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It's A Gray Area: Breaking the cycle of poverty

July 31, 2010|By James P. Gray

One final thing I wanted to share with you from the FreedomFestconvention in Las Vegas a few weeks ago was the program that has spawned an upcoming movie, "To Catch a Dollar." This program provides small loans to people who otherwise would not qualify for any financing, so that they can start their own small businesses and break out of the cycle of poverty.

There are several similar programs around the world that focus upon this activity, such as Technoserve and the Heifer Project, but the one that was presented at FreedomFest was started in Bangladesh by the an economist named Muhammad Yunus. He observed that many people on the bottom rungs of the economic ladder had feasible ideas for starting businesses, but were totally unable to borrow any money to get started. So, 30 years ago, Yunus loaned a total of $27 of his own money to 42 different people for that purpose.

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Of course that amount of money went a lot farther back then and in that country, but it still was a truly modest amount. Nevertheless, Yunus was amazed at the results. Within six months all of the women he had loaned money to had paid it back, and all of them had a new business started of some kind.

So over time he put together the Grameen Bank that made similar small business starter loans – but just to women. No collateral was required, but the loans had to be paid back within a year, complete with interest at 7.5% per year. The program also required that groups of at least five potential borrowers get together and approve each borrower's individual "business plan," as well as a plan for repayment before any of the loans would be made. Then that group would be required to meet together for an hour each week, at which time they would make payments of 2%of the principal and also compare notes about how they were progressing. In a world in which there are more than 4 billion cell phones, there are only 1.5 billion bank accounts. So the Grameen Bank became a bank for the unbankable, and it has been successful.

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