Archive for the 'Economics' Category

There Is No “Them”

I don’t know what this means but, despite being inspired by Dr. Jeffrey Sachs (author of “The End of Poverty”), I sometimes find myself also agreeing with Dr. William Easterly (author of the book critical of foreign aid called “The White Man’s Burden”).

Today was one of those days:

What Dr. Easterly is referring to is the fact that, even if you had the power to control billions of aid dollars, this really can’t be about what “we” (in the developed world) can do to help “them” (those in the developing world).

But here is where I believe we need to change the conversation – and the thinking – on global poverty. When it comes to humanity, there is no “them” there are only facets of “us”. So we don’t have to help “them”, we have to help “us”.

And we can only help “us” if we understand “us” and talk to “us” and not second guess what will help “us”. This, of course, is what any good charity or NGO says they are already doing. But I believe we can do much more on this front.

For example, take the very medium in which Dr. Easterly is espousing his views on aid. Even if “we” derive an online consensus on what is and isn’t “good aid”, it is a consensus made without the inclusion of the poorest of the poor.

If the poor don’t even have a say in a “free and open” platform like the internet, what chance do they have of having a strong say anywhere else? In the classrooms of Western universities? In NGO boardrooms? In government?

“What can we do?” is really the only question that needs to be asked – but only if “we” is redefined.

A Tale of Two Meetings

With new funding and less restrictions, I’ve been running around lately trying to get my project complete before I finish next Wednesday.

Before my grant got rejected, I had a meeting with all of the grandmothers who would be receiving loans.  I explained the rules of the loan:

  • It had to be used for income-generation
  • It had to be paid back with 10% interest
  • It could not deal in animal husbandry

They were perfectly fine with the first two rules, but when I explained the third, they groaned.  They were frustrated, and understandably so.  They knew how to raise animals.  They didn’t know how to run a business.  And they were quite frank — they weren’t interested in learning.  They wanted to tend to their crops and animals.  They wanted to do what they were good at.

But we continued, and I guess the meeting was an overall success.  We settled on different activities for the grandmothers to pursue and they walked away thankful.  However, I could not shake the feeling that they were not in it.  Sure, some of it was a lack of confidence, and that could be changed with training.  But there was also the fact that they weren’t able to do what they wanted to do.

Then I had my second meeting with them.

Last week, I went out to inform them that the restriction on animals had been lifted.  I thought that I’d give them the chance to reconsider their project again, this time with the possibility of practicing animal husbandry.  There were fourteen grandmothers there, and fourteen of them changed their minds.  They all wanted to raise animals.

Not only that, but the meeting itself had an entirely different feel.  In our first meeting, I was struck by how aloof they seemed.  In this meeting, they participated in the discussion.  They made jokes.  They laughed at ours.  They stayed around after it was finished to make small-talk.

They were excited!

Their excitement rubbed off on me.  It was contagious.  We all had our own reasons, but everybody wanted this project to succeed now.  We all had something at stake.

What have I learned this trip?  The capacity and the expertise can come from outside, but the ideas must come from the people.  You cannot storm a country with ideas of your own and hope to make an impact.  Someday you will have to leave, and if the people do not feel ownership in the project, they will abandon it.

Introduction to Microfinance

Dr. Muhammad Yunus I think since I am mentioning microfinance so much in my posts that I should expand on it a little for those who have not encountered it before.  Microfinance was pioneered by Dr. Muhammad Yunus, an economics professor from Bangladesh.  What Dr. Yunus did was to take traditional banking and transform some of the assumptions so that it helped the poor rather than excluded them.

There are a few problems with traditional banking that Dr. Yunus overcame in his quest to become “Banker to the Poor” and win the Nobel Prize doing it.  For instance, the typical loan process at a bank involves the giving of collateral. Banks do not wish their borrowers to fail repaying loans, so banks demand that borrowers present proof of repayment ability.  Usually, we see borrowers put up houses as collateral in America.  However, this process has the side effect of excluding the poor, since they have very little collateral to put up.  Also, banks are traditionally interested only in giving loans either with large principle amounts or large interest rates.  It is not profitable to earn small interest on a loan that is only $100 in size, given the operating costs that go with granting a loan.

But Dr. Yunus found ways to avoid these problems and make credit accessible to the poor.  Instead of collateral, he demanded something different: community backing.  If someone wants to get a loan, they must first create a credit group — a group of people that all agree to back up the loan.  These people are there for support during the loan process, and they are unable to receive a loan until the first has been repaid.  Thus, the incentives to repay come not from the giving of collateral, but from community ties.  Dr. Yunus also found ways to give small loans at small interest rates.  By standardizing the loan process and minimizing the screening costs, he was actually able to give extremely small loans at rates barely above the inflation rate, and still even turn a profit!

Granted, Dr. Yunus’ will be the first to tell you that his bank, the Grameen Bank, is not a profit-maximizing entity.  It is what he calls a “social business.”  If it makes a profit, that is all well and good; however, its measure of success comes not from the bottom line, but from the number of people that it helps escape poverty.  And by that measure, it has performed quite well.  Today, there are over seven million poor people in Bangladesh who have loans from Grameen Bank.  To date, it has loaned the equivalent of $6 billion (U.S.), and the repayment rate is an astonishing 98.6 percent.  Bangladesh is currently the only country in the world on track to meet the Millennium Development Goals, and that is in no small part due to the Grameen Bank and Dr. Yunus’ many other social businesses.

That brief explanation should be enough to understand anything that I address in future posts.  If you are interested in learning more about Dr. Yunus and his development of the microfinance model, read his autobiography Banker to the Poor. If you are interested in microfinance and social business as it stands today, I recommend his second book, Creating a World without Poverty, which looks more towards the future.

My Thoughts on Micro-Credit

“Have you looked into micro-credit?” is the question I get asked most frequently. I actually got to meet Professor Yunus – a Bangladeshi and Nobel Peace Prize winner for his work in micro-credit. Micro-credits are basically small loans to those poor who wish to use that small loan for entrepreneurial purposes with the goal of pulling themselves out of poverty. Grameen Bank (founded by Professor Yunus) has had incredible results and amazing success stories. The reason I have somewhat shyed away from focusing on micro-credit in my work here in Bangladesh is because I believe there is an overemphasis on micro-credit back in the developed world. Micro-credit is part of the solution to ending poverty. It is not the solution to ending poverty in and of itself.

In terms of borrowing money, the poor in the developing world are very much like people in the developed world: what makes sense for us also make sense for them. It makes perfect sense, for example, to take a loan so you can attend a college. But does it make sense for you (or your parents) to take a loan so you can go to grade school? It also makes perfect sense to take a loan to buy a car. If you took a loan to buy a car, for example, you could start a delivery/transport business. But, would it make sense to constantly have to take subsequent loans because your car keeps breaking down because of the lack of proper roads? It’s also understandable that people sometimes need to to take loans to pay for medical expenses. But imagine if you could avoid getting sick in the first place simply by having a community with basic sanitation and the simplest of protection against diseases.

There is nothing wrong with micro-credit. It’s the developed world’s attitude toward micro-credit which is the problem. Aid and micro-credit isn’t an either/or proposition. They can work together. Many of the Millennium Development Goals advocated by Dr. Sachs and the United Nations are really a good basic support. Completing the MDGs will put people in a position of 1) being able to take full advantage of any micro-credit loans they ask for as well 2) helping people avoid unnecessary loans. Why take a loan for malaria treatments in a hospital when you can avoid getting infected by sleeping in an insecticide treated mosquito net? Imagine how far someone can go with a micro-credit loan if they have had the opportunity to gain even the basic of literacy skills to tap their full potential and ingenuity.

If there was a one sure fire solution to ending extreme global poverty – we’d already have this problem solved. Reaching a real solution means having to break our romantic belief that there is a holy grail to ending poverty.

A REAL Conversation about Poverty

After my latest video got featured on the YouTube homepage, there were so many people leaving comments about how fat I was, how I talked, or just leaving racial epithets, that I was resigned to the fact that my message had been lost among all the hateful messages. Then, something really amazing happened. A group of well-spoken, intelligent, and considerate group of commenters appeared. And, for the first time since being featured, a real conversation emerged.

Of course, as with any discussion, we didn’t all end up agreeing. But at least we addressed some important issues. Here is a summary of some of the topics that were touched upon:

Continue reading ‘A REAL Conversation about Poverty’

New Episode: Super Tuesday

What does Bangladesh have to do with Super Tuesday? Just some friendly (non-partisan) words of advice:


I’d write more but, much of what I said I have already written up earlier when I was giving my take on the Davos Question.

$130 Million Donated to Bangladesh… Anonymously

Wow. $130 Million. Dollars…. $130 million. That’s the amount donated to Bangladesh anonymously by an individual earlier today to the Islamic Development Bank to help rebuild after the damage done by Cyclone Sidr.

Let me put it this way. If you donated $500 you could provide for all the nuts and bolts to rebuild 50 homes in Bangladesh (sound like a good idea? here’s the charity that does that). $130 million could help build 13,000,000 homes. Or build schools. Or roads. Whatever it will be spent on it will help families recover, rebuild, and help to resume their lives.

I would like to think I made a difference in the Cyclone Sidr relief efforts. But, in reality, I was only able to spend about $200 in my personal out-of-my-pocket on that three day trip to Bagerhat. Imagine what $130 million could do? It boggles my mind.

Here’s the original story by the Associated Press. and thanks to my friend Mo back in Toronto for making me aware about this story.