking for Bangladesh's flood victims

DHAKA, Bangladesh (CNN) -- Flooding has hit Bangladesh hard in the past three years. Each time, as villagers flee their homes, there are questions about the survival of the Grameen Bank, the world's first micro-credit lending facility founded by Professor Muhammad Yunus in 1983.

But each time, Grameen has survived.

The bank has lent $3 billion to more than two million Bangladeshi borrowers Most of the tiny loans, averaging $150, go to destitute village women.

Despite critics ranging from the Bangladeshi government, the World Bank and many commercial banks, Grameen claims an overall repayment rate of 98 percent.

"So the fact that the bank manager was telling me that poor people are not credit-worthy now has clearly demonstrated they are very much credit-worthy," Yunus told CNN.

"The real question to be asked is whether the banks are people-worthy."

"Dr Yunus has offered them something far more valuable than a plate of food -- security in its most fundamental form"
Former U.S. President Jimmy Carter


Yunus founded the bank while teaching economics in a country where more than half the population is below the poverty line.

Bangladesh is a tough place to implement any economic programme. Large swathes of the country's 120 million people live in areas with little infrastructure and many suffer from the annual rains.

The floods of 2000 were considered the worst to hit the country just as it was rebuilding after the 1998 deluge. Both disasters killed hundreds of people and displaced millions of others, making it even harder for Grameen to deliver loans and collect interest each week from its 2,200 borrowers in 40,000 villages.

"Traditionally Grameen bank has been 98% repayment record. But recently we had a setback," said Yunus.

"We had a big flood in 1998 and that pushed us back, way back. So today would be near 90% repayment record for us.

"But I think by the end of this year we will come back to the same traditional level that we always held on to, 98%. But the recovery of Grameen was never in question because we never had any doubts about the ability of the poor people."

In 1999, the last year for which statistics have been released, Grameen made a $1.5 million profit, not much different from the previous year. It has not been made public if the bank suffered financially from the 2000 floods.

Pay-back time

Some critics of micro credit point to Grameen's falling repayment rate as proof that loaning to the poorest of the poor will not work long term.

Canadian author David Bornstein studied the Grameen Bank for his book "The Price of a Dream: The Story of the Grameen Bank". He says its no surprise Grameen now faces such a default rate.

"Repayment is not fixed at a point in time and stays there," says Bornstein. "It fluctuates and so the Grameen Bank is working in a very, very difficult context -- poor people, natural disasters, health crises, a government that is not always as helpful as it should be.

"Given all that, keeping repayment levels as high as it does I think is a tremendous achievement."

The Yunus model, which states that a loan with interest is more effective than charity, has critics and supporters.

Mexican President Vicente Fox and former U.S. presidents Jimmy Carter and Bill Clinton have all praised the banker from Bangladesh.

But the country's finance minister says a Grameen loan, which comes with 20 percent interest rate, is too much of a hardship.

There have also been reports that some villagers got money from illegal sources to repay the interest, especially since the floods.

Yunus flatly dismisses talk of troubled villagers. "Many critics never come to visit and see what we do, or what the borrowers do. They look at the figures or read some reports and make up their criticism. Anybody who spent time with us would not make the criticism that we usually see."


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